What Are Post Closing Liquidity Financial Requirements for Co-ops in NYC?
Post-closing liquidity forecasts how many months’ worth of co-op mortgage and maintenance payments you have in liquid assets after you close on your apartment. Most co-op buildings in NYC require one to two years of post-closing liquidity.
Original Article: https://www.hauseit.com/post-closing-liquidity-definition-nyc/
Post-closing liquidity in NYC is typically quoted in months or years. For example, a buyer who has 24 months of post-closing liquidity has enough liquid assets to pay the monthly co-op maintenance and mortgage bills for 24 consecutive months. Listing agents in NYC also refer to post-closing liquidity in years. For example, “The buyer has 2.5 years of post-closing liquidity, not factoring in her vested 401K assets.”
It’s important to note that the definition of ‘liquid assets’ varies by co-op. While some buildings may allow a buyer to include vested 401K or IRA assets, other buildings will only allow cash or cash equivalents to be counted towards post-closing liquidity.
The definition of post-closing liquidity can be obtained by reviewing the co-op purchase application instructions or asking the managing agent.
What is the Formula for Post-Closing Liquidity in NYC?
The formula for post-closing liquidity is as follows:
Post Closing Liquidity (Months)= (Liquid Assets — Down Payment — Estimated Closing Costs) / (Monthly Mortgage + Maintenance + Assessments)
You can view an example post-closing liquidity calculation here.
What Is the Typical Post-Closing Liquidity Rule for Co-Ops in NYC?
A typical New York City co-op will expect buyers to have at least one (1) to two (2) years in post-closing liquidity. Before submitting an offer on a co-op, it’s important to have your buyer’s agent confirm the co-op’s financial requirements.
If a building does not specify it’s post-closing liquidity requirements, a conservative rule of thumb is to have at least two years of post-closing liquidity. Even if a co-op does not have a stated requirement for post-closing liquidity, they may still provide guidance as to what types of assets they consider to be liquid.
What Qualifies as Liquid Assets When Calculating Post-Closing Liquidity?
The definition of ‘liquid assets’ is open to interpretation and varies by co-op board. As a general rule of thumb any asset which can be converted to cash in 24 hours is considered ‘liquid.’
Liquid Assets Include:
Cash and CDs
Money Market Funds
Government Bills and Bonds
Stocks and Bonds
Vested Stocks and Options
Illiquid Assets Include:
Unvested 401K, IRA, SEP IRA, Roth IRA
Pension and Keogh Plans
Life Insurance
Property and Real Estate
Unvested Shares
Original Article: https://www.hauseit.com/post-closing-liquidity-definition-nyc/
Disclosure: Hauseit and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).
