Board packages

"This made me wonder, for anyone who has ever served on a board, how much time and effort do you typically spend reviewing a board package? Do you typically just glance through the financials to make sure all the numbers make sense, skim through the reference letters, and make sure all the documentation is complete, or is there a much more thorough evaluation? Are there particular pieces of the package you pay the most attention to?"

When I first receive the package, I give it a cursory once-through just to make sure nothing is missing.

Then I brew a nice pot of tea, slip into something comfortable, put some classic Dionne Warwick on the stereo (the Burt Bacharach years) and really start to dig in. I really try to get a sense of the PERSON behind the information, as well as how this person measures up as an applicant.

I give it about an hour. Then I wait 48 hours before calling the other board members to set up a meeting. Typically, though, we wait until the next regularly scheduled board meeting to discuss any applicants.

I look very closely at the financials, particularly the bank statements. I make sure the deposits add up to the salary declaration. I look for any regular deductions or payments that might be a loan that wasn't declared (we've spotted a lot of undeclared student loans and such this way, as applicants often try to make their debt load look lighter than it really is).

I don't put too much weight on the credit score, particularly in this economic climate. Anyone who was unemployed for a long period is bound to have their credit trashed, even if they've regained employment and cleaned up their financial picture. And banks these days seem to be playing bullshit games with people's credit scores.

I put a lot of weight on employment history, industry tenure, and recommendation letters.

"I brew a nice pot of tea, slip into something comfortable, put some classic Dionne Warwick on the stereo (the Burt Bacharach years) and really start to dig in. I really try to get a sense of the PERSON behind the information..."

This is the first time I heard of psychic abilities being used in the evaluation process.

"pot of tea" is redundant in Fort George

Matt needs the tea after he's walked up the stairs to his apartment carrying that heavy board package.

The board package is hand-delivered to my door by the managing agent.

You could at least meet him/her downstairs and save the poor managing agent the shchlep up the stairs.

Matt, thanks for the very helpful response. It's good to hear that you do take the time to get to know the applicant through the package, rather than just checking the numbers.

It's interesting you mention paying so much attention to the bank statements. I hadn't thought those would be so important other than checking the total amount on deposit. As far as using bank statements to confirm salary, won't the deposits tend to understate actual salary due to deductions?

I think he's looking for that one time 100K deposit.

I thought the management company checks the financials and the board checks if they like the person/s based on their letters, etc.

Management company just makes you give them copies of everything and then charges you $1000 for it.

dtc1804

as i learned the hard way, what they are looking for is proof that your balance is a result of consistent earnings of some sort and not, uh, an infusion of capital from family elders to make you look like less of a loser.

"As far as using bank statements to confirm salary, won't the deposits tend to understate actual salary due to deductions?"

That's why we ask for copies of pay stubs too.

"I thought the management company checks the financials and the board checks if they like the person/s based on their letters, etc."

Management companies have absolutely no role in the decision-making process. They do no screening or vetting. Their only function is to act as the go-between between the seller's agent and the board.

Their role is pretty much limited to making copies of the package and distributing it to the board members.

How does a typical board know for sure that the documents in the package have not been altered or made up all together?

@NYCMatt You should know that the brokers make the copies of the package and the managing agent verifies that all the information is in the correct order in the package. As a broker submitting a board package, having it clear management is a crucial first step in the process.The next milestone is when the board reviews the information and schedules an interview. If you get this far it's more or less a shoe-in unless you do something crazy at the interview. I bet Alan has some interesting suggestions if you did decide to "throw" the interview. (;

Keith Burkhardt
The Burkhardt Group

>How does a typical board know for sure that the documents in the package have not been altered or made up all together?
It's not impossible but would require some work to do. It may be slightly easier in an all cash deal where a bank giving the mortgage isn't scrutinizing many of the same docs.

Things have to add up and match or your asking for trouble.
On a cover sheet, answer obvious questions a board may have and/or summarize tricky manuevering the backup docs.

Keep in mind most board members are just as bright or dumb as you. Follow every instruction. This tells them you read and understand rules.

I think credit score should be one of the most important things. It tells a lot about how someone deals with their financial responsibilities.

MATT
>I don't put too much weight on the credit score, particularly in this economic climate.

But given if in this climate the score was still high, wouldn't that trump most other things your looking at?

EDIT
It may be slightly easier in an all cash deal where a bank giving the mortgage isn't scrutinizing many of the same docs.

TO
It may be slightly easier in an all cash deal where there isn't a bank giving a mortgage to scrutinize many of the same docs.

If a board does see anything that would cause them to raise questions, how will they typically deal with it? Will they often go back to the purchaser and ask them specific questions once they review the file, will they ask them in the interview, or will they tend to draw their own conclusions and make a decision based on that rather than going back for further explanation?

"But given if in this climate the score was still high, wouldn't that trump most other things your looking at?"

No.

That just means they were lucky enough to keep their jobs AND their good credit.

A good credit score, in my evaluation, no longer trumps anything anymore.

"If a board does see anything that would cause them to raise questions, how will they typically deal with it? Will they often go back to the purchaser and ask them specific questions once they review the file, will they ask them in the interview, or will they tend to draw their own conclusions and make a decision based on that rather than going back for further explanation?"

Depends.

If we've pretty much decided you're a "no", it just ends there.

If we want more information, we will never contact the applicant directly; we will go through the proper channels of contacting our managing agent, who will then contact your broker, who will then contact you.

@dtc1804
If we have any questions,and we sometimes do, we will have our managing agent convey them to the broker. We would never draw any conclusions without documentation or presume anything prior to an interview.
By the time the purchaser has made it to the interview, they're more or less approved. In my 10 years sitting on our board we've only rejected one person after an interview. Loads before, but just one after.

>No
That just means they were lucky enough to keep their jobs AND their good credit.

Couldn't disagree more. Credit score tells you a person's financial personality more than anything else.
If I had something to rent someone and one was a banker with a salary/bonus that represented 10% of the rental amount with 2 years of rent in cash in the bank, and a credit score of 520
vs
A school teacher with little cash in bank and a salary that represented 30% of the rental amount and a credit score of 780

No contest, schoolteacher is a slam dunk.

>>I don't put too much weight on the credit score, particularly in this economic climate. Anyone who was unemployed for a long period is bound to have their credit trashed, even if they've regained employment and cleaned up their financial picture. And banks these days seem to be playing bullshit games with people's credit scores.<<

<

Some boards disaggregate the packages with certain board members seeing full financials and others seeing summary ratios only. A very thorough board will do a forensic evaluation of the financials. Certainly most boards at this point will Google and Facebook you. So it's tough to come up with any hard and fast rules.

My best attempt: You want to try very hard to make each piece stand on its own, if it has to.

ali r.
DG Neary Realty

"So does your board still get (and charged the applicant for) a credit score? If so, why?"

Yes. Because not all board members agree with me on this.

"Credit score tells you a person's financial personality more than anything else.
If I had something to rent someone and one was a banker with a salary/bonus that represented 10% of the rental amount with 2 years of rent in cash in the bank, and a credit score of 520
vs
A school teacher with little cash in bank and a salary that represented 30% of the rental amount and a credit score of 780

No contest, schoolteacher is a slam dunk."

****

Credit score USED to be a reliable indicator of a person's financial personality. Until the recent recession threw people out of work for up to two years ... most through no fault of their own ... and those who are now back on track are stuck with suck-ass credit now for the next seven years.

This is why I want to see the WHOLE financial picture, not just an impersonal numerical aggregation by the credit bureaus.

"This is why I want to see the WHOLE financial picture, not just an impersonal numerical aggregation by the credit bureaus."

@NYCMatt- Our board agrees completely.

And incidentally, I've approved applicants with FICOs in the low 600s, and rejected applicants in the high 700s.

I'm truly sorry for people who lost their jobs and were late or defaulted on their bills. At the same time, I think it's fair for them to wait at least the seven years it takes for this information to fall off their credit report before buying in a co-op. Or at least in mine. We're a small building. A deadbeat would be a disaster, and even a habitually late person can create cash flow issues.

On the other hand, if a person's credit score is low because they do not have much credit history, but they have a solid employment and have always paid their rent/maintenance on time in their previous buildings, then that is an entirely different story.

A good credit score does not necessarily mean a good candidate, but a bad credit score is definitely a big red flag on its own.

Let's say an applicant lost her in July 2008 through no fault of her own. How many months into unemployment would her credit be ruined? July 2009? December 2009? Now April 2011, she has enough money to buy an apartment all of a sudden?

"A deadbeat would be a disaster, and even a habitually late person can create cash flow issues."

What I'm hearing is, "we're not smart enough to glean from a board package the difference between a true deadbeat and a responsible person who lost his job for 16 months but is now back on track, and we'd rather just look at a numerical score prepared for us by the credit bureaus."

"Let's say an applicant lost her in July 2008 through no fault of her own. How many months into unemployment would her credit be ruined? July 2009? December 2009? Now April 2011, she has enough money to buy an apartment all of a sudden?"

Maybe she does.

Maybe she got an early bonus.

Maybe her new job pays a crapload of money.

Maybe she got an inheritance.

None of these would necessarily translate (yet) into a cleaned-up credit score. And I think it's a bit much to tell people who CAN afford to buy ... who ARE responsible ... that they have to wait the better part of a decade until the credit reporting agencies catch up before they should buy a new home.

"On the other hand, if a person's credit score is low because they do not have much credit history, but they have a solid employment and have always paid their rent/maintenance on time in their previous buildings, then that is an entirely different story."

Sorry Lad, just catching up.

So you WOULD hold it against someone who lost their job through no fault of their own during the worst depression in 70 years.

Why?

NYCMatt, how would you even know if the applicant lost their job through no fault of their own? Maybe they lost the job during the recession, but it was just a coincidence.....they're actually an awful employee.

Selborne, this is where the employment history and letters of recommendation kick in.

Awful employees don't usually get promotions, or stay with the same company for any considerable length of time.

Not only that but what if their skills are in an industry that will need less and less of them over time. They might have been unemployed through no fault of their own but they might be unemployed again at some point through no fault of their own.

You all can 'what if' and 'let's say' yourselves to death, but it's the total package that counts. Finances (clearly the most important), employment history, letters of recommendation both social and business, the whole lot. As we all know, it's not a simple, mechanical decision.

NYCMatt, that does indeed makes sense, as does bob420's comment.

correction: Should have said NYCMatt, that does indeed make sense, as does broadbent's comment.

"Maybe she got an early bonus.

Maybe her new job pays a crapload of money."

Yet that person with such high income cannot survive 16 months of unemployment without trashing her credit score? In any case, the chance of her missing payments in the future would be high. = bad credit score.

"Maybe she got an inheritance."
*Maybe*, if she pays in *cash* and have enough *cash* left over for 2 years of expenses.

To clarify, I'm not holding it against anyone that they lost their job. I'm holding against them that they defaulted on or did not pay their bills. I care much more about what the credit report SAYS than what the numerical score is (though the numerical score does have some relevance).

If someone submitted a board application that showed 18 months of unemployment but an excellent credit score, no late bills, solid savings, and solid landlord/prior building references that indicated no late payments, I'd give them strong consideration and vote to move forward with an interview if the rest of the package is solid.

But if someone submitted a board application that showed 18 months of unemployment, a low credit score, and several late or defaulted bills, I'd recommend automatic rejection even if they intended to pay cash for the apartment and had two years of liquid savings in the bank. I don't care how good their new job is or how much money they have. They have defaulted on financial obligations in the recent past, and that's enough for me to say no.

My #1 criterion when evaluating board applicants is "will this person pay their maintenance on time every month without fail?" In a small building, that's the way it has to be. One deadbeat is enough to depress all of our property values and make it hard for everyone to get a mortgage or sell their unit.

Thank you lad, you illustrated my point so much better than I did.

would NYCMatt approve NYCMatt if the application was hand delivered to NYCMatt's door?

Sjtmd--that is the problem with Co-op boards is most members do not have jobs that make enough to qualify them to purchase their same apartment today. Thus they take out their career frustration on the younger people who out-earn them but are prevented from buying into alternatives like new construction due to zoning and "preservation" enforced by the same generation. Thus Manhattan has turned into half playground for rich, half retirement home.

It's the opposite in my building. Most of them bought in the last five years or so. At every annual meeting one or two of the new owners run, and we elect them. We old-timers have done it already, mostly when we were fresh meat ourselves.

In my building the board president is someone who was a VP in financial services, involuntarily retired a number of years ago, and seems to look at the coop as his "job" (which can be good) and as his fiefdom (which can be bad). He recently totally screwed up on prospective purchasers (allowing a board interview when they should have been turned down outright ) when he had, in fact, a distinct conflict of interest.

Most other board members have been so for a long, long time.

And Matt's building was so "exclusive" that he bought his apartment for less than his annual income (according to one of his posts). And, as you read his posts about being a coop board memberin his walk-up building, you do get the feeling that he gets off on his "power".

"To clarify, I'm not holding it against anyone that they lost their job. I'm holding against them that they defaulted on or did not pay their bills."

And yet, that's inevitable if you're unemployed for any significant length of time.

"Yet that person with such high income cannot survive 16 months of unemployment without trashing her credit score?"

Who said she had a high income BEFORE?

"And Matt's building was so "exclusive" that he bought his apartment for less than his annual income (according to one of his posts)."

I never said my building was "exclusive".

I bought the apartment for $310K.

"Who said she had a high income BEFORE?"

Ok, so this person with a bad credit score due to being recently unemployed from a medium income job, all of a sudden got a high paying job (perhaps even with a big signing bonus) wants to buy a place in your building and you think that's even worth considering? Are you hoping the applicant can hook you up with whatever drugs she's selling?

OK Matt, sure. LOL

"Ok, so this person with a bad credit score due to being recently unemployed from a medium income job, all of a sudden got a high paying job (perhaps even with a big signing bonus) wants to buy a place in your building and you think that's even worth considering?"

And why WOULDN'T she be worth considering?

Matt, you're usually so sensible ... why would you pay $310K for a walkup in Fort George?

I'm not in Fort George, Alan.

Please stop trying to piss me off.

"Matt, you're usually so sensible ... "

...and so imaginative too! He's reviewing the board package of someone who lost her medium income job in July 2008, used up all her savings and ruined her credit score after 16 months of unemployment. She then miraculously found a new job about *a year ago* that pays *much* higher (with a huge signing bonus to boot). Within that short year, she saved enough for a down payment plus xx-months of expenses.

Theoretical question: presumably a big inheritance passes co-op muster (old money, and all that). Are there circumstances in which a lottery winner could get into a hard-to-get-into co-op? For instance, an applicant is well-educated at top schools, employed in a six-figure job, etc. (say, a lawyer or something) but would not otherwise be able to afford a $10+ million apartment absent a Powerball win. This is not a trailer park Beverly Hillbilly. Would such a lottery winner ever get into one of the rarefied buildings?

What about self employed people? I pay myself once or twice per year.

I'm late to this party. But I offer my two cents as someone who served on an admissions committee in a nice-enough-but-nothing-overly-special Chelsea coop for many years. We reviewed board packages very thoroughly. Packets had to be 100% complete. We cross-checked documents to be sure everything jibed. We carefully reviewed bank statements, deposit and withdrawal histories. Tax returns were studied and deductions noted and sources of income scrutinized. Reference letters were indeed all read. In short, every page in the packet was reviewed and we weren't shy about asking for additional documents if we had any questions. So, in response to the original question, treat the board package very seriously and assume it will be closely and thoroughly reviewed. And yes, neatness counts.

Under what circumstances would you find someone with a bad credit score, 2 years out of work as Matt says in his example, but have lived rationally prior to the two years, such that the bad credit score is only attributable to being out of work 2 years which was "no fault of their own"?

Oh, inheritance, well that certainly cleans up the bad credit score person's character. Let him in!

I suspect one of the posters on this thread has a bad credit score.