Did you know that there are more than eight thousand co-ops in the United States? Within these buildings, there are more than one million homes!
Housing cooperatives, also known as co-ops, have been part of the American housing sector for decades and seem to become more popular with each passing year.
However, it can be difficult to get into a co-op. It can even be difficult getting out of your co-op. Luckily for you, if you're trying to figure out how to sell a co-op apartment then you've come to the right place.
So keep on reading and we'll take you through everything that you need to know about selling a co-op apartment.
What Is a Co-op Apartment?
Before we get into how to sell a co-op apartment, let's first go over what a co-op actually is. A co-op is a type of homeownership that can be found in major cities in apartment buildings.
The building is owned by a corporation that is composed of the residents in the building. When you buy a co-op apartment, you're not just buying an apartment. You're also buying shares of a nonprofit corporation that lets you live in the building.
Every person who lives in the building is a shareholder. The bigger your apartment is, the more stake you have in the building. Everyone in the building will share the expenses and will be responsible for maintaining the quality of the building.
With a co-op comes the notorious co-op board. A co-op is governed by a board of directors who come up with bylaws that outline the rules for the building.
Some co-op boards have a bad reputation for being power-hungry and draconian.
Now that we know what a co-op apartment is, let's go over how to sell one.
Hire an Experienced Co-op Listing Broker
The easiest and quickest way to sell a co-op apartment is to hire a co-op listing broker. When you hire a full-service broker, you can cut down on high closing costs and only pay a commission of one percent.
A good listing broker will handle the costs associated with marketing your property. They will also bring in professional photographers to take photos and draw up floorplans with a draftsman.
If you want to sell your co-op quickly and with as little hassle as possible, this is the best way to go.
You can find full information here about what it's like to list your co-op home.
Hire a Flat Fee Listing Broker
If you are planning on doing a "For Sale By Owner" situation, then you will still need some kind of broker. This broker will be able to access the RLS broker database so that you can offer the commission to buyers’ agents
With a one-time flat fee, you can get this accomplished. A local agent can list your home in the local inter-broker listings database. They can also put your listing on popular real estate websites and even newspapers.
You'll be forwarded or copied on all inquiries. This means you can directly manage the sale process.
You'll only need to pay a commission if you choose to close with a buyer who is represented. If you and the buyer aren't represented then you won't need to pay any commissions.
Set a Realistic Initial Listing Price
No matter who's listing the home, any property is going to sell at the right price. The lower you list your home for, the faster it will likely sell. If you're planning on selling quickly then you'll want to be as realistic as possible.
However, if you have time on your side, then you can list your home for a higher price than you might otherwise expect to get. You can then wait and see if anyone takes the bait. If not, then you can lower your price slightly and wait until you get bids.
A broker will try to get you to list your home on the low end so that they can get it off the market and make their commission.
Be Available to Show Your Home
This is a major issue for most co-op owners. It can be very difficult to take off from work during the day to show your apartment. This is why it can be helpful to have an agent handle this for you.
If you live in a big city, then you might have interested buyers from foreign countries. These people tend to only be in town for a few days before they need to go back home. If you don't have the availability to show them around your home then you might end up missing out on a big sale.
If you're serious about selling your co-op apartment then you want to make sure that someone is available to show your home.
Hire an Experienced Real Estate Lawyer
During the sale process, you might want to hire a real estate lawyer as soon as you can. Ideally, this person can even review the exclusive listing agreement before you sign with your broker.
Your lawyer will help you draft a contract of sale so that it's ready to send to the buyer's lawyer before an offer has been accepted. This way, you can be ready when it's time to sell and get the deal under contract.
Give the Buyer One Week to Sign a Contract
If you've priced your property correctly, this step shouldn't be a problem at all. If you've underpriced your property by a little bit then you'll likely be the one with the upper hand as you'll be getting tons of offers.
Because you'll have interest coming in from all different places, you can demand that the buyer speeds up the contract diligence and signing process.
Some sellers in hot real estate markets will send out contracts to more than one buyer. This way, whoever signs first will get the deal. You might offend some buyers but you're just doing your due diligence.
After all, nothing in real estate is final until both parties sign the contract.
Minimize the Number of Deal Contingencies
Buyers love to add in contingencies because it gives them multiple exit strategies throughout the closing process. However, as the seller, you have the power to limit the number of deal contingencies.
A good real estate lawyer will help you negotiate your contract so that the buyer's ability to exit the deal is limited. This might mean negotiating the appraised value contingency clause and the financing contingency clause in your favor.
What Is the Financing Contingency Clause?
The financing contingency clause is a statement in the contract that allows the buyer to exit the deal with their earnest money deposit if they can't secure financing.
Buyers love to use this clause because they can get deals under contract before they even have the money to actually buy the property.
What Is the Loan Amount Contingency?
Banks are only going to lend against the appraised value of a home. This makes the appraisal very important for buyers who are trying to get financing.
The appraised value could end up being lower, higher, or equal to the listing price. If the appraisal value is lower then the buyer might not be able to get all of the financing that they were expecting.
Buyers will use this contingency that says they can pull out of the deal with their deposit if they can't get the full financing needed.
A seller can't control what value the appraiser will come up with and needs to prepare for these variables.
Your attorney will help you with contract negotiations.
Understand Co-op Financing
It's important to understand some financing basics when it comes to selling your co-op. For example, a buyer can't get a traditional mortgage when they want to buy a co-op.
This is because co-op owners don't actually own any real estate. This menas that the financing process is going to be different from your traditional mortgage application.
Instead of applying a home mortgage loan, the buyer will need to take out something kown as a share loan. During the application process, the buyer needs to give information to the lender about how the co-op runs.
The lender then needs to look at hte board of directors and the underlying mortgage loan. Some co-ops have existing relationships with certain mortgage brokers. This can make financing easier for your buyers and speed up the whole process.
Make sure that you find out if your co-op has relationships with local lenders.
Be on Your Co-op Board
The co-op board has a great deal of power over who can live in their building. They can reject new residents without even needing to give a reason.
This means that you can't just sell your home to the highest bidder. You need to sell your home to someone who your board approves of.
If you're trying to sell your co-op apartment, then you definitely want to try to get onto your co-op board. This will help give you more power over who you can sell your home to.
The sooner you know that you want to sell your apartment, the sooner you can start campaigning to be on your board.
And if you're not able to get on your board in time then you at least want to make friends with the people who are on the board. If you have enemies on the board then you might be in trouble.
After all, the board can reject your buyers as many times as they want.
Streamline the Co-op Purchase Application and Board Interview
You want your top buyer to be approved the first time. Otherwise, they're going to have to keep applying to be approved or you'll have to try and find a buyer who will be accepted by the board.
You know the board better than anyone else involved in the sale. Make sure that the buyer knows what the board is like and how to behave when they get interviewed.
Is the board casual? Are they stuffy and obnoxious? The more your buyer can be ready, the higher their chances of getting accepted into the building will be.
When it comes to the purchase application, some boards are more formal than others. Some co-op boards out there will automatically reject anyone who even has a typo or other error. Some boards, on the other hand, won't even read the whole application.
It's usually a good idea to assume that your co-op board is going to scrutinize the whole application very thoroughly.
It's a good idea for your buyer to not ask any questions at the board interview. Even if the board asks them if they have questions, the buyer should say no.
Some boards use this as a test to see if a potential buyer will be difficult when they join the co-op.
The Importance of Knowing How to Sell a Co-op Apartment
Hopefully, after reading the above article, you now have a better idea of how to sell a co-op apartment. As we can see, a lot is involved in selling a co-op. However, by following our guide, pricing your home right, and being as prepared as possible, you should be able to sell your home quickly while turning a nice profit.
Are you looking for other helpful real estate articles like this one? If you are then you should make sure to check out the rest of our site today for more!
