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purchasing co-op with equity loan on 2nd co-op

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purchasing co-op with equity loan on 2nd co-op

Postby ravgil » Thu Dec 22, 2005 10:11 pm

My son owns a 1-BR co-op in Manhattan. (The co-op is about 50 yrs old, with 1400 units.) His mother and I live there with him.

He wants to purchase a 2-bedroom apt that is available in the same co-op. It is quite undervalued, although needs some fix-up. We would all move there.

He wants to take an equity load against a third co-op he and I own together, which we are subletting. The present value is about 600K.

This would pay about 80% of the purchase price. The 20% balance we want to pay through a loan against the apt we are purchasing.

After closing on that apt, he would then sell his 1-BR which should bring in enough to pay the equity loan + some money for remodeling the new apt. Similar 1 BRs are selling for 450-480K.

My son's income is about 45K; mine is about the same, but mine is take-home money--I don't pay much in taxes.

We figure we would have to pay approx. 3K per month until the 1BR is sold--which should take 4-6 months, hopefully. If it takes longer, my income is enough to pay the entire mortgage, if need be.

The sales mgr of the co-op indicates this could probably work out, but the board would have to vote on the application.

The seller has accepted our offer, but the broker says they expect 10% down at contract signing.

Putting down this much would be impossible for us, as we do not have much cash; we'd have to immediately close on the 80% loan and (presumably) start making mortgage payments while waiting for the board to approve the application.

If for some reason the board did not approve, we'd be out the closing costs, legal fees and any payments made.

We would prefer to apply for a line of credit, make a token payment at contract signing, then apply to the co-op board (which also costs $500).

Upon approval, we would pay the seller in full and pay off the 80% loan. We'd then carry the 20% loan, which would be about $670 a month over the CC--not a problem.

My questions are:
1. Do we really have to put down 10% at contract signing?

2. What is the logical order to procede as far as signing the contract, applying for the loan, & applying to the co-op board? (I assume we'd have to sign a contract before applying to the board, for example.)

How do we prevent the seller from selling to someone else before we sign the contract? We wouldn't want to pay for the co-op app. and closing costs on a loan + legal retainder, only to find the seller had accepted a better offer.

Many thanks for any help anyone can give.

Ravgil

<small>[ December 22, 2005, 09:22 PM: Message edited by: ravgil ]</small>
ravgil
 
Posts: 8
Joined: Thu Dec 22, 2005 2:01 am
Location: Manhattan

Re: purchasing co-op with equity loan on 2nd co-op

Postby Aubergine » Thu Dec 22, 2005 11:39 pm

You should consult a lawyer now to address your concerns, rather than waiting until later in the process.
Aubergine
 
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Re: purchasing co-op with equity loan on 2nd co-op

Postby cestmoi123 » Fri Dec 23, 2005 9:30 am

My son's income is about 45K; mine is about the same, but mine is take-home money--I don't pay much in taxes.

Announcing that you evade taxes isn't a great way to convince people to help you out, FYI.
cestmoi123
 

Re: purchasing co-op with equity loan on 2nd co-op

Postby ravgil » Fri Dec 23, 2005 10:16 am

My son owns a 1-BR co-op in Manhattan. (The co-op is about 50 yrs old, with 1400 units.) His mother and I live there with him.

He wants to purchase a 2-bedroom apt that is available in the same co-op. It is quite undervalued, although needs some fix-up. We would all move there.

He wants to take an equity load against a third co-op he and I own together, which we are subletting. The present value is about 600K.

This would pay about 80% of the purchase price. The 20% balance we want to pay through a loan against the apt we are purchasing.

After closing on that apt, he would then sell his 1-BR which should bring in enough to pay the equity loan + some money for remodeling the new apt. Similar 1 BRs are selling for 450-480K.

My son's income is about 45K; mine is about the same, but mine is take-home money--I don't pay much in taxes.

We figure we would have to pay approx. 3K per month until the 1BR is sold--which should take 4-6 months, hopefully. If it takes longer, my income is enough to pay the entire mortgage, if need be.

The sales mgr of the co-op indicates this could probably work out, but the board would have to vote on the application.

The seller has accepted our offer, but the broker says they expect 10% down at contract signing.

Putting down this much would be impossible for us, as we do not have much cash; we'd have to immediately close on the 80% loan and (presumably) start making mortgage payments while waiting for the board to approve the application.

If for some reason the board did not approve, we'd be out the closing costs, legal fees and any payments made.

We would prefer to apply for a line of credit, make a token payment at contract signing, then apply to the co-op board (which also costs $500).

Upon approval, we would pay the seller in full and pay off the 80% loan. We'd then carry the 20% loan, which would be about $670 a month over the CC--not a problem.

My questions are:
1. Do we really have to put down 10% at contract signing?

2. What is the logical order to procede as far as signing the contract, applying for the loan, & applying to the co-op board? (I assume we'd have to sign a contract before applying to the board, for example.)

How do we prevent the seller from selling to someone else before we sign the contract? We wouldn't want to pay for the co-op app. and closing costs on a loan + legal retainder, only to find the seller had accepted a better offer.

Many thanks for any help anyone can give.

Ravgil
ravgil
 
Posts: 8
Joined: Thu Dec 22, 2005 2:01 am
Location: Manhattan

Re: purchasing co-op with equity loan on 2nd co-op

Postby ravgil » Fri Dec 23, 2005 10:24 am

Dear Cestmoi123:
Why would you assume tax evasion? FYI, I am disabled; most of my income is a nontaxable disability annuity.

Ravgil

<small>[ December 23, 2005, 09:29 AM: Message edited by: ravgil ]</small>
ravgil
 
Posts: 8
Joined: Thu Dec 22, 2005 2:01 am
Location: Manhattan

Re: purchasing co-op with equity loan on 2nd co-op

Postby cestmoi123 » Fri Dec 23, 2005 12:30 pm

I made an assumption from what you posted, and I was wrong. My apologies.
cestmoi123
 

Re: purchasing co-op with equity loan on 2nd co-op

Postby ravgil » Sun Dec 25, 2005 1:47 am

Originally posted by cestmoi123:
I made an assumption from what you posted, and I was wrong. My apologies.
No Problem.
ravgil
 
Posts: 8
Joined: Thu Dec 22, 2005 2:01 am
Location: Manhattan


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