If you are buying a condo, the board approval is when the condo board waives their “right of first refusal,” which allows them to buy the condo from the seller at the same price you agreed to buy it. Once it’s waived, you are free to buy the condo and occupy it. Getting a condo board approval is relatively easy.
If you are buying a co-op, the board approval is the official permission you get from the co-op board to buy an apartment in their building after reviewing your application and interviewing you. Technically, you get shares of the corporation that give you the right to occupy the apartment. Getting a co-op board approval may be more difficult, as they have the right to refuse any potential buyer without any reason and explanation, apart from discrimination (though it may change in the future).
However, not all co-op boards are the same, and some may have lenient requirements and faster board approval times.
The Board Approval Process
The condo board approval process is usually just one step: You have to complete a board application which may or may not be as detailed as a co-op application. It’s also called completing a board application package which in essence is the application and all the documents that go with it (documents that endorse what you filled out in the application).
The co-op board approval process has two steps: The first is completing an application package which is usually quite thorough and invasive. Since you buy shares in a corporation, the co-op board has a more vested interest in your financial position. They prefer buyers with solid financials, including a debt-to-income (DTI) ratio of under 28 percent as a guideline. You can calculate this number by adding up all your monthly debts (mortgage, maintenance, student loans, etc.,) and dividing by your monthly salary.
Debt-to-Income Ratio Example:
Debt: $7,000 per month
Income: $300,000 per year or $25,000 per month
DTI = $7,000 / $25,000 = 28%
The second step is the board interview, which might be brief or thorough, depending on the board.
Co-op boards have a lot of power to approve and reject buyers. They also move at their own speed. If the co-op boards only have monthly meetings to review new applications, it may take them two months or longer just to review your application and call you for an interview, based on when you submit the application package, though it varies greatly. The board approval time is one of the reasons why it takes buyers about three months (on average) to close a co-op apartment in NYC.
When And How Can You Avoid Board Approval Process In NYC?
In a condo, you don’t need to avoid board approval because they rarely exercise their right of first refusal just to reject you. And even if your application package is not ideal according to the condo board, they have to give you approval or buy the apartment themselves.
You can still avoid board approval by:
- Buying a sponsor apartment in an established condominium building
- Buying new development
In both cases, you are buying directly from the sponsor.
For co-ops, there is just one way to avoid board approval: Buying a sponsor unit. Sponsors or original owners of a co-op apartment have the authority to sell their apartment without going through the board, so buyers skip the whole board approval process. However, not every board is strict and sometimes you can find co-ops that have a very easy application process and turnaround time.