For years, Halstead Property’s Richard Grossman has run a boot camp, teaching agents how to get buyers approved by co-op boards. In it, he presents four hypothetical applicant profiles. The first is a professional—a teacher, perhaps—with an average income but an outsize down payment. The second is a bonus-dependent candidate like a banker, who makes $80,000 and is putting down the minimum, but has a bonus three times his salary. The third, a non–Wall Streeter, earns somewhere in the low six figures and has a small bonus and a standard down payment, and the fourth, a first-time buyer with a good job, relies on relatives to cobble together a decent down payment.
In the past, says Grossman, agents invariably picked the financier as the most board-worthy, thanks to his bonus. At last month’s seminar, however, the answers were unanimous: “Go with the teacher.” And that is a big change. “If you were bidding against someone from Wall Street who had this kind of bonus history, you couldn’t compete. First of all, they were willing to outbid you, and second of all, the sellers were willing to take them over somebody else,” says Gumley Haft Kleier president Michele Kleier. “Bonus used to be the favorite word in everybody’s vocabulary. Now salary is a much more attractive word.” Admits one Upper West Side board member: “We’re definitely cautious across the board now, especially when someone’s touting their bonus.”
In the pre-Lehman days, many boards grew to regard bonuses as standard parts of compensation, as reliable as anything else in the financial package. “If your stream of bonuses was steady for several years, you could anticipate that your bonus was going to be equal to or exceed what you got the last two years,” she says. “The boards would look at that and basically count it.”
“We’ve always advised people to be cautious and to look at assets and salary, not just bonuses,” says Mary Ann Rothman of the Council of New York Cooperatives & Condominiums. But well-funded portfolios alone aren’t enough, says Grossman, who has sat on two different boards. Investments should be diverse, too. “Stocks in conservative [companies], not in financial institutions,” he says. “They want to see diversity, especially after the Madoff thing.” Some boards are actually asking prospective buyers still awaiting interviews for updated financials, in case their situation has changed since the stock market fell.
The intense scrutiny can be frustrating for both buyers and sellers needing to unload properties fast, but lawyer Stuart Saft says “boards generally feel they have a fiduciary duty to the existing shareholders to make sure they’re not taking any risks.” If that means nixing someone with an acceptable bid who can’t pass beefed-up standards, so be it. Fair Housing laws prohibit discriminating against entire employment classes, but experts say boards aren’t stereotyping; they’re being financially prudent. “No one’s being given a hard time because they’re in finance,” says Saft. “They’re given a hard time because they don’t have adequate liquid assets with which to pay for the apartment.”