2012 Aug 27th

Hoboken Real Estate Agents Never Cease to Amaze Me

I showed a Hoboken condo property to some potential investors the other day.  They liked it and were considering making an offer so they wanted some more info about the building.  I called the listing agent to ask her about the financial status of the building and to ask how many of the 10 units were currently rented out.  Nowadays, if more than 50% of the units are rentals, the building will not meet Fannie Mae requirements, making it much harder for a buyer to obtain financing.  The agent said he had not yet filled out a condo questionnaire or anything so he had no idea of the answer to any of my questions.

First of all, a condo questionnaire is something the lender requires to be completed during the underwriting process if the loan is going to be sold to Fannie.  What normally happens, or should happen though, is that when an agent meets with a seller to list a property the agent, if he or she is at all competent, will ask the seller some basic and vitally important questions about the property.  These questions include things like ‘does your condo association have any reserves’ and ‘how many units in the building are rented out’.  If the agent is really good, he or she will advise the seller to get together the condo documents (Master Deed, by-laws, meeting minutes, financial statements) in advance of listing the property.  This way, when an offer comes in, the seller has all that is going to be needed for attorney review readily available.

This agent did not have a clue as to the financial situation of the building.  A week later, he called me to say the building had no reserves at all.  Not a wise investment purchase to buy into an old, dilapidated building that has no money on hand for upkeep or repairs.  Strike one.

To figure out if any of the units were investor owned, it took me all of two minutes to pull up the tax records on the internet – public records accessible to anyone – and see that almost none of the owners’ addresses were listed as the property address.  The listing agent should have done this ages ago.  That means almost the whole building is rented out and not owner occupied.  Strike two.

My investors didn’t need a third strike to decide to move on.  Though they did say that negotiations with an agent representing a seller on the other side of the transaction who was so ill-informed and ill-prepared was something in which they had no interest.  What amazed me the most was that when I looked up the property in the MLS, this listing agent sold the property to the seller when the seller bought it not that long ago!  Didn’t he ask these questions when the seller was buying the unit?  Didn’t he see any of the the documents during the course of the deal?  I guess not.

Taking nice pictures and posting them on the internet is surely an important task for the agent who is selling your property.  Knowing the vital information with respect to the property they are selling is just as key to a successful sale.

  1. Zach Turner

    You go, Lori!

  2. Randy

    A bizarre but similar story happened to me about two months ago.

    I wanted to buy a condo as an investment. I went to the listing broker and made an offer. I explained that I wouldn’t need a mortgage and that I had enough cash on hand but would prefer a mortgage.

    The broker told me to make an offer waiving my mortgage ability and that the owners would look highly on that as they had experience with someone who couldn’t get a mortgage earlier and didn’t want that to happen again.

    I said no problem assuming that it would be easy for me to get a mortgage later on (I had 25% down payment, great credit…). Then during contract review my lawyer had explained that this condo (based on the unit situation) would not be fannie approved and that it would be very difficult to get a mortgage for it regardless of my status.

    When I went back to the broker/lawyer explaining this, they basically pulled the deal from me and ignored my phone calls. For a broker that was supposed to also be representing me, the guy wouldn’t even return my phone calls.

    To date, I’m not sure what they were thinking. Initially I thought they got another offer better than mine and that the change of me getting mortgage was an excuse to kill the deal…which made sense to me….but the property is still available! So I have no idea what they are thinking. Maybe they think I’m a bad buyer because I initially waive needing a mortgage (at the broker’s strong insistence) and then changed it later on – making me an unethical buyer? Or maybe they knew it would be impossible to get a mortgage?

    Either way, I learned I will never deal with this nonsense again and will now get my own intelligent broker to rep me.

  3. Lori Turoff

    Randy – just another reason why a buyer should not walk into an open house and expect that the listing agent is going to consider their interests. Get your own agent is right.

  4. bz

    I live in my current property, but the tax record of this property has my old address which I sold in 2008. Should I call the city tax office to make the correction?

  5. Lori Turoff

    BZ – that is really up to you. Do your tax bills get sent to you at the right address?

  6. bz

    Yes…I get my tax statement (postcard size) every year. My mortgage ascrow account pays for the taxes for me. I didn’t even know that they had a wrong address on tax record until I read this post and checked today! I guess its a good thing to make the correction.

  7. Jason

    This is why Hoboken realtors are the worst. (excluding you Lori, obvi). I’m so glad that you have pointed this out with proof why some hoboken realtors are useless and incompetent. Most of them provide no added value to the home buying process and aare basically getting paid to show off units. Its a pretty good gig if you can get it.

  8. Gilby

    This thread is very upsetting, more and more condos are being rented out or bought by investors that will rent them out. Won’t this hurt people that have lived their condo that have now decided to sell when many potential buyers won’t be able to get a mortgage? How many condo buildings have more than 50% rentals in them? I see so many RE adds that say, buy to live in or purchase as an investment. I know the market is strong, but how many legitimate buyers that need a mortgage are unable to buy because of properties not Fannie Mae approved? Maybe the recovery would be more dramatic if that weren’t the case. Prices, while recovering, are still below what they were in 2006 and 2007.

  9. Lori Turoff

    Jason – it used to be that 90% of the business was done by 10% of the agents. Now it’s more like 95% is done by 5%. So the really bad agents often don’t last or have another job. Fortunately. The sad part is that their poor performance hurts all of us.

    Gilby – I can’t answer how many buildings have more than 50% rentals but it is a real concern, or ought to be. Remember that a buyer can always get a non-Fannie Mae mortgage but they cost more.

    I don’t know what you base your last statement on as it’s not necessarily true. It depends on the specific property. Some are above their ’06 and ’07 prices already.

  10. Gilby

    Thanks Lori – last statement was just my perception, i.e. we haven’t yet reached and/or surpassed 2006 or 2007 prices, but I really don’t know. I was just speculating that there may be legitimate buyers that can’t get a mortgage with so many condo properties being rented. I, for one, would be concerned about purchasing a condo where more than half of the units are rented for, perhaps, the same reason that Fannie Mae might not approve a mortgage – i.e. what if the absentee owner stops paying the condo fee – it puts a bigger burden on the other owners and that might hurt general property upkeep. Do you know roughly the difference between the rate on a Fannie Mae mortgage and one that’s not? I’d think even a percentage point can make a big difference.

  11. JC

    Gilby…I’m not an expert but the difference is not much or maybe none. Its more about the terms (% down, points, PMI, etc)

  12. Lori

    Response to question about difference in rates from William Kumpf, one of my preferred lenders:

    Great question. There are a few lenders that allow for non warrantable condos. Here is a snapshot of rates for a non-warrantable condo:

    5YR ARM @ 2.500%
    7YR ARM @ 2.875%
    10YR ARM @ 3.750%
    15YR Fixed @ 3.500%
    30YR Fixed @ 4.375%

    Bottom line, for larger loans there is little to no impact. Clients looking for a smaller loan, under $417,000 on a 30YR Fixed feel the biggest impact. On a warrantable condo, the rates are in the 3.500% range for a 30YR Fixed as compared to 4.375% for a non warrantable. However, ARM pricing is still very competitive, so it really comes down to the loan program they choose.

  13. Azul

    Re: Smartphone as key fob? I would love to use my iPhone as my fob. I think it is a great idea. I hate having thigns in the pockets of my slacks. I never carry change, all my office doors have code or card locks. On the house locks? An app Lockitron Unlock Your House Doors With Your iPhone | Apple iPhone School

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