Showing posts with label guarantors. Show all posts
Showing posts with label guarantors. Show all posts

Dec 16, 2016

Parents Helping Children Buy or Rent NYC Apartments

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Co-purchasing, Gifting, Guarantors  

Many first time home purchasers are fortunate to get help from their parents. There are several ways parents can help their adult children buy apartments. There are several options depending on the building. The most common is gifting and or serving as a guarantor that will guarantee payments.

Gifting means the parent gifts their child a certain amount of money toward the purchase or down-payment. Lenders and coops will require a gift affidavit declaring the amount of gift. A gift is not a loan as a loan is debt that needs to be paid back.

Gifting, guarantors and co-purchasing are building to building specific. Some buildings may require co-purchasing as opposed to a guarantor and some buildings will not allow co-purchasing from a non resident. 

In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Most condos have applications but many are very simple applications. I recently had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. I presented proof of funds with the offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.

It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Many coops will allow co-purchasing or a guarantor for working adult children. Even if the parents pay for the apartment, the coop will want the adult to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.

Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.

The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.

The only alternative other than a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building when it converted to coop that still has shares These shares are "unsold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents from out of state for their son that recently graduated college here.

Purchasing a sponsor apartment in a coop is buying "unsold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is resold there is board approval and a board package is required.

A "holder of unsold shares" may pass the same rights to an investor purchaser as long as the purchaser never moves into the apartment. In other words a sponsor can sell a coop unit to an investor and as long the investor never occupies the unit the investor retains all the same rights as the original sponsor. The investor "holder of unsold shares" does not need board approval to rent or sell the unit.

Aug 22, 2013

Guarantors Co-Signers & Co -Purchasers

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What are Guarantors Co Signers and Co-Purchasers?


Over the years I have sold and rented apartments where a guarantor was needed. I have also sold apartments where parents and/or trust funds bought the apartment outright for an adult child or beneficiary.

A guarantor is simply someone who will cosign your rental lease and in the event you can’t pay the landlord rent or the coop maintenance they can legally go after your guarantor to collect payment.

In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Some condos have applications but many don't or have very simple applications. I  had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. Proof of funds  were shown with offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.

It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Some coops will allow co-purchasing or a guarantor for working adult children. Some will not allow guarantors. In some coops even if the parents pay for the apartment, the coop will want the adult child residing there to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.

Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.

The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.

An alternative to a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building that has "unsold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents in Ohio for their son that recently graduated college here. Purchasing a sponsor apartment in a coop is buying "unsold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is re-sold there is board approval and a board package is required.

I have worked with corporations looking for a rental apartment for corporate use. While the corporation has excellent financials, documented assets and cash flow, landlords will often require a personal guarantor.
 
While the Supreme Court of the United States ruled that a corporation is a person, New York landlords think otherwise. They want a personal guarantee from a person.

Lease "Good Guy" Guarantees:  

A good guy guarantee is a limited personal guarantee often written into a lease when a tenant is a business entity such as a corporation, partnership or limited liability company.

The guarantee, generally signed by a principal of the business entity, enables a landlord to bring an action against the guarantor in the event the tenant stops paying rent and continues to occupy the space.  A good guy guarantee is not necessarily onerous to a tenant. Although after a default, the landlord is free to pursue the tenant for unpaid rent (if there are any assets left in the business entity) the guarantor is released from its obligation to pay rent once the tenant vacates the space.  From a landlord's perspective, a good guy guarantee is an insurance policy against the amount of time it can take to evict a non-paying tenant (something that often takes a year or more).

Lease Guaranty Insurance:  

In many instances, individuals are unable to rent apartments they would like without a co-signer/guarantor, additional security or prepaid rent.

When a guarantor or co-signer is required, it is often difficult for a renter to find a third party that is acceptable to the landlord. For example, the prospective co-signer or guarantor may live out of state, or may not have the financial resources or credit to meet the landlord’s requirements. Recently an insurance company began a lease guaranty program.

The Insurent® Lease Guaranty Program was created to serve renters, landlords, condo/co-op owners,  by offering the first institutional guarantor of residential leases. The Insurent® Lease Guaranty Program is underwritten and issued by Argonaut Insurance Company, a property and casualty insurance company.

Instead of looking for a guarantor or co-signer, or having to pay a significantly larger security deposit or prepaid rent, a renter may utilize the Insurent® Lease Guaranty to satisfy the landlord’s financial and credit requirements if the landlord or coop will accept this new form of guaranty insurance.

 How to Rent an Apartment in Manhattan
 Buying A coop - Be Prepared and Qualified 
 Coop Board Requirements - What do Coop Boards ask For?

Dec 2, 2011

Guarantors & Parents Purchasing Homes For Children

0 comments
In a condo it is very simple. A parent can buy for an adult child. A corporation and or a trust can buy a condo. Some condos have applications but many don't or have very simple applications. I recently had a condo transaction where the couple obtained a mortgage from their parents. As far as the seller, listing agent and the condo were concerned it was a Cash Sale. I presented proof of funds with the offer. A condo may require documentation but they can't reject a buyer. They can only exercise their "right of first refusal" and purchase the apartment for the same price and terms of offer.

It becomes more difficult purchasing a coop and even renting in certain Manhattan buildings. Most coops will not allow a parent buying for their adult child. Many coops will allow co-purchasing or a guarantor for working adult children. Even if the parents pay for the apartment, the coop will want the adult to be working with their own income and be responsible to pay the monthly maintenance and/or mortgage payments. The monthly housing costs can not exceed 25-30% of the adult child's monthly income.

Some rental buildings may require the parent to be on the lease. Some may not accept out of town guarantors and/or may require a few months of rent up front and additional security deposit. 40x rent in annual income is required by applicant and 80x rent is required to be a guarantor.

The coop will want full financial disclosure from both the guarantor and the applicant and from both applicants if a co-purchase. A guarantor letter and a gift affidavit is usually required as well.

The only alternative other than a condo purchase is purchasing a sponsor coop apartment. The sponsor is usually the developer or owner of building that has "un-sold shares" in the cooperative corporation. I recently sold a coop sponsor apartment to parents from out of state for their son that recently graduated college here.

Purchasing a sponsor apartment in a coop is buying "un-sold shares" there is no board approval process. However once purchased the shareholder has to adhere to the coop rules, enjoys the same "quality of life" as other shareholders but when unit is re-sold there is board approval and a board package is required.

Lease "Good Guy" Guarantees

A good guy guarantee is a limited personal guarantee often written into a lease when a tenant is a business entity such as a corporation, partnership or limited liability company. The guarantee, generally signed by a principal of the business entity, enables a landlord to bring an action against the guarantor in the event the tenant stops paying rent and continues to occupy the space.

A good guy guarantee is not necessarily onerous to a tenant. Although after a default, the landlord is free to pursue the tenant for unpaid rent (if there are any assets left in the business entity) the guarantor is released from its obligation to pay rent once the tenant vacates the space. From a landlord's perspective, a good guy guarantee is an insurance policy against the amount of time it can take to evict a non-paying tenant (something that often takes a year or more).
 
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