Should you borrow money and claim it is your own for the sole purpose of getting approved by a co-op board?
It took years, but you have finally saved up enough money to make a down payment on a home. You believe that a co-op is the best fit for your lifestyle. You think you have all your ducks in a row until you are informed that the co-op board wants to see a certain amount of money in your savings in addition to the down payment and closing costs. Surprisingly, the board wants you to have enough savings to cover two years of mortgage payments and maintenance fees.
What do you do now?
You could borrow the money you need from a bank, but this might not work because the bank may also want to see that you have a certain amount of money saved before giving you a loan. You have also heard that a lot of people borrow the money from another person to deposit into their accounts just until the sale is finalized. This can be referred to as "dummy money" and you are considering whether this is the right move.
Is it advisable to use dummy money?
If you use this strategy, you might say that this money was a gift. If you are asked to execute an affidavit swearing to this fact, however, you will be committing fraud. You want to make sure you are not doing anything that will cause you to be liable for a misrepresentation of this kind. Also, many co-op boards are aware that this is going on. So, they now require that this money be placed in escrow for a certain time period as a condition of the sale. This could tie up of the money for a number of years. Therefore, we do not recommend this course of conduct.
The truth is, if you do not have the kind of money that a particular co-op board requires, it is probably in your best interest to set your sights on a different piece of real estate. Our Albany, Troy, Saratoga Springs and Clifton Park attorneys handle all types of residential and commercial real estate transactions. Contact us for a consultation today.