What Is a Board Package and How Sellers Can Prepare for It
What Is a Board Package and How Sellers Can Prepare for It
Selling a cooperative apartment in New York City is a unique process that requires navigating the co-op board's approval process. While the board package itself is a comprehensive application prepared by the buyer, the seller plays a crucial role in the process. Understanding your responsibilities as a seller and what the board package entails is essential for a smooth and successful transaction.
What Exactly Is a Co-op Board Package?
In New York City, a cooperative apartment isn't a transfer of real property; it's the sale of shares in a corporation that owns the building. The buyer, known as a prospective shareholder, must be approved by the building's board of directors. The board package is the buyer's detailed application to the board. It's designed to give the board a complete picture of the potential new owner, ensuring they are financially stable and will be a responsible, compatible neighbor.
The package is a massive collection of documents, often including:
A detailed financial statement (assets, liabilities, and income)
Two years of tax returns
Verification of employment and income
Bank statements
Personal and professional reference letters
A contract of sale and other transaction-specific documents
The board reviews this package meticulously to assess the buyer's financial health and character. From a seller's perspective, your primary goal is to provide your buyer with everything they need from you to make their package as strong as possible.
How a Seller Can Prepare for the Board Package Process
The most important thing a seller can do is to work closely with their real estate agent and attorney. They will guide you through the process and ensure you have all necessary documents and information ready for the buyer's team.
1. Provide Key Documents to the Buyer’s Team
Your real estate agent and attorney will be the main point of contact for the buyer's agent. You should have the following documents prepared and ready to share as requested:
A fully executed contract of sale. This is the foundational document of the entire transaction, and a signed copy is a required component of the board package.
A copy of your proprietary lease and stock certificate. These documents prove your ownership of the co-op shares and are essential for the transaction.
Information about any existing liens or loans. Your attorney will need this information to ensure that your loan is paid off and the original shares and proprietary lease are canceled at closing. The buyer's bank will also need this for their Recognition Agreement, which outlines the rights and obligations of the co-op and the lender.
A copy of the building's house rules and by-laws. While the buyer will likely get these from the managing agent, having a copy available can speed up the process.
2. Get Your Finances in Order for Closing
Beyond the documents for the board package, the seller has specific financial responsibilities at closing. Being prepared for these costs is critical. Your attorney will handle the specifics, but you should be aware of the following:
Payoff of existing mortgage/loan. This is often the largest financial transaction at closing. Your attorney will coordinate with your lender to ensure the loan is paid off and the lien on your shares is released.
Real Estate Broker's Commission. The seller typically pays the commission for both the seller's agent and the buyer's agent.
NYC and NYS Real Estate Transfer Taxes. These are a significant portion of a seller's closing costs. Both New York City and New York State impose a tax on the transfer of real property. As of early 2024, the rates are as follows:
New York State Transfer Tax: $2.00 per $500 of the sale price.
New York City Real Property Transfer Tax (RPTT): The rate is tiered based on the sale price. For residential properties, it's 1% on sales of $500,000 or less, and 1.425% on sales over $500,000. For co-op sales of $500,000 or less, the tax is 1%. On sales over $500,000, the rate is 1.425%.
Flip Tax. Unlike transfer taxes, which go to the government, a flip tax is a fee paid to the cooperative building itself. This tax is often a percentage of the sale price, a flat fee, or based on the profit from the sale. It's a key source of revenue for the building's operating budget and capital improvements. Your attorney will confirm if your co-op has a flip tax and its rate.
Other Building Fees. Your co-op's managing agent may also charge the seller various fees at closing, such as a move-out deposit and a recognition fee.
Tips & Takeaways for Sellers
Partner with the right team. The right real estate agent and attorney are your greatest assets. They will manage communication, prepare documentation, and ensure you're meeting all your obligations.
Be proactive. Get your documents in order early. The sooner your attorney has all the information they need, the smoother the process will be.
Communicate with your attorney. Let your attorney know if you have an existing loan that needs to be paid off or if you have questions about the various taxes and fees you'll be responsible for.
Manage expectations. The board approval process can take several weeks or even months. Remember that this is a critical step for the buyer, and a delay in their approval does not necessarily mean the deal is in jeopardy.
Ready to sell your NYC co-op? Let us help you navigate the process. Contact Yeo Real Estate today for an expert consultation and a seamless selling experience.