Board package preparation is one of our industry’s most important and underrated skills. It requires financial know-how, authorial and editorial skills, and a keen ability to craft disparate elements into a coherent and compelling narrative. As most of my readers will know, co-operative apartment purchases, and increasingly purchases in condominiums as well, require an assembly of personal and financial documents, which are then presented to the building’s Board of Directors, to make certain that the buyer is an appropriate choice for the building. These Boards, although they are often not aware of it, are as required as any landlord to follow the dictates of Federal, state, and city anti-discrimination laws. That said, since deliberations are private, the reasons for a Board’s decision to reject a prospective purchaser are often shrouded in mystery. So as brokers for New York City owners and buyers, we incur an obligation to create the clearest and most informative Board packages we can. It is a painstaking and often misunderstood process which can significantly alter the outcome of a transaction. At Warburg we pride ourselves on our expertise in this endeavor.
One of the unfortunate side effects of the new condo economy is the rise of a new generation of agents who have sold only in new construction. They are both experientially ignorant of and wholly untrained in the fine art of bringing the disparate elements of the Board package together. As I say to my agents, Board package preparation requires a planning process with the exactness of a successful military campaign. No part of it can be left to chance. Herewith some fundamental pointers:
- Make sure the contract allows enough time for package preparation. The standard co-op contract provides for 10 business days to complete and submit the papers. It’s not enough. A well edited and carefully reviewed package requires three weeks (15 business days) to assemble.
- Buyer and agent should sit down with the list of building requirements and review them step by step. Typically, in addition to the specific forms regarding alterations, window guards etc. which vary from building to building, most building require similar documentation. They ask for four social reference letters, two business reference letters, employment verification, income verification, recommendation from a landlord or managing agent, and a complete financial statement with all the numbers backed up by bank and brokerage documents.
- The social reference letters should always showcase different aspects of the buyers’ lives. Family relationships, children, schools attended, philanthropic involvements: all these should receive attention in the letters. The Board should come away from reading them with as complete a sense as possible of who their proposed new neighbors actually ARE. Cliches, homilies, and single paragraph submissions are NOT helpful. Nor, needless to say, are four letters written with the same font and/or using the same adjectives and phrases, clearly demonstrating that they were either written by the purchaser herself or plucked wholesale from a sample letter provided to the supposed authors.
- Business letters should always touch on skills and reputation as well as longevity at the company or within the industry. Ideally they do not both come from the firm which employs the purchaser.
- Financial statements should be prepared with an “as of” date, to which all the documentation conforms. For a package prepared in March, either January 31 or February 28 would be fine. Every number on the financial requires back up documentation to the penny from all the relevant financial institutions. Real estate should have back-up valuation letters from a local agent. Art and jewelry, if a significant part of a buyer’s overall asset picture, are usually best verified with insurance binders. Special asset categories, like investment real estate, hedge funds, and deferred stock or stock option awards, will require detailed explanations. Often a well-put together letter from the buyer’s accountant will clarify the picture.
These basic pointers by no means provide a comprehensive guide to this exhaustive (and often exhausting) process. The package will be reviewed before submission by both the buyer’s and the seller’s agents and the best packages benefit from nuanced and attentive thinking from both sides. So I strongly recommend working with a skilled and experienced broker whether as a buyer’s or a seller’s representative. This process requires expertise; the principals should both make sure they get what they pay for.