What is a REBNY financial statement?
The REBNY Financial Statement provides sellers and listing agents with an overview of your financials as a buyer. Completing a REBNY Financial Statement is almost always required when submitting an offer on a co-op apartment, as sellers and listing agents need to ascertain whether or not you satisfy the co-op’s financial requirements for applicants.
If you’re selling a co-op apartment in NYC, knowing how to read a REBNY Financial Statement will help you evaluate a buyer’s financials before moving forward with an accepted offer. In short, a REBNY Financial Statement helps buyers, sellers and agents minimize the risk of a co-op board rejection.
What Is a REBNY Financial Statement?
A REBNY Financial Statement is used by listing agents and sellers to evaluate and compare the financial strength of potential buyers. The statement itself is effectively a personal ‘balance sheet’ or statement of net worth.
The REBNY statement asks a potential buyer to provide information about his or her assets (cash, stocks, property, etc.), liabilities (mortgages, student loans, etc.) as well as monthly income (salary, bonuses, dividends, etc.), and projected monthly expenses.
REBNY Financial Statements are most often used when dealing with the purchase and sale of co-op apartments because of the strict financial requirements imposed by NYC co-ops during the board application process. All experienced co-op NYC listing agents will ask buyers to submit a completed REBNY Financial Statement as part of the offer submission process.
Co-op board rejections happen frequently in NYC, and the last thing you want is for the rejection to possibly be a result of the buyer not necessarily passing all of the board’s financial requirements. It’s therefore in your best interest as a buyer to complete the REBNY Financial Statement even if you feel that it’s somewhat invasive.
Working with an experienced buyer’s agent (who also offers you a buyer closing credit to save you money on the purchase) will help ensure that you are fully informed about the nuances and different requirements for each co-op before you’ve invested too much time in something which may not be the right fit.
In general, for co-op sponsor units, condos, and new construction you will not be required to include a REBNY Financial Statement when submitting an offer. For these situations, a pre-approval letter, proof of funds as well as your offer level (price, % down, and contingencies) will suffice.
How to Complete the REBNY Financial Statement
It’s a good idea to fill out a REBNY Financial Statement, prepare your offer documentation, and select a real estate attorney toward the beginning of your search. Desirable properties sell quickly in NYC, so being prepared will ensure that you aren’t outmaneuvered by competing buyers.
Here are the instructions for completing each section of the REBNY Financial Statement:
Assets
Under the assets section, you will be asked to itemize and list all liquid and non-liquid assets for both yourself and any co-applicant (spouse, significant other, etc.). When a listing agent reviews the assets section of the REBNY financial statement, he or she will be looking to see if you have enough liquid assets to cover the following items:
Down Payment – usually a minimum of 20% for most co-ops
Closing Costs – 1% to 2% for co-ops in NYC
Post-Closing Liquidity – 12 to 24 months’ worth. Most co-ops have specific guidelines for the amount of post-closing liquidity a new shareholder (purchaser) should have after closing on the apartment. If you are buying all cash, ‘post-closing liquidity’ simply means the number of liquid assets you have available to cover the monthly co-op maintenance. If you are financing the unit, ‘post-closing liquidity’ means the number of liquid assets you have to cover both the monthly mortgage and maintenance bills.
Co-ops often look for anything between one to three years of post-closing liquidity. In some cases, the amount the board is looking for is also related to how strong your ‘debt to income ratio is (more on this below).
Liabilities:
Under the liabilities section you will be asked to itemize any debt you currently hold including the following:
Notes Payable
Mortgages
Unpaid Taxes
Installment Accounts (i.e. Auto Loans)
Loans on Life Insurance Policies
It’s especially important to list all outstanding debts you may have, as these debts and their corresponding monthly debt servicing payments will have an impact on your debt-to-income ratio.
If you do not accurately list your liabilities in the co-op board application, you will likely be caught once the building runs your credit since these debts will show up on the report.
Sources of Income / Monthly
The income section of the REBNY financial is very important because it allows a listing agent to assess your monthly debt-to-income ratio. You should list all sources of income including base salary, bonuses, dividend income, real estate income, and any other income (stipends, etc.).
If your income varies from year to year and/or your bonus or overtime income is unpredictable, you need to seek clarification from the co-op’s managing agent on how they will interpret your income. Some buildings may use a two-year average when calculating your debt-to-income ratio, so this can impact whether or not a co-op board will approve you.
Here is the formula for the debt-to-income ratio:
Debt to Income Ratio (%) = (Monthly Mortgage & Maintenance) / Monthly Income
If you have other debt such as student loans, your debt-to-income ratio is calculated as follows:
Debt to Income Ratio (%) = (Monthly Mortgage & Maintenance + Other Debt Payments) / Monthly Income
In most cases, co-ops will require this ratio to be below 30% and often under 25%.
Projected Expenses / Monthly:
The projected expenses section of the REBNY Financial Statement is where you list your estimated monthly maintenance and mortgage amounts for the co-op you’re submitting an offer on. You will also need to list any other recurring monthly expenses, such as car payments or student loan payments.
Because your projected monthly maintenance and co-op mortgage bill vary depending on which unit you are bidding on, you or your buyer’s agent will need to ensure that this section is updated for each apartment you submit an offer on.
The most efficient way to do this is to provide your buyer’s agent with a completed Excel version of your Financial Statement. For each offer you submit, your buyer’s broker can simply update this section and regenerate the statement for inclusion with your offer.
Itemized Schedules:
The Itemized Schedules section (page 2 of the REBNY Financial Statement) is where you list more specifics about the assets, liabilities, and other income that you stated on the first page of the statement.
For example, let’s say you have $250k in cash held in 3 separate banks. You would list each bank and the balance in the itemized section, like this:
Chase – $100k
Bank of America – $80k
Capital One – $70k
If you own another property, you’d provide details on the estimated fair value, outstanding loan balance, maturity date, monthly rental income, and carrying costs.
Once you’ve completed the REBNY financial statement, it’s important that you and your co-applicant (if applicable) sign and date the form.
How Do I Review a REBNY Financial Statement as a Seller?
The most important things to screen for as a seller when reviewing a buyer’s REBNY Financial Statement are the debt-to-income ratio, the type and consistency of the income, and the liquid net worth of the buyer.
Taking the time to thoroughly analyze your buyer’s financials will maximize the chance of board approval and ensure that you aren’t wasting your time by moving forward with a prospective purchaser.
Debt to Income Ratio – is the bidder’s ratio below 25% or 30% or in line with the stated requirements of your co-op?
Income – what type of income does the buyer have? Is the income heavily weighted towards bonuses or some other form of unpredictable income? How stable is the income year over year?
Liquid Net Worth – does the buyer have enough liquid assets to pay for closing costs, the down payment, and a provision for 1-2 years of post-closing liquidity?
Pro Tip: Does the unit you are selling require renovations? If so, the board may ensure that the prospective purchaser has sufficient net worth to comfortably pay for a gut renovation. In a case like this, you’ll need to be much more conservative when determining whether or not the buyer can meet the financial requirements of the board.
Can I withdraw an accepted offer?
Yes, you can withdraw an offer on a house at any time before purchase contracts have been signed. However, you should be very careful about signing any sort of offer letter or form because doing so may enable a counter-party to sue you if you back out of an accepted offer.
When Is It Too Late to Withdraw an Offer?
It becomes too late to withdraw an offer after you have signed a contract of sale and delivered an earnest money check to the seller’s attorney. The seller could counter-sign the contract at any point and deposit your contract deposit into the seller’s attorney’s escrow account.
Generally speaking, once the seller has counter-signed the contract and returned the fully executed contract to the buyer’s attorney, the listing is considered to be in contract and binding on all parties.
However, please note that some buyers’ attorneys will try to be clever and include language that says the contract will only be considered to be fully executed and binding once the buyer’s attorney has confirmed in writing receipt of a fully executed contract.
If this type of language is agreed upon, then technically the buyer would be the last to act vs the seller, and the buyer could technically still withdraw an offer by instructing his or her attorney to say that they never received the fully signed contract.
We’ll explain in the following section why this is a bad idea, and why you should never sign anything if you don’t intend to follow through in good faith.