The buying process – 6 Steps Every Buyer Must Understand
There is usually a total of 6 steps that a buyer must take in order to successfully complete a coop transaction.
Once an initial agreement has been reached between a buyer and the seller, a summation of the transaction and the parties involved called the “Deal Sheet” or a “Transaction Sheet” is sent to all respective attorneys, brokers and principals involved. The seller’s attorney drafts a contract and sends it along with the building’s offering plan to the buyer’s attorney. The buyer’s attorney conducts due diligence on the building, negotiates some key contractual points to protect his client, and if all is well advises the buyer to sign the contract. The contract along with down-payment check is then sent to the seller’s attorney. The seller’s attorney deposits the down payment into an escrow account, then advises seller to sign. When the seller signs, a copy is then delivered back to the buyer’s attorney. Once the buyer’s attorney receives the contract it becomes binding, and the rest of the transaction can proceed.
2. Bank Loan (Mortgage)
Considering bank financing is being used, the buyer must apply for a mortgage loan (by submitting financials and authorizing credit check) as soon as the contract is signed. The bank will then appraise the property, approve the building based on the building’s financials, questionnaire and verification of insurance, then ultimately issue a letter of “Commitment” to fund the loan.
3. Board Approval
In most cases where board approval of the buyer is also required, the buyer must submit an application for the board’s approval in order to buy into the building. The application is usually provided by the building’s management and must be fully completed as specified in the application cover letter then submitted to the board for review. Most boards in addition to reviewing the buyer’s application have a policy to interview the buyer. It is scheduled shortly after the board members have been able to review the buyer’s application. Once the board issues official approval, the transaction is CLEAR TO CLOSE.
4. Scheduling Closing
Once the clearance to close is given by the board there are many final details that get addressed by the lender, the attorneys, the brokers, lean holding bank, building’s attorney and building management. Then ultimately a date is chosen based on the availability of all the parties involved. NOTE: in most closings there are FIVE attorneys present (Buyer’s Attorney, Seller’s Attorney, Building’s Attorney, Buyer’s Bank Attorney who brings the money and documents to closing, Lean Holding Bank’s Attorney who comes to collect a payoff check and release the lean) then there are the main people involved, the Buyer and the Seller. The buyer’s attorney informs the buyer as to what checks and/or documents to bring to the closing.
5. Final Walk Through
Withing 24hrs of closing the Buyers must do a walk through of the property to make sure it is being transferred in the condition specified in the contract of sale.
Closing entails sitting at a large table with all the attorneys present and signing a lot of documents with the guidance of your attorney. Then in the end keys/possession transfers hands and the property officially belongs to the buyer.