While the REBNY Financial Statement is used primarily while applying for a cooperative ("co-op") apartment, it can be used when submitting offers to other types of apartments as well.
Remember, the majority of apartments available for sale in New York City are in co-op buildings, and unless you're buying a sponsor unit, it is standard for co-op boards to expect this form. As you may know already, the approval process for purchasing in a co-op building is significantly more intensive than if you were purchasing an apartment in a condo building, and one of the main difference and headache of buying a co-op in New York City is the board application and approval process.
What is the REBNY financial statement?
The REBNY financial form was created by the New York trade association called the Real Estate Board of New York (“REBNY”). Specifically, the REBNY financial statement is used to evaluate the financial strength and ability of a purchaser. While the REBNY financial statement is not required by law, the financial statement is used by the entire NYC real estate industry, including management companies, real estate agents, sellers, and condo and co-op broads.
While this financial form is only two pages, it details a substantial amount of information to allow sellers to evaluate the financial position and strength of the buyer. Specifically, the REBNY financial form details the assets, income, and reserves of the buyer as well as any financial debts and liabilities that the buyer has.
Mainly, if a buyer expects to be taken seriously, or expects a seller to entertain an offer, he or she should be prepared to fill out the REBNY financial form.
When do I need to submit the REBNY financial statement?
If you're purchasing in a co-op, it's expected that you submit the form whenever you present an offer. If you're buying a condo, the form may not be required, but it's still recommended that you have it prepared ahead of time. Generally speaking, you should complete the form and obtain a mortgage pre-approval before you start seriously looking for homes as you'll want to be able to act quickly, you find a suitable property.
Do I have to submit the REBNY financial statement?
Legally speaking, no. There is no law that requires you to submit the form, and the listing agent will still be legally required to present any offers you make, even without the form. But keep in mind that while the form may seem intrusive, the seller will likely not take your offer seriously without the form being submitted. Even if the seller is unaware of the importance of this form, listing agents expect it to be submitted, so it's essentially required if you want your offer to be taken seriously.
The breakdown of the REBNY form
The REBNY financial statement can be broken down into two parts, the balance sheet and the income statement. The board can use this information to determine a buyer's debt to income ratio. The debt to income ratio can be defined as the amount or percentage of debt that a borrower has compared with his or her monthly income. Most co-op board requires that a buyer's debt to income ratio be under 30%. Some boards may have even stronger requirements, including the requirement that the buyer's debt to income ratio falls under 25% or even 20%.
On the balance sheet, the buyer will list all of his or her assets. This includes things like cash, stocks & bonds, investment properties, etc. While every board has different financial requirements, in general, the board wants to ensure that the buyer has the following, at minimum.
1) the down payment
2) closing cost
3) the required post-closing cushion/reserve (which can be anywhere from 2-24 months of housing expenses)
Next, the buyer will list all of his or her liabilities, which include credit card debt, mortgages, and personal loans, etc.
Finally, yet importantly, the buyer must list his or her monthly income as well as any monthly income attributed to the co-applicant. The income portion is broken down by income type. Specifically, the buyer will list his or her guaranteed base salary, followed by discretionary income, which includes overtime wages and bonuses and/or commissions. Next, the buyer will list his or her income received from dividends and interest income, followed by net real estate income and any other applicable income. A buyer should enter as much income as possible and include all sources of income to strengthen the application.
Projected Housing Expenses
This section is where the buyer includes the cost if they are approved for and end up purchasing the subject property. The charges vary depending on the property. In any event, the expenses include the common charges and maintenance fees, as well as the mortgage loan for the property.
The next couple of sections on the REBNY financial statement are where the buyer will itemize some of the information provided in the previous sections.
Schedule Aof the REBNY form is where the buyer will itemize the cash portion of the asset section. Specifically, the buyer will list the type of account, the amount, and which financial institution holds the cash.
Schedule B of the REBNY Form is for stocks and bonds. In this section, the buyer will list the number of shares held, description, and market value of each stock he or she owns.
Schedule C will have the buyer itemize the real estate owned and include the type of property, the amount of the mortgage payments, and any additional monthly/yearly property expenses.
Schedule D is for any other assets. The buyer should try his or her best to accurately reflect the fair market value of any additional assets owned. The buyer should also include the fair market value of any retirement accounts.
Financial Statements and Documentation
Once the buyer's offer is accepted, and the contract of sale is signed by both parties, the buyer would then proceed and submit the board application. As part of the application, the financial statement must be confirmed; by providing supporting documentation for each entry. Supporting documents include bank statement and brokerage statements etc.
Sample REBNY Financial Statement
Overall, the stronger a buyer's financial position is, as detailed in the REBNY financial form, the more leverage a buyer has when it comes to being approved for a Condo or Co-op. As such, it's crucial to become familiar with the form, if you are considering purchasing in New York City soon. Doing so will give a buyer an advantage over other buyers during the purchasing process.