When purchasing a property, there 3 primary methods of making an offer:
(1) Cash Offer: The property must be purchased using cash only. Financing of any type is prohibited and can result in a default.
(2) Non-contingent on Financing: The purchaser may obtain financing; however, if the purchaser is not able to obtain a loan for any reason, they must proceed on an all-cash basis.
(3) Contingent on Financing: The purchaser may cancel the transaction and seek a return of the down payment deposit if they are unable to obtain a loan – typically for any reason absent bad faith.
My Offer Was Accepted. Is My Deal Locked In?
Just because a seller accepts your offer doesn’t mean that either party is obligated to proceed. It is not until both parties execute the contract and the purchaser delivers the down payment deposit that the contract is enforceable. Before a purchaser is ready to sign the contract, their attorney must complete due diligence and negotiate the contract. This process typically takes1-2 weeks.
What is Due Diligence?
Before a purchaser signs a contract, their attorney conducts due diligence to gather information on the building and to confirm that the building has no material issues. Due diligence includes, but is not limited to, a review of the following:
(1) the building’s board minutes;
(2) last 2 years of audited financial statements;
(3) last year and following year’s budget;
(4) offering plan and amendments; and
(5) building questionnaire.
What Does “Unconditional Consent” Mean as it Relates to Co-op Approval?
A Co-op contract states that the Co-op must give unconditional consent. If a Co-op board approves a purchaser but provides condition(s) in connection with the approval, the purchaser may, if they wish, cancel the deal and demand a return of the down payment deposit. A co-op board will typically give conditional consent when the purchaser’s financials aren’t strong enough.
Most commonly, conditions are:
(1) 1 year in maintenance in escrow for 1-2 years; and/or
(2) co-signor or guarantor