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I am interested in buying a coop in a building that has a sponsor who still owns a large number of units. The single sponsor owns 67 of 205 shares (32.7%) - 18 of 59 apartments. Is this a problem for me or any other borrower in obtaining a loan? Is this a major red flag?
I'd call it a yellow light. It is possible that that level of sponsor concentration will prevent the big banks from lending to the building -- your mortgage broker can tell you that over the phone -- so that you and other borrowers have to go to portfolio lenders (who probably will charge higher rates) or pay cash.
Also, you want to assess how that big shareholder throws his/her weight around in the building -- shareholders with rental tenants often have a different POV on, say, renovation, than residential shareholders.
DG Neary Realty
yeah I agree yellow light. Owner occupant level of the non sponsor apartments will be important.
Check out discussion of Beekman Regent where sponsor of condo building still owns significant percentage of building: http://streeteasy.com/nyc/talk/discussion/31701-rental-at-351-east-51st-street. Make sure to check out lawsuit mentioned by NYCNovice as well. Consistent with front_porch's input, potential sponsor domination of the board might be something to be wary of.
Difficult to get financing but Hudson City Savings Bank, Apple Bank & Astoria Savings will do it. However, you should consider the desirability of such a property from a resale perspective.