Buying a coop without a broker is not as difficult as real estate agents make it out to be. In this article, we’ll explain how the process works and what you’ll need to do to successfully purchase a coop apartment in NYC without a traditional real estate broker.
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You’re giving up “free” advice and guidance from a seasoned industry veteran.
No doubt you’ve heard by now that buyer agent services are free for home buyers.
This is the primary reason why over 90% of home buyers end up working with a buyer’s agent. Especially if this is your first purchase, why would you give up free advice and guidance for one of the most important and expensive purchases of your life?
Real estate is an especially opaque industry. Even the most avid do-it-yourselfer will have some unanswered questions when it comes to buying a coop in NYC.
Why not consult an expert for free when it could mean the difference between screwing up a board interview and getting accepted?
Pro Tip: Don’t ask any questions at a board interview, even if the board asks if you have any questions at the end of the interview.
Why? There’s a chance that the board is testing whether you’ll be a potentially troublesome shareholder that will cause them unnecessary work and hassle. You can ask questions after you’ve become a shareholder!
You’re giving up a buyer’s broker commission rebate.
The primary reason to use a buyer’s agent to buy an apartment in NYC is the ability to receive a split of the commission earned by your buyer’s agent.
This is called dual agency and does not benefit the buyer in any way as the listing agent’s fiduciary duty and loyalty is to the seller and the seller does not receive any sort of break in commission just because the buyer is unrepresented.
The only way for you as a buyer to gain some of the broker commission is through a commission rebate from your buyer agent. The listing agent is legally obligated to present all information and offers to the seller. Won’t you be able to beat the competition if you’re able to pay more because of the commission rebate you’ll be getting?
Why Is Buying a Coop in NYC Without a Broker a Good Idea?
A first major reason is not having any risk of a potentially incompetent middleman delaying or messing up your deal.
With over 30,000 licensed real estate agents in Manhattan alone, there are bound to be quite a few incompetent agents running around with barely a high school education under their belts. And you want this person who can barely write a complete sentence to handle the biggest purchase of your life?
Not only could an incompetent or simply too busy buyer’s agent delay communication between you and the seller, they could even potentially miss emails altogether! What assurances will you have that they didn’t forget or were simply too busy to see an important email for your purchase?
A second major reason is that you’ll reveal your personal finances to one less person.
Too much information is shared online these days by individuals. From rampant social media accounts to carelessly having personal emails and other information indexed by Google, the last thing your average person needs is to have one more person unnecessarily know the intimate details of their personal finances.
Remember that both the listing agent and buyer’s agent will typically know much more about your personal finances in a co-op transaction versus a condo transaction. That’s because a co-op board will be much more strict in who they approve to become a shareholder. Their just concern is that the shareholder will be financially sound and able to make maintenance payments going forward.
As a result, you can expect the co-op board, and brokers and lawyers on both sides to have access to your co-op board package. This application will be very detailed and contain pay stubs, tax returns, reference letters and other intimate details of your financial history.
What Are Next Steps for Buying a Coop in NYC Without a Broker?
Step 1: Search online
You’ll miss out on the luxury of having a buyer’s agent spoon feed you listings to check out while you sit back and relax. However, if you have the time and focus for it, you can be extremely comprehensive in your search since you’ll know which listings you’ve already seen. You will never face the situation of a buyer’s broker sending you listings which you’ve already passed on.
The best bet is to use a local real estate search website like the New York Times or Brownstoner to begin searching for listings in the neighborhoods you’re interested in. Be sure to exclude listings which are already “in-contract” which means there is a mutually executed purchase contract and the unit is no longer available.
As a result, you’ll need to inquire with the listing agent of each property to ask them whether the property is still available before getting too ahead of yourself.
Another annoying thing you’ll encounter when buying a coop without a broker is that every listing agent will want to speak with you over the phone to try to poach you as a potential buy side client should you not end up buying their listing. This will be especially prevalent for a listing that is no longer showing but not in contract yet (i.e. contract out or accepted offer).
Step 2: Attend open houses and private showings
As a direct buyer, it’ll be most convenient for you to attend open houses on the weekends. Why? Because you won’t have the same legitimacy for private showing requests as a seasoned real estate agent inquiring on behalf of a pre-vetted client.
A seasoned real estate agent or senior broker will typically ask a listing agent something like this:
Hi Debra, may we show this to our pre-approved buyer Robert Elksworth who will be in town this weekend on Sunday at 3:30 or 4pm? We’re seeing other properties in the area in the afternoon. Thank you very much.
Hi Debra, may we show this to our all cash buyer Tom Jordan next Tuesday or Wednesday evening? He is available generally between 5-7pm. He’s ready to make a move and we’ve been searching for quite a while already. Thank you.
An email like this from a seasoned real estate professional will show the listing agent that he’s dealing with a pre-vetted buyer who won’t be a waste of time to show. In real estate, brokers are obsessed about their reputation and no one wants to be known as a time-waster. As a result, the buyers led around by buyer’s agents are generally pretty well qualified. After all, a buyer agent logically shouldn’t be doing work for an unqualified buyer because who wants to work for free?
Note: Open Houses By Appointment Only are a NYC phenomenon that requires you to email the listing agent to schedule a visit.
Step 3: Get pre-approved for a bank loan
Having a loan pre-approval letter from a reputable mortgage broker or bank will show listing agents that you are serious and not merely window shopping. Furthermore, you will need a pre-approval letter when you submit your offer if you intend to finance your purchase.
Pro Tip: A pre-approval letter is much more legitimate than a pre-qualification letter. The former means the bank has received and verified documentation from you and the NYC mortgage process is part way complete. A pre-qualification letter can be received after a 15 minute phone call with a mortgage banker and no verification or submission of any documentation.
Step 4: Submit an offer
So you’ve fallen in love with a co-op apartment you saw over the weekend and you’ve confirmed with the listing agent that the property is still available. What’s next?
Make sure you have everything in order to be able to submit a comprehensive offer by email. You will need the following in your official offer submission email:
Full legal name of the buyer(s)
Offer level and form of consideration (i.e. all cash, mortgage and down-payment amount)
Timing for the buyer on closing date
Any contingencies to close (i.e. Mortgage Contingency and Sale / Hubbard Contingency)
Short biography of the home buyer(s) or introductory letter
Pre-approval letter if the buyer will be financing with a mortgage
Proof of funds if the buyer will be purchasing all cash
Depending on how lenient or strict the listing agent is, you may be required to present much of this information in the standard REBNY Submit Offer form.
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Step 5: Negotiate
Unless you’re submitting a very qualified high down-payment or all cash offer at or above asking, you’ll need to negotiate with the listing agent before your offer is accepted.
That means the listing agent may counter your offer with a lower price than the listing price, but a price that is still above your initial offer price. You may than choose to counter-offer and so on until both parties have agreed on a price.
The seller may negotiate with multiple bidders at the same time and may even hold a best and final offer process where all interested parties are asked to submit their highest and best offer at a certain date and time.
Step 6: Offer Accepted
Have you and the seller agreed on a price? Congratulations! You’re now officially in “offer accepted” status. Please be aware that although this is an official listing status in RLS which other brokers will be able to see, it does not in any way obligate the seller to stop showing or negotiating with other buyers until the contract has been signed by parties.
As a result, depending on which party has the upper hand, you may want to either quickly sign the contract in order to secure a good deal on a hot property, or you may want to take your time with contract due diligence if a property has been on the market for multiple months and the sellers are desperate.
Either way, you will need the help of a real estate attorney at this point to review and negotiate the purchase contract on your behalf and to conduct legal and financial due diligence.
Step 7: Deal Sheet
Once the terms of the transaction are summarized, they will be circulated in a transaction summary file (i.e. Deal Sheet) to the lawyers on both sides of the transaction. Typically the listing agent will send out the Deal Sheet to the buyer’s attorney and the seller’s attorney and will copy the buyer’s agent on the email. Since you are buying a coop without a broker, you will be copied in lieu of a buyer’s agent.
The Deal Sheet will include important terms like estimated closing date, contingencies and any inclusions or exclusions which need to be specified.
Step 8: Contract Out
“Contract Out” is a listing status which means a contract has been sent out by the seller’s attorney to the buyer’s attorney but that it has not been signed yet.
Depending on the amount of negotiating power each side has, the seller may require the buyer to sign the contract within a certain time frame, in some cases as little as 4-5 days. A seller may even send out multiple contracts to different buyers to increase the probability that at least one buyer will sign it.
Please remember that just because a contract has been sent out does not mean the seller is obligated to stop showing the property or stop negotiations with other buyers. In a similar vein, the buyer is free to make multiple offers on other properties and do as he or she wishes until the buyer actually signs the contract.
Step 9: Home Inspection
The home inspection is typically ordered by the buyer before the contract is signed. A licensed home inspector will visit the property and since you’re buying a coop without a broker you will be expected to coordinate the showing with the listing agent. The home inspector will be trained to look out for shoddy wiring, potential issues with the pipes, faulty appliances and boilers as well as structural issues in the building. If any major issues are discovered, the buyer may request a price reduction as a concession. The possibility of the buyer asking for concessions post home inspection is the reason some sellers decide to renovate before selling.
While not universally done nor very common, home inspections are recommended for buyers since real estate is sold in New York “as is” and under the principle of caveat emptor (i.e. buyer beware). In lieu of a signed property disclosure form since most sellers are not engineers who could competent analyze the condition of their property, most sellers give home buyers a standard $500 closing credit instead.
Step 10: Contract Signed
At this stage, the seller will have counter-signed the contract after the buyer’s attorney mailed or couriered the signed the contract signed by the buyer along with a good faith deposit check of 10% of the contract sale price to the seller’s attorney. It typically takes two to three months to close on your co-op purchase once you have a signed contract.
At this stage, it is customary for the buyer’s agent to begin working with the buyer to complete the co-op board application.
Step 11: Line up bank financing
You have a deal at this point pending board approval. This means you need to make sure your bank finishes up the underwriting process at this point so you can get a “commitment letter” and a “clear to close” from the bank. A bank commitment letter is the closest you’ll get to a promise by the bank that they will approve and fund your loan. A clear to close is a thumbs up signal from the bank that you can go ahead with a scheduled closing date because they are ready to fund your loan.
Step 12: Submit board package
The purchase application, often times known as the NYC coop board package, is a lengthy application which will also require multiple copies of your pay stubs, tax returns and reference letters as well as various signed disclosure forms. As of this writing, board packages are still required to be submitted in hard copy format (i.e. printed and mailed).
Step 13: Board interview
You should ask the seller for some advice on how to sail through the co-op board interview since the seller has done it before! A common piece of advice is to not ask any questions and not bring up future planned renovations during the interview. The reason for this is you don’t want the board to perceive you as a future, trouble-making shareholder who will just cause them more work. Some agents claim that boards will often ask at the end whether you have any questions simply to test whether you will be a troublemaker! It’s best to just be yourself and friendly and sail through the interview without causing too much trouble.
After the board interview you simply need to wait for your bank to provide you with a commitment letter and a clear to close if you are purchasing with a bank loan.
Step 14: Property Appraisal
If you are buying a coop without a broker but with a mortgage, your bank will want to conduct a property appraisal. It is important to remember that the bank will be loaning you money against the appraised amount of the property versus the purchase price. The bank will send a licensed real estate appraiser to inspect the property who will then produce an appraisal report.
The appraised value may be higher or lower than the purchase price and this may impact the amount of financing you are able to obtain. You will have to pay for this property appraisal out of pocket. Expect to pay up to $1,000 for this to be done. Consult your attorney on the ramifications of getting a lower appraised value and whether you may be able to walk away from the contract if the appraisal comes in low and you are only able to receive a certain amount of bank financing.
Step 15: Final Walkthrough
Typically, the buyer’s agent will accompany the buyer to do a “final walk-through” inspection of the apartment the day before closing to check for any unexpected changes in the condition of the home. The purpose is to make sure that there haven’t been any damage or change to the apartment since it was last seen by the buyer. The buyer will test the lighting, appliances, faucets and showers and look for new damage to the apartment since it was last viewed.
In situations where the buyer intends to “gut renovate” the apartment, the final walk-through becomes a mere formality to check for major structural damage and to check the functionality of any appliances the buyer is keeping.
Step 16: Attend Closing
Congratulations on making it this far! The last step to buying a coop without a broker is to attend the closing with your attorney. The seller and his or her attorney will also be present along with a closing coordinator and attorneys representing the banks if financing is involved. The listing broker may also attend the closing purely for moral support although often times brokers simply pick up their commission checks from the seller’s attorney at a later, more convenient time.
If you’ve chosen wisely to work with a buyer’s agent providing a commission rebate you’ll also be handed a check discreetly at the end of the closing meeting!
Can I Sell My Coop in New York City?
Congrats on buying a co-op! Now that you know it’s possible to buy a co-op without a broker, you’re probably asking can I sell my coop by myself too.
Just like buying a coop without a broker is possible but not recommended since the advice of a buyer’s agent is technically free and you’d miss out on the opportunity for a buyer’s broker commission rebate, you shouldn’t necessarily avoid brokers if you’re asking can I sell my coop.
Rather than asking can I sell my coop, you should ask can I get the same exposure to all buyers without paying the standard 6% broker commission.
The short answer is yes. You can sell your coop without a broker. However, it’s better to work with a flat fee RLS listing broker instead of no broker at all.
A flat fee MLS broker can list your home on the RLS, which functions as the local inter-broker listings database where listing brokers offer commission to buyers’ brokers. The RLS is essentially the de facto New York City Multiple Listing Service.
Can I Sell My Coop Without a Broker at All in NYC?
The main problem that traditional FSBO sellers face is the inability to fully engage the 90% of buyers who are represented by agents.
If you don’t want to engage listing brokers or buyers’ brokers at all, then yes you can list as a traditional For Sale By Owner seller and even write “no brokers” or “principals only” on your listing. However, this is ill advised as you will be guaranteed to be boycotted by 100% of buyers’ agents. Unfortunately for you, 90% of all home buyers are represented by an agent so your listing would essentially be off market.
Why Won’t Buyers’ Agents Show FSBO Listings?
Because they have no assurance or mechanism to get paid! No one wants to work for free.
Just because a FSBO seller says they will pay a fee to buyers’ agents does not mean that it will happen. There are no protections in place for agents. Buyers’ agents would literally need to negotiate a custom FSBO commission agreement with each FSBO seller, and even then they run the risk of being disintermediated. It’s too much work!
So How Do Buyers’ Agents Get Paid on Normal for Sale by Agent Listings?
Through the genius of contractual co-broking. All brokerages of a local Realtor or inter-broker association contractually agree before joining to split commission with other members on their listings. Typically the split is a mandatory 50% of the total commission.
As a result, buyers’ agents won’t hesitate to show the listings of their fellow member firms. In NYC the dominant inter-brokerage listings database is the RLS (REBNY Listing Service).
So Can I Sell My Coop Without Paying Any Commission?
Yes, if you use a flat fee RLS listing and sell to an unrepresented buyer, you won’t have to pay any commission upon closing!
If you choose to close with a represented buyer, then you will owe whatever commission you’ve decided to offer buyers’ agents in RLS.
With a flat fee RLS listing, you have the power to choose when, if and whom you decide to sell to. You could never accept an offer during your entire listing period, or simply email us to take your listing off market and as a result never owe any commission whatsoever.
Can I Sell My Coop Without Any Professional Help at All?
You will need a real estate attorney at your side, especially in New York City where purchase contracts are customizable and negotiable.
Moreover, condominiums and cooperatives have building financials and board meeting minutes that should be carefully studied by a real estate lawyer. Furthermore, you’ll need the attorney to review the offering plan on your behalf.
This is especially important for a new development where the sponsor or developer has just written the offering plan.
Lastly, your real estate attorney will manage the closing process, give you an exact breakdown of closing costs and negotiate the contract on your behalf.
So while a traditional listing broker charging 6% commission might not be necessary, it’s extremely important to get access to the RLS broker database through a flat fee broker and to hire a seasoned real estate attorney to guide you through the closing process.
Can I Sell My Coop Without Getting Harassed by Brokers?
You’ve probably heard about infamous cases of bad behavior by brokers soliciting hapless FSBO home sellers.
The ironic thing about selling FSBO is that you’ll be boycotted by all the good brokers (i.e. brokers who represent real buyers) but you’ll be constantly solicited by all the bad brokers (i.e brokers without buyers looking for their next listing client).
If you’re adamant on proceeding with a traditional FSBO, be very careful about revealing your personal contact information. This will be difficult as often times one broker will pose as an unrepresented buyer in order to get your contact information and hand it off to another broker who will solicit you.
Even though real estate websites like Zillow or StreetEasy will attempt to protect and hide your contact info, you will still presumably want to contact and thereby reveal your contact information to unrepresented buyers right?
As a result, it’s nearly impossible to keep your contact information away from cold calling agents because there are companies that specialize in acquiring the contact information of FSBO home sellers! The only way you can avoid revealing your contact information completely to clever brokers is to not respond to any inquiries at all. In which case what was the point of you listing your home for sale in the first place?
Can I Sell My Coop Without Physically Getting Harassed by Brokers?
Unfortunately, it will be very difficult to fully avoid brokers at open houses because anyone can attend by definition. As a result, you will be bound to run into brokers attending alone or “previewing” for their international buyers at your open house.
Be very wary of brokers attending without clients! They’ll be bound to try to corner you in the kitchen and make you go through the pitch book they brought detailing how they’re supposed to be different from the 50,000 other agents in NYC.
The best way to deal with broker harassment is to just immediately decline as soon as solicitation begins. You can tell them you’re not interested and to get out if they have no intention of trying to find a buyer. If they refuse to get out, you can call the police or have a muscular friend escort them out of your apartment.
Disclosure: Hauseit® and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. No representation, guarantee or warranty of any kind is made regarding the completeness or accuracy of information provided.