Condo Competition Has High-End Co-ops Relaxing Financing Requirements
Herrick Real Estate partner, Andrew Freedland, was quoted in an article from CooperatorNews New York discussing the NYC co-op market and how high-end co-ops are increasingly considering—and in some cases have already enacted—loosening their restrictions on financing.
"Condos can’t restrict buyers at the same level as co-ops, and co-op communities have to compete with that," says Andrew. "A buyer can get as much as 80% on a high-end condo. As such, the development of the high-end condo market is part of the change." In response, he says, co-op boards "are trying to widen the net of potential buyers. If you’re allowing 50% financing for an apartment that sells for $10 million, there’s still a lot of equity and financial strength there."
"The market is much softer," Andrew notes. "Apartments aren’t flying off the shelves. Accepted offerings are down 20% from a couple years ago—nothing goes for over asking price anymore. Sellers are slashing prices, and boards must figure out a way to appeal to a broader pool of buyers. In addition to permitting unit financing, they’re also loosening restrictions on financial requirements for buyers. They are looking at lower overall asset levels."
CooperatorNews notes that if market conditions were to turn around, boards at top-end buildings could revert to prior restrictions and requirements, but once a change is made, it’s difficult to go back; residents don’t like it. And as Andrew points out, "Changes can’t be willy-nilly. In ten years perhaps, but in the short term the changes are here to stay."