Coop board requiring 18 months escrow

If you say it's fair to ask, sounds like it wasn't a surprise. If you are truly having second thoughts, then use this as your reason to walk. It is not reasonable to ask for discount from the seller in my opinion, if they are desparate to sell, maybe they'll go for it. We had to put 2 years in escrow on our first apartment - I was bitter at the time, but looking back, it was the right thing to do.

Sure, it could be a negotiation tool. Talk to your attorney and broker to get a sense of how much leverage you actually have with the threat of walking out. Your negotiating power depends on the seller's situation, the local market, and your ability to find a replacement housing plan elsewhere (i.e. a different purchase). Keep in mind:

Any contract amendment would need to be resubmitted to the coop, I believe. And to your lender, assuming you're financing. Either party could object to this type of 'seller rebate', depending on how it's structured, though this is probably not a huge risk.

If cash flow is the concern (both yours and presumably the coop board's), I assume you're financing 80%? On that basis, remember that reducing the purchase price by the escrow amount will only get you 20% of the escrow amount in cash saved (reduced down payment) and the rest will get you a minor reduction in monthly mortgage payments. You'd still be looking at coming up with 14.5 months of maintenance in addition to your planned down payment and closing costs.

On another aspect -- be sure you know the exact terms of any adjustment or reduction in the escrow requirement -- would the coop hold 18 months maintenance until you sell, requiring you to contribute more every year when maintenance increases? Is it a fixed amount held until you sell? (What interest accumulates?) Or do you get chunks of it back over time assuming you demonstrate a reliable payment record, or improved finances, etc.?

why is it fair to ask for 18 months of escrow?

What do you mean "escrow"? Would you be permitted to draw against it for payments each month until the balance is zero, or at the end of 18 months do you get the lump back? Or does the coop keep it in perpetuity until you sell? If the coop were to permit you to draw against it for 1.5 years, or return it in 1.5 years, those may be tolerable and reasonable conditions. Seems excessive to hold the money forever even if your financial situation improves and/or you have developed a proven track record of responsibility for payments at the coop.

I would not be willing to go through the entire reapplication/approval process that would result from an altered contract. More delay, more expense, more pain in the neck. I'd instead explore the legality and willingness of the seller posting the escrow for you. The coop in unlikely to care where the escrow comes from--they probably have no mechanism in place to check that since it doesn't matter to them. The likelihood of the seller agreeing to reduce the price by giving you an outright refund seems remote--but if this were the path followed I'd certainly be asking my lawyer about how this can be done without altering the sales agreement.

The last two deals I did that required escrow each required far more than 18 months, so I guess you can consider yourself lucky in that regard.

Interestingly, they were both all-cash purchases.

As far as terms, I assume, KW, that a lump of 18 months is being deposited, with the lump to be returned under X conditions. Those conditions are often after three or maybe five years of being a good shareholder -- I can't imagine that this money is coming back as quickly as 18 months from closing.

I personally find this a strong seller's market, so I would not advise a buyer client to bring escrow into a negotiation that already had a handshake on price -- but every deal is different, so consult your agent and your attorney, who know your specifics.

Also bear in mind that *someone* has to write the escrow agreement, and that someone is probably the building's attorney, and that you as buyer are probably going to be charged for that lawyer's time.

ali r.
DG Neary Realty

>but I've been having second thoughts about the apartment. I'm allowed to walk from deal now

Walk.

What Ali says. I guess my 18 month return of funds was optimistic. Curious OP: why are you having second thoughts about the purchase? That is perhaps more important to address.

So where is MIBNYC when you really need them? I would love to see the apoplectic seizure (in CAPS) he would have over this thread. Pure 100% entertainment value...

Wow.

You've found yourself a REALLY sympathetic board.

Consider yourself lucky, and realize that you're probably over-extending yourself into an apartment you really can't afford.

Don't expect a similar deal elsewhere if you walk away from this one.

Ali:

1. if the last two deals you did involving maintenance escrows
2. were all cash and required their buyers to deposit well over 18 months maintenance escrow

3. then you have a civic duty

4. to report the directors of those two Coops
5. to the NYC Department of Mental Health