Buying a Co-op? You’ll Need to Reveal Your Finances First

Thinking about buying a co-op apartment? Get ready to expose yourself, right down to your credit-card debt. 

"The process of buying in a co-op is virtually synonymous with an invasion of privacy,” Deanna Kory, a broker with Corcoran, tells Brick Underground. “If you are not comfortable with that, then it is important that you buy in a condo. A co-op board, by its nature, can ask for anything it wants as it pertains to your financials, letters of reference, and more." 

Co-op boards typically want to see that a buyer has the financial reserves to cover six months to two years of maintenance fees after closing on an apartment. To determine this, the board may ask to see various documents, including tax returns, reference letters, and other kinds of financial statements – even credit card statements. Part of what the board is looking for is debts. Many co-op boards want to see a debt-to-income ratio of no more than 25 percent. 

"The crux of the application is your financial statement, where you list your assets and liabilities, followed by verification of assets, where you prove the numbers and totals on your financial statement with bank statements," says Gordon Roberts, global real estate advisor with Sotheby's International Real Estate. "Suppose you do carry debt on three credits cards; you’d have to record that debt as liability on the financial statement, and submit the credit card statements to prove that the amount of debt you’ve declared is, in fact, accurate."

Roberts suggests that buyers redact the "activity" from the credit card statement and just show the outstanding debt, which is likely all that the board is interested in. This is why getting their finances in order – and paying down any substantial credit card debt – is something buyers should address before they apply to buy a co-op apartment.