NY Mag goes there: do coop boards reject prices as 'too low'?

real sources, with real stories
I am tempted to try to find that Soho loft that leads the short S.Jhoanna Robledo October 23 piece in New  York Magazine that is making the rounds of the blogosphere and twitterverse (The Dealbreakers / If you discover a real bargain, the co-op board may not let you get away with it.), but actual work (and blogging) may prevent that. I am often critical of media pieces on the Manhattan residential real estate market, but not this time: she quotes real people who claim to have observed the phenomenon she writes about, while acknowledging the difficulties in finding hard proof.

The fear is that some coop boards are rejecting some purchase applications for the sole reason that the purchase price is uncomfortably low for the board and other shareholders.

Some of this is simply the result of a bad economy, which causes banks and boards to scrutinize buyers more closely than ever. Sometimes, though—and boards will rarely say so—they’re loath to approve sales at low prices, fearing that other apartments in the building will be devalued by association. “No board will ever confirm it, but I do believe that I’ve seen cases where deals were rejected because the price was not high enough,” says Barak Dunayer of Barak Realty. “If the price is too low, that becomes a comparable,”….

been here, chewed that
I can’t do this better than the last time I noted this issue, way back in 2009 in response to The Real Deal having linked to a Habitat magazine piece exploring this in more detail. My June 19, 2009, power of a coop board to reject a deal as "too low"??, went into this issue at length, as I am wont to do.

Seriously: you should read that whole post if you have any interest in the topic. I will quote myself only once, at some length, in part because I love using the Canute reference:

coop boards protect value like Canute protected beaches

Having been a coop board president in a small Manhattan loft building for ten years, I can’t think of any other ‘reason’ for the board to reject a deal because of price than that articulated by the sighing lawyer: the board absolutely has "an obligation to protect the property value for the rest of the people." My considered judgment is that the solution (rejecting a shareholder’s application to sell and get out because remaining shareholders will be struck with a bad comp) has nothing to do with the purported problem (fear that units will be worth less after the sale than before it); even putting aside for the moment the harm the board would do to one specific shareholder and the risk that other shareholders will be left dealing with a fellow shareholder who may be financially strapped (after all, is selling at a ‘distress’ price) and will be emotionally pissed.

***

For a board to insist that market value contracts will not be approved actually says this about units in the building: they have no value because they are unsaleable; any price that is low enough for The Market to accept is too low for us to approve.

I go through an extended analysis there about how it is really not in the remaining shareholders’ interests if a board tries to interfere with market transactions, even if it might not be ‘illegal’ for a board to do that. Again: read the whole thing.

© Sandy Mattingly 2011