Buying a Coop Without a Broker in NYC

Buying a NYC co-op 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.

Why Is Buying a Coop in NYC Without a Broker a Bad Idea?

Why Is Buying a Coop in NYC Without a Broker a Good Idea?

What Are the Steps for Buying a Coop in NYC Without a Broker?

Sellers in NYC typically pay a fixed commission regardless of whether you are represented or not. Therefore, the cost of your representation is included in your purchase price!

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 advice and guidance for one of the most important and expensive purchases of your life – when it doesn’t cost you anything out of pocket?

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 when it could mean the difference between screwing up a board interview or 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.

The typical 6% broker commission paid by the seller will automatically be split equally with a buyer’s agent. If for some reason a buyer decides to forgo representation, the listing agent will keep all 6% of the commission.

The only way for you as a buyer to gain some of the broker commission is through a commission rebate from your buyer agent.

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.

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.

“In-contract” is the only status update available on public search websites like Agorafy. You won’t be able to easily discern whether a listing already has an accepted offer or whether it has a contract out unlike a buyer’s agent who has access to this data in RLS (REBNY Listing Service).

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.

Or

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 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 at the end of the closing!