Cohousing-L Mailing List: Financial Checks for Prospective Shareholders

[John Pustell (jpustell]

We at Bay State Commons in the Boston area (and hoping to move in in April) 
made a financial review a requirement of being made an equity investor in our 
Development company.

There was an interview with a member of the finance team and we wanted to see a 
plan to purchase the specific unit they were interested in.

We did not ask to see bank statements and investment statements or W2's (we 
took their word) BUT to help them frame the conversations we:
** checked Zillow for the value of their current home and asked how much was 
still owing on the mortgage (if any)
** Figured out how much more they would need to come up with to buy the unit 
and asked how they would finance that
     **** If cash and/or investment (and if so - did they have those funds now.)
     **** If through a  mortgage (after applying the cash they said) we would 
go to a mortgage estimator to see what the monthly payment would be and then we 
asked if that was 25% or less then their current monthly earnings.
** We included estimated condo fee, estimated RE taxes and Estimated insurance 
amounts in their monthly costs.
** Some members had other special circumstances and we asked them how they 
impacted the ability buy.
** We documented all information/answers in a purchase plan tracking sheet only 
available to finance

IF the prospective equity member's plan made sense - then an email came from 
Finance tio Membership saying so, (cc'd to the prospective member.)

We also talked with them about risks at that point to and reminded them that 
all money's invested in the project were at risk until we actually succeed in 
the build and buy our units.  AND -- that no money invested in the project 
would be returned (even if they dropped out) until at the end when the units 
were finally sold and the construction loan repaid to the bank.

The conversation usually took about 1 hour.

Some prospective equity members dropped out at this stage - but very few 
because we talked finance at every meeting so mostly folks already knew how we 
were financing the project just from conversations happening all the time.  
Some prospective members did shift to a smaller less expensive unity when we 
went through the n umbers.

John Pustell - Bay State Commons


-----Original Message-----
From: Cohousing-L [mailto:cohousing-l-bounces+jpustell=verizon.net [at] 
cohousing.org] On Behalf Of Sharon Villines via Cohousing-L
Sent: Thursday, February 24, 2022 10:32 AM
To: Cohousing-L <cohousing-l [at] cohousing.org>
Cc: Sharon Villines <sharon [at] sharonvillines.com>
Subject: Re: [C-L]_ Financial Checks for Prospective Shareholders

> On Feb 23, 2022, at 1:24 PM, Diane Maluso <dmaluso [at] gmail.com> wrote:
> 
> Hi, folks.  I'm a member of TREE, the third neighborhood at Ecovillage 
> Ithaca in the Finger Lakes area of NY State.  We have decided to 
> conduct financial checks for prospective shareholders but do not have 
> a policy yet about exactly what we should check nor how to do so. I'd 
> love to know what other co-housing groups do regarding finances of 
> prospective members.

Mortgage brokers have a standard process of prequalifying people for mortgages. 
Then the person knows how much they can afford when purchasing a unit. Unless 
there is some specific cause to doubt the people who wish to join the group 
this can be done by the prospective members themselves without collecting 
forms, etc. The value for everyone is in having defined limits in terms of 
costs. This can be very helpful to planning because you begin knowing your 
limits. 

Diamond studded faucets or not? Yes, we want the faucets but they have to come 
at this price. Or we will have to stud them ourselves after move-in.

Sharon
     
Sharon Villines, Takoma Village, Washington DC

We don t agonize, we organize.   Nancy Pelosi

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