Cohousing-L Mailing List: Re: Financial Checks for Prospective Shareholders

[Diana Carroll (dianaecarroll]

John, this is a very wise process. We (Mosaic Commons) asked people to be
pre-qualified for a suitable mortgage, but in retrospect, I wish we had
done something both more thorough and more personal, as you are doing. We
did have several people who signed on, including putting in their initial
20%, who then later felt they couldn't afford the home they had wanted.

Congrats on your upcoming move-in. Let us know when the housewarming is. ;)


On Thu, Feb 24, 2022 at 11:06 AM John Pustell via Cohousing-L <
cohousing-l [at] cohousing.org> wrote:

> 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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