COOP Financials 101

If you buy me a glass of wine, I can sit down with you for an hour and teach you how to read a building's financials (recently on the boards there has been a potential purchaser who had two years of co-op financials and still couldn't figure out where the last maintenance increase was going).

However, the financials of a building are private information, and it's fairly unusual to get them released before you make an offer. (Especially since 90% of the potential buyers who want to see numbers very early don't end up being buyers.) The trade is generally that you submit your personal financials, and then you get to see a building's financials.

You could try to work with a broker who concentrates very hard on one neighborhood and just see what's built up over time in his/her collection.

ali r.
DG Neary Realty

In my experience it may be difficult to get the financial statements before submitting a formal offer. However, if you're actually able to get your hands on them, here are a few articles that may be helpful:

NYT: That Riveting Co-op Financial Statement
http://www.nytimes.com/2012/07/01/realestate/getting-started-that-riveting-co-op-financial-statement.html

Cooperator: Understanding your Finances
http://cooperator.com/articles/2450/1/Understanding-Your-Finances/Page1.html

NYT: Red Flags in a Coop's Financial Statements
http://www.nytimes.com/1999/03/07/realestate/your-home-red-flags-in-a-co-op-s-statement.html

My broker gets the financial statements for any building housing a unit I'm seriously considering making an offer on (this is before I submit my financials). It doesn't seem to be a big deal. The seller's broker sends them over.

General practice is as Ali says: you review financials for a coop once a price is tentatively agreed upon but before the contract is signed. It is not something you ever do in a "fast way" no matter how "organized" you are. Info can be buried and needs to be discerned by closely--very closely--looking at the entire statement. Devil is in the details. It is also a joint process: you, your attorney, and for what it is worth your agent may have opinions you wish to weigh or info that can explain some of what the numbers are reflecting. Reviewing financials are part of due diligence and you don't race through any aspect of due diligence.

I (via my broker) was able to get financials for all the buildings I was interested in before putting in an offer or giving away any of my personal financial info. I didn't automatically request them for every building I saw (20-30), but only the ones that I went back to (about 6 of them). Agree w/ Wetlands: seller's broker should be happy to provide them. (possible red flag if they're reluctant to!).

Aaron, how is it a red flag? On the sell-side, agents tend to take our cues from our sellers (and the boards of their buildings) about how nonpublic information should be communicated. If the board and seller are particularly laid-back about the release of the financials, that might be a cue that you're going to face any easy-going board, but I'm not sure you can infer all that much from the contrary case.

and certainly if a building has a very material, active issue (such as an upcoming assessment for a renovation project) I would say that should be disclosed by listing broker at first contact.

ali r.
DG Neary Realty

Aaron, I'd agree with Ali that some buildings may be happy to send the financials over, but many coops are more concerned with privacy. In my experience, buildings have been less forthcoming to send out their financials to anyone that asks.

Are there ways to use ACRIS to determine Building Mortgages and types?

I think the only time Ive seen detailed mortgage information on acris was while searching individual CONDO UCC filings.
Of course I defer to NWT.

BTW, I heard a rumour about bedbugs at 98 riverside dr. So don't look there FALCO...

LOL

Sure, if you know the name of the cooperative corporation, you search under that name and that building in ACRIS and you can get the size and date of the mortgage easily. In many cases, you can see the mortgage itself and pick through the verbiage to see the terms.

Search under block and lot #, don't need corp name. Pick the "mortgage and ..." option in ACRIS. You should be able to see the entire mortgage doc. In a few cases, shareholders of each apt is listed by name.

i have never heard of a coop board getting all secretive about building financials. it's not exactly "non-disclosure" information.

i have always gotten reasonable answers to simple inquiry re reserves, anticipated assessments/upcoming work to be done, lawsuits, etc. why would any selling broker hide this? if the info is good, why hide it? if the info is bad, why go to contract with buyer assuming all is ok, only to find out otherwise and walk or, at least, seek to renegotiate?

if you have viewed and shown interest in an apt, it behooves the selling broker to give you at least a verbal on key financial issues, and anything you might find negative or positive. prior to signing you will have a lawyer due dilly the building, and see all in the financials, minutes , etc.

brokers who wont provide accurate financial info on apts they list, are foolish, and risk a disservice to their selling clients.

if a selling broker tells me (potential buyer) that financials and other relevant info, cant be discussed until a contract is in play, that broker

Yikes, there's a difference between sending over a copy of the audited financial statements and the selling broker mentioning that there's an upcoming assessment. I haven't seen situations where boards or brokers are willing to send over copies of the financial statements in advance of a board package.

Has anyone here received full audited financials (of the type that Falcon would require for his analysis) prior to submitting a formal offer to the board?

I've received a few years of audited financial statements on request before making an offer, and in my recent experience, sellers' brokers have been listing current and upcoming assessments on the show sheets with the other costs (maintenance, financing). As someone else pointed out, it's stupid to hide this information, as buyer and buyer's lawyer will learn of it anyway before contract, and it could break a deal, costing everyone time, and the seller money.

@jsw: The board may not give out financial statements to just anyone, but certainly the listing agent will have a copy of them in advance along with the OP (at least an agent who is on the ball).

Whether the listing agent will fire off the docs when asked is a crap shoot, but I would estimate that 70-80% of the time we can get them. Many agents feel that buyers will be confused by a co-ops financials and will only send them off to the buyers attorney. But most NYC buyers who ask are usually sophisticated enough to make some sense of them and it can help them get more comfortable with their bid.

I have found that when an agent refuses to disclose them upon request, it creates negative energy, sets a bad tone for the ensuing negotiation. A buyer spending potentially millions of dollars on a home is entitled to see such information if it is readily available. Most listing agents understand this and oblige, occasionally offer it up before it is requested.

Keith Burkhardt
The Burkhardt Group

whatever the case, the selling broker would be foolish not to supply a buyer considering making an offer with any pertinent due dilly details requested, especially uniquely positive or negative details.

lawyer will discover all ultimately. good details help sell the apt, bad details hidden slow deals or cause walkaways.

i have bought several coops and always had an accurate understanding of due dilly items prior getting contract, details verified by my lawyer prior to my signing.

couldn't be more simple...no cues or other crap...and totally a red flag if selling broker says they cant divulge info that will be found in lawyer's due dilly

Late to respond to this, and KeithB and yikes have pretty much said it: The only reason it would be a 'red flag', and a pale one at that, is what yikes points out: if the listing agent won't produce the financials prior to an offer, it makes me wonder what else they're not being forthcoming about, and how much more due diligence I'm going to have to do. It's more of a reflection on the agent than the place being sold, since it should all come out in the due diligence.

jsw363: Yes, I obtained 2 years audited financials (in 1 case, 3 yrs) prior to making a serious offer. My broker requested them of the selling broker, who produced them. I'm a finance person, and can read financials, and this was made clear to the brokers. My lawyer's due diligence confirmed what I had read, and answered any add'l questions.

If you get the feeling the seller/broker/agent have something to hide in not anteing up the financials, it's probably best to walk. It could be that they're just needlessly private about that stuff, though.

It can be worthwhile just googling around. If the sponsor owns more than 10% of the shares, then there're annual offering-plan amendments that include financials. It's a big chore to get those from the Attorney General, but they might be at www.offeringplanet.com or on the managing agent's site. E.g., Midboro has quite a few.

For instance, http://97.74.35.99/243wea-21stamendment.pdf. Besides the financials, the amendment includes interesting stuff like the sponsor's rent roll.

It's not as difficult as many people believe.
A good broker can get the financials in 1 hour

You are one amazing ferret, NWT.