The NYC co-op boards do not have to share the reasons for rejecting buyers and cannot be challenged on their decision unless you can prove their decision is discriminatory. But even with the lack of transparency, it’s possible to deduce some of the reasons a co-op board may reject you as a potential buyer. These reasons include (but may not be limited to):
The co-op boards have some of the most stringent financial requirements, which include Debt-to-Income (DTI) ratios lower than what mortgage lenders require, adequate post-closing liquidity, and a consistent income stream. Basically, this includes anything in your financials which may alarm the board that you will not be able to maintain your yearly monthlies regularly or have enough room in your finances to cover any special assessments for capital improvements.
2. Credit History
Your credit history is tied to your finances or, more accurately, how you handle your finances. If your credit score is low, it may indicate a weak financial history and issues with debt management, which may be a red flag for the co-op board. However, if your credit is moderately bad and you can justify the reasons behind it to the board in the interview and have solid financials, you may avoid rejection based on that.
3. Wrong Agent
If your seller is working with an agent that has no experience working with co-ops in the past, and hasn’t taken the time to learn about the co-op board’s preferences and approach, you may suffer a rejection. Similarly, if your agent doesn’t prepare you (as they should) for the co-op board approval process and your application or interview is less than ideal because of it, you might be rejected.
While it’s difficult for a co-op board to ascertain your lifestyle from your application package, they may be able to evaluate it during the interview or by contacting your past landlords (if you were a tenant) or other references. If they judge your lifestyle to be disruptive for the current residents of the building (too many guests, loud music, etc.), they may consider it a valid reason to reject you.
5. Incomplete Co-op Board Package or Bad Interview
If your co-op board application is incomplete, not transparent enough, or not well organized, it may lead to a rejection, but it’s tied to other factors as well. If the board likes your financials and you as a candidate, they may gloss over a lousy application or give you multiple chances to fix it. If they have other reservations, a bad co-op board package might simply become the final nail in the coffin.
6. Bad History as a Tenant (or a co-op apartment owner)
Most co-op boards require reference letters from previous landlords or co-op boards where you may have owned an apartment in the past. Favorable letters can help establish you as a good prospect for the co-op board, but if the landlord or your previous co-op board mentions having any complaints, it may alarm the current co-op board as well.
7. Primary Residence Conundrum
You shouldn’t try to buy in a co-op building that prohibits Pieds-à-Terre and subletting if you do not plan to use it as a permanent residence. If your board thinks that you may plan on using it as a Pied-à-Terre, even if you don’t explicitly express this intention, it may lead to rejection.
8. A Biased Board
Lastly, you may simply be a victim of a biased board. They may be biased against the seller, have an interest in the apartment, or have a problem with the price the apartment is listed for.