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jenheartsrob
LIF Adult
Member since 5/06 1861 total posts
Name:
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evaluating co-op financials?
Hi guys... this whole buying a co-op process is complicated!! I didn't realize how much so.... so our realtor gave our attorney the building's financials, prospectus, etc. and now the attorney is telling me that it's not a legal issue, it's a financial issue.... that we need to have an accountant or financial person review the documents to make sure that the investment is sound and the corporation is healthy.... Did everyone do this? Do you know what to look for on these documents to check for that? I have no idea.... and we don't have an accountant.
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Posted 2/27/07 5:52 PM  |
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Prudential Douglas Elliman Real Estate
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Dani
Life is about choices.
Member since 5/05 6532 total posts
Name:
Dani
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Re: evaluating co-op financials?
OMG im going through this too! im completely overwhelmed! help us!  
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| Posted 2/27/07 6:09 PM |
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KrisT
Two Boys for Me!!
Member since 1/07 5213 total posts
Name:
Kristin
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Re: evaluating co-op financials?
I feel your pain!! DH and I had the exact same thing happen to us - our attorney would not look at the co-op financials. DH and I are both attorneys so we were able to call some friends to help us out. DH did most of it, so I will ask him when I get home for specifics as to what to look for. I know a few big things you want to look for is to make sure the co-op has adequate reserves. You want to make sure the co-op owns the land (mortgaged) under the building and is not leasing it. You want to look to see if there were any recent assessments and what they were for (assessments are not necessarily bad things!!!). These are the only things I remember off the top of my head!
Ultimately, if you are getting a mortgage, the bank is going to do a thorough job of checking the financials because a reputable bank will not give a mortgage if the co-op is having financial problems. HTH
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| Posted 2/27/07 6:39 PM |
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BabyBoy
is Skylar Elizabeth
Member since 5/05 4189 total posts
Name:
Tom
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Re: evaluating co-op financials?
prehaps it depends on the lawyer...our lawyer told us what to request (same documents about building/finicials, etc..) and he reviewed all the relevant points.
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| Posted 2/27/07 6:51 PM |
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Palebride
I am an amazing bakist
Member since 5/05 13673 total posts
Name:
Lori
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Re: evaluating co-op financials?
Our lawyer took care of all of that for us. He requested and reviewed the financials before he gave us the ok on the co-op.
The financials are VERY IMPORTANT....make sure you're making a sound investment!
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| Posted 2/27/07 6:55 PM |
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Pumpkin1
LIF Adult
Member since 12/05 3715 total posts
Name:
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Re: evaluating co-op financials?
Purchasing a coop is more involved than purchasing a home and, thus, you need to get an attorney who specializes in coop transations.
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| Posted 2/27/07 7:03 PM |
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tourist
Member since 5/05 10425 total posts
Name:
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Re: evaluating co-op financials?
My lawyer handled all of this as well. Actually, her husband is her partner & while she was our lawyer, he looked over the financials & explained it to us, because he had more experience with it.
Does your lawyer not usually do co-op closings? It sounds like that might be the case.
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| Posted 2/27/07 10:33 PM |
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jenheartsrob
LIF Adult
Member since 5/06 1861 total posts
Name:
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Re: evaluating co-op financials?
He does co-ops and real estate.... he said that it's our investment, so it's really in our interest to have it reviewed by someone financial... he said it's not a legal matter, rather a financial one... he said from what he sees it looks healthy and sound, but since it's our money we should get an accountant
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| Posted 2/27/07 10:40 PM |
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tourist
Member since 5/05 10425 total posts
Name:
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Re: evaluating co-op financials?
Posted by jenheartsrob
He does co-ops and real estate.... he said that it's our investment, so it's really in our interest to have it reviewed by someone financial... he said it's not a legal matter, rather a financial one... he said from what he sees it looks healthy and sound, but since it's our money we should get an accountant
I wouldn't even know wher to start with that? Can you get an account for just one thing like you can a lawyer?
He sounds like he's just trying to cover his butt.
Our lawyer explained it all to us, but did say it was up to us, but gave us his opinion.
Do you know anyone that is good with finances? Maybe they can help.
The paperwork seems more confusing than it is.
You want to look at the reserves, what they spent money on in recent years, how many years they have on the mortgage, how often they raise the maintene, if there are frequent assements, how many repairs have been done in the reecnt years.
Basically you want to see that they have enough money to stay in business, and that they have have been taking care of things periodically, so everythign isn't going to break all at once.
good luck! 
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| Posted 2/27/07 11:26 PM |
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KvsGrl
Round 2!!
Member since 1/07 1202 total posts
Name:
Samantha
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Re: evaluating co-op financials?
Posted by KrisT
I feel your pain!! DH and I had the exact same thing happen to us - our attorney would not look at the co-op financials. DH and I are both attorneys so we were able to call some friends to help us out. DH did most of it, so I will ask him when I get home for specifics as to what to look for. I know a few big things you want to look for is to make sure the co-op has adequate reserves. You want to make sure the co-op owns the land (mortgaged) under the building and is not leasing it. You want to look to see if there were any recent assessments and what they were for (assessments are not necessarily bad things!!!). These are the only things I remember off the top of my head!
Ultimately, if you are getting a mortgage, the bank is going to do a thorough job of checking the financials because a reputable bank will not give a mortgage if the co-op is having financial problems. HTH
This is correct. Look at the mortgage and when it expires. Alot of co-op mortgages are interest-only balloon mortgages. That means that they pay interest for 10 years with the final principal due at maturity. Co-ops have to pay the entire principal or re-finance. Most re-finance, and it will affect your maintenance if they re-finance at a higher rate.
Look at the reserves. A good estimate is 2 mos of operating expenses in reserves.
Look at past assessments to see if they are supplementing your maintenance for regular business expenses or if they are for updates/renovations/etc.
I also looked at the comparative budeted expenses v. actual expenses.
It is in your best interest to have a professional look at it (I am a CPA). An attorney can probably highlight any red flags, but they are not knowledgeable of the details.
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| Posted 2/28/07 11:00 AM |
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Tenari
LIF Zygote
Member since 2/07 1 total post
Name:
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Re: evaluating co-op financials?
Hi,
I'm jenheartsrob's DH. IMHO the financials look good. The mortgage has been entirely satisfied, the maintenance is really low for the area has only gone up by a pittance each year (if at all) and there have been no recent assessments, and there is close to a million-five in reserve. I definitely think our attorney was trying to cover himself, but based on the information I see its hard to see anything out of whack.
Rob
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| Posted 2/28/07 11:16 AM |
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