Post-Closing Liquidity Requirements in NYC Real Estate
Post-Closing Liquidity in NYC Real Estate
You need far more than a down payment to buy a co-op in New York City. When buying a co-op in NYC, you will need to meet the building’s post-closing liquidity and debt-to-income ratio requirements. Many co-ops have specific requirements, while others take a holistic approach to evaluating a buyer’s financials. This information, along with just about everything else about you, will be presented in your board package to the co-op board before they decide whether to invite you for an interview.
What is Post-Closing Liquidity?
Post-closing liquidity means the amount of liquid funds a buyer will have after he or she closes on their home. Buyers should consider what their liquid assets will be after their down-payment and closing costs are paid.
What Do Co-Ops Require?
Generally, co-op boards will require post-closing liquidity of 24 months of your mortgage and maintenance payments. You should aim to have 24 months of cash or cash equivalents post closing. Of course, there are some buildings that require far more.
What Is Considered Liquid?
Generally, if you can convert your asset to cash in a day or two, it is considered liquid. For example, the cash surrender value of your life insurance plan would generally be included in the calculation, but the death benefit would not be included.
Buildings consider different assets as “liquid,” like your 401K and deferred compensation. Some will factor in your vested 401K and other IRA assets, while other buildings will not consider this at all.
Calculating Your Post-Closing Liquidity
When you prepare your REBNY financial statement, we will assess your post-closing liquidity for each property you are interested in to determine whether you are qualified to pass the co-op board. We will factor in the buildings monthly maintenance, assessments, your monthly mortgage payments, and taxes/mortgages/rental income on any other properties you own.
Digs Realty is a residential real estate brokerage in NYC that provides full service at a discount. The Digs Mission: Saving you money without compromising service or quality. We give our home buyers up to 67% of our commission and charge our sellers up to 4% less than traditional brokerages.
Trackbacks & Pingbacks
[…] Post-closing Liquidity: Generally, co-op boards will require post-closing liquidity of 24 months of your mortgage and maintenance payments. Buildings consider different assets as “liquid,” like your 401K. To be on the safe side, you should aim to have 24 months of cash or cash equivalents post closing. Of course, there are some buildings that require far more. Recently, we made an offer for a two bedroom co-op on the UWS for a couple who makes over $1MM a year in salary and bonus, and who would have had over $500K in cash (plus another $1.75MM in less liquid assets) after the purchase. The seller’s agent checked with management and informed us that the seller could not consider our offer because the building requires the full purchase price liquid after closing. Buildings like this are rarer today than in the past, but they are still around. It is unfortunate because they are limited the buyer pool for their sellers and, as a result, potentially decreasing the value of the homes. Read more about post-closing liquidity requirements here. […]
Leave a ReplyWant to join the discussion?
Feel free to contribute!