REBNY Financial Statement – What Is It And Why Do You Need It?

If you’re delving into a REBNY financial statement, you’re either incredibly diligent in doing your homework or ready to place a bid. Most buyers are aware of the need for pre-approval, but the requirement of a REBNY financial statement often comes as a surprise.

Before you complete one, it’s beneficial to comprehend what it entails, which components are critical, and why it’s generally required. SPiRALNY, your trusted luxury brokerage in New York City, is here to guide you through the nuances of this process, ensuring that your journey in the luxury real estate market is as smooth and seamless as possible.

What Is A REBNY Financial Statement?

Despite its rather official-sounding name, a REBNY financial statement is quite straightforward. If your background is in finance or accounting, you’ll easily recognize it as a balance sheet, income statement, coupled with a few supplementary queries. 

The upper portion of the REBNY financial statement is essentially a balance sheet. Here, you’ll document all your assets and liabilities. The blank form might seem daunting initially, but there’s no need to worry, most of it will likely remain unfilled.

Typically, assets such as cash, investments, real estate, and retirement savings make up the bulk of this section. If there are any liabilities to report, they generally include elements like mortgages on other properties or outstanding student debt.

Further down the document, you’ll find the “Sources of Income” section where you’re expected to detail your salary, bonuses, and any other anticipated income. The “Contingent Liabilities” and “General Information” sections pose specific, self-explanatory questions.

Arguably, the most crucial section is “Projected Monthly Expenses.” Here, you should outline what your monthly expenses will look like if you proceed with the purchase of the apartment.

Why Are You Required To Submit A REBNY Financial Statement?

The real estate landscape of New York City stands out due to its numerous co-ops. In fact, about 75% of NYC apartments are co-ops, making them an integral part of the city’s housing market.

Co-ops are known to have financial requirements that are often more conservative than those of your lender. While possessing a pre-approval is indeed excellent (and mandatory), this is where a REBNY financial statement comes into play. It aids the seller in determining if you’re likely to get approval from the specific co-op board in question.

But what if you’re planning to purchase a condo or a house? A condo cannot reject your purchase outright, and a house doesn’t have a board to approve your application. So, is a REBNY financial statement still necessary in these cases?

Technically, there’s no legal obligation to submit a REBNY financial statement. However, given the reasons outlined above, it’s practically impossible to purchase a co-op without one. As for condos or houses, although the statement’s relevance might be lesser, most listing agents will still request one.

Which Parts Of A REBNY Financial Statement Are Important?

In the realm of co-ops, boards often concentrate on your debt to income (DTI) ratio and post-closing liquidity. Consequently, sellers also focus on these parameters. But what do these metrics mean?

Remember the “Projected Monthly Expenses” section in the REBNY financial statement? This is significant because the total amount becomes a crucial component of both DTI and post-closing liquidity metrics. Your total “debt” payment constitutes everything you’re obligated to pay each month.

Clearly, your mortgage falls into this category, but other monthly outgoings associated with the apartment, such as maintenance, common charges, and property taxes, are included as well. If you possess other properties, you’ll be asked to include those monthly payments. The same applies to other forms of debt like a car loan or student debt.

Your DTI is simply the total projected monthly payment divided by your monthly income. Post-closing liquidity refers to how many months of these payments you will have in “liquid” or readily accessible assets after you close. Liquid assets are cash or anything that can be easily converted to cash.

Cash is undoubtedly the gold standard of liquid assets. Stocks rank pretty high as well since they can be sold easily. Real estate? Retirement savings? Converting these to cash takes time and incurs a cost, so boards generally don’t attribute much credit to them.

Are There Optional Parts Of A REBNY Financial Statement?

When you’re ready to submit a bid, the REBNY financial statement, as outlined above, is typically required. There is a more comprehensive version of this document, but it’s generally not needed at this preliminary stage.

However, it’s important to remember that each seller and, by extension, each transaction is unique. If the seller insists on additional financial disclosure before considering your bid, you then have the choice to either comply with the request or consider other options.

Do You Need To Provide Backup For A REBNY Financial Statement?

When you’re in the process of submitting bids, it’s important to note that a REBNY financial statement does not necessitate supporting documents. Its primary function is to provide the seller and listing agent with a broad overview of your financial standing.

However, if the seller has reservations about your approval by the board, they might request additional details or documents for clarification.

For instance, if the board stipulates a debt to income ratio under 25%, and your ratio is at 26%, the listing agent might ask for a record of your annual bonus over the past three years to ascertain its stability.