Should Your Hoboken Grandma Run Your Hoboken Condo Association?
Categories: Finance, For Buyers, Hoboken Condos, Legal Matters
Grandma Ran the Building in the Old Days
Before I say anything else let me make it perfectly clear that I have nothing against Hoboken grandmothers. In fact, for some things, like watching the grand kids, making Sunday supper, there is simply no one better. I’m using grandma to make a point so hear me out. There are lots of small 4 or 5 family buildings in Hoboken that were at one time owned by Grandma. Originally, the extended family lived in them. Then they became rentals with Grandma as the landlord. Eventually the tenants moved out when a smart cookie advised Grandma to condo her building which is now worth millions. So Grandma sold off all the units but one. Now she lives in that unit with her new neighbors, the other unit owners around her. Her handsome profit is safely deposited in the bank. Since it was her building, she kept on ‘taking care’ of the building as she always had. At first, the other unit owners were happy to have her to look after things they just didn’t have time to deal with. Whether it was getting someone to shovel snow, clean the hallways or paint the front door, Grandma had the Hoboken connection and knew who to call and how to get it done.
Times Change - Grandma is in Over Her Head
Fast forward 10 years. Now each unit sells for close to half a million. One is for sale, has an accepted offer, and during attorney review the buyer’s attorney naturally asks the seller for the finanical statements and condo documents. Seller goes to Grandma but all she has is last month’s bank statement. There really haven’t been any formal condo association or board meetings. In fact, there really is no formal board. Grandma, 100% honest, just took care of things as they came up. The seller has nothing to produce for the buyer to show the history of the building, how it’s been maintained, whether it’s being run according to its budget since there is no budget. There is no real reserve fund and no real records of what maintenance has been collected or how it has been spent. Buyer walks away from the deal.
Let’s Teach Grandma a Lesson - Here’s What She (and the Condo Owners) Needs To Do:
1. Elect a board.
When a building goes condo, as soon as a majority of the units are sold, a condo board should be elected. Typically the legal documents that create the condo will dictate what that board has to look like. In small buildings there is usually one person elected president, another treasurer and a third may be secretary. Remember 8th grade history - checks and balances? The same idea applies here. You need a board to run the building. It’s typically required by the documents that created your condo association. If you don’t do it, a disgruntled condo owner could potentially cause problems for everyone.
2. Hold regular meetings.
Sure it’s difficult to find a day or evening when everyone can attend but serving food and beer often helps. Not only will the unit owners get to know each other, you are neighbors after all, but you can talk about what is going on in the building and what you would like to see happen going forward and make plans and develop a budget. Whether it is shopping for a better, more affordable insurance policy (your condo association does have insurance on the building, I hope) or deciding to put flower boxes in front of the building, meetings provide a forum to voice these issues. Again, the condo docs are going to tell you how often and what type of meeting are supposed to be held, and what notice of these meetings needs to be given to the condo owners.
3. Keep records.
The secretary is the one assigned with the task of keeping records of the board meetings and condo association meetings. In a small condo building, the board may actually comprise a person from each unit so there’s not a real difference between the board and the association. Not every word of the meeting needs to be documented, just the general subject of the discussion and any decisions that were made by the board.
Equally important is keeping financial records. Even if it’s as simple as writing it down in a notebook, you want to know where the money is coming from and where it is going to. Did everyone pay their maintenance? Late fees? Any special assessments? Have the bills been paid? There is insurance, utilities for the common areas, possibly snow removal, exterminators, handymen, an accountant. Did you know that condo associations have to file an annual tax return? Someone has to do the paperwork. As much as Grandma tried, you need real books and records.
Why, If You Own a Hoboken Condo, You Should Care
You Will Need Records To Sell Your Condo
Remember that a buyer is going to ask for these records. Hoboken buyers want to see how a condo building is being run. They want to assess the risk of maintenance increases and special assessments in the future. Has the condo association done renovations? For example, if the roof been replaced or common areas redone, showing that to the buyer and being able to account for how big (and small) items are paid for helps you sell your condo!
Buyers Will Want Your Condo More Than Other Hoboken Condos for Sale
There are literally hundreds of condos for sale in Hoboken at any given time. With so many units competing with yours, do you think a buyer is going to choose a unit in a well run condo with books and records showing the history of the building and its finances or a condo where Grandma just pays the bills as they come and can’t find the bank statements when asked? Buyers - here is a tip: when a building is professionally managed, there will be a sign in the lobby of the building with the name and contact info for the management company. Look for it when you are out looking at condos.
Too Much on Your Plate - Not Enough Time For Condo Business?
Hire a management company. There are lots of them that do a good job. They are not very expensive. They will add value to your condo.
The board still has to decide on a budget and only the board can decide on things like how much maintenance charges should be or whether to incur any significant expenditure. Someone from the board will also keep minutes of the meetings and they can be emailed to the management company for record-keeping purposes.
There are lots of more little things a management company can help a condo association do. For example, every time a unit is sold and there is a mortgage, someone from the condo association has to fill out a questionnaire for the bank. The management company does this.
Why A Well Run Hoboken Condo Pays for Itself
When it is time for you to sell, you can advertise to potential sellers that you have a “strong condo association”. Having a “strong condo association” and “professionally managed building” are very big selling points in the Hoboken condo market. It is equally or more important than having stainless steel appliances. Don’t kid yourself, the days of Grandma running the building are over. Do yourself a favor and get your condo in order.
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The May ‘08 Hoboken Condo Sales Figures
Categories: Finance, For Buyers, For Sellers, Hoboken Condos
Hoboken Condos - Prices Are Down in May
Monthly Hoboken condo sales according to the Hudson County MLS show that May was a good month for buyers. Average asking and median sales price dropped below $500,000 for the first time this year. The discount off of list (actual sales price vs. asking price) increased back to 2.41%, about where it was back in March.
The Good News (for Sellers) in the Hoboken Condo Market
Not everything favored the buyers in May. Price per square foot is up, the number of units listed is down, the days it takes to sell, on average, is also down. The average price per square foot for Hoboken condos in May was $532, the highest it’s been since January. The average number of days a Hoboken condo is on the market before going into contract is only 57. I work with many buyers who think they are going to outsmart the current market. They see a fabulous property in a good location that, in my experience, is priced correctly, but they either wait too long to make an offer (and miss out because the condo is already under contract) or they make a low ball bid thinking they are going to get a bargain (and miss out because the unit was well-priced and sold at or close to the asking price.) Prime Hoboken condo units are often under contract the week they hit the market. What is a prime Hoboken condo? One that offers good value and is in a good location. No matter what you may read or hear in the press, these units sell at or above asking price. Many disappointed buyers learn this lesson the hard way by losing out on the best condo they saw during their search. Think of the market as a bell-curve with the nicest, well-priced apartments selling immediately, not nice, overpriced apartments languishing on the market forever and the majority falling somewhere in the middle. Condos that are the cream of the crop, i.e., condo units that show well, are in good locations and are priced properly sell quickly - often very, very quickly.
‘08 Hoboken Condo Sales vs. ‘07 and ‘06
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When analyzing numbers, it’s easy to make knee-jerk assessments based on a one-month-sales-activity “snapshot” but to make an accurate evaluation it’s crucially important to look for trends over a period of time. One needs to look at a period of months to determine if the Hoboken condo market is advancing, declining or stable. Average sales price may be up a little one month, down the next and price per square foot, may do the opposite. Year-to-year comparisons may demonstrate similar, very slight changes in both directions. In the stock market, that’s known as volatility. While the Hoboken condo sales market appears volatile in the short run, the overall trend has been pretty flat since 2006 and that is a healthy thing. Next month, at the end of the second quarter, I’ll post a chart that shows average sales figures from 2000 to date, by quarter. That will more clearly indicate the current trend in Hoboken condo sales. We are holding steady.
A Few Footnotes to Keep In Mind:
1. The Numbers May Change
The numbers come from the Hudson county MLS system. At the start of each new month, I look up the numbers for the month that just ended. When a property sale “closes,” the status gets changed in the MLS from “dabo” (under contract) to “sold.” Some Hoboken real estate agents don’t enter the change of status immediately. There is no reason for this or hidden agenda on the part of the agent. Closings that take place the last few days of the month may not get entered until the following week. I have entered what has been recorded in the MLS to date. About the second week of each month I check again to capture the sales that were entered late. So should you see my numbers change, that’s why.
2. New Construction is Different
New construction is often sold by the developer. The large buildings at Maxwell Place, for example, are primarily sold through Toll Brothers sales office. These properties are not listed on the MLS so those condo sales are not captured in these charts. Also, gut-renovations of rental properties (a different type of “new construction”) are often sold off floor plans and these units are listed on the MLS far in advance of construction being completed. When this happens, the days on market number is very high. The clock has started ticking before the construction began and sales aren’t recorded until closing - the wait for the Hoboken condos to be finished and granted a C of O can be a long one. It skews the numbers a bit when this happens. These units also tend to be priced higher than resales and that affects the average sales price figure as well.
3. Discount Off List is Only Partial
Usually, when a seller reduces the asking price on a condo, the listing gets pulled from the MLS and relisted at the new price and the days-on-the-market clock gets reset to zero. Discount off of list is calculated off the most current asking price. It does not reflect the original asking price of the property. To do that I’d have to look at hundreds of listings one-by-one and it simply takes too long. If the Hudson board wanted to present more complete information, they could show the original asking price and subsequent price reductions on the listing. Unfortunately, they don’t. A special report, called property history, has to be run on each individual property to see the earlier pricing.
4. What is Prime?
How does a buyer know it’s a “prime” condo? Simply by looking at enough Hoboken condos to be able to judge which ones offer the best value for the money. The most important factors are location and condition. Price per square foot comes into play but, often, things like the layout and use of space, what floor the condo is on, how big the building is, how strong the condo association is (and by this I mean financial strength) all affect that assessment. How many is enough? The more condos you see the better you’re able to compare. Most people only have a limited amount of time to dedicate to their search. My best advice is to work with an experienced, competent realtor whose advice and judgment you trust. Many people just use a friend, but we’re talking about an investment of hundreds of thousands of dollars here and your friend may not be the best choice. Look on Trulia or Active Rain and see who are the top rated agents in your area. The counsel of a good, experienced agent familiar with the area you desire may be what you need to land that prime condo and to pay the right price to get it. But that’s an article for another time.
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Hoboken Condo Sales Prices Hold Steady in April
Categories: Finance, For Buyers, For Sellers, Hoboken Condos, Market Analysis
Hoboken Condos Lure Buyers in April
April was a pretty good month for Hoboken condo sales. The end of month numbers are in and Hoboken condo sales remain fairly strong. I know, there are stories in the press every day about the collapse of the housing market and we all have witnessed prices skyrocket at the gas pump and grocery store. While our country has some significant economic woes that are likely to get worse before they get better but, for various reasons, people want to live in Hoboken and continue to be willing to pay top dollar for Hoboken real estate.
Average Sales Price of Hoboken Condos is Up 8%
April sales figures represent a 8% increase in average sales price for a Hoboken condos compared to last month. The average price of condo is now just over $560,000. That’s 5% over the same period last year but 3% less than April 2006.
Price per Square Foot Down Slightly
Last month the average price per square foot for a Hoboken condo was $520 and in April it was $517. Of course, that is just an average and the real number varies depending on the usual factors - location, condition, and promotion. The mix of units sold each month also has an impact on this figure. Smaller units tend to sell for more per square foot than large ones. So if more large units sell in a given month it may tend to pull down the average. This may have been the case here since the average size jumped from 1000 square feet in March to 1087 in April.
Hoboken Property Is Selling Briskly - 72 Days on Market is Average
The standard measure of sales activity is “days on market”. This number dropped from 90 days in March to 72 days in April. Of course, the nice weather has an impact on how many buyers are willing to go out condo shopping. We are in the midst of prime selling season.
Here is a Chart View of Monthly Hoboken Condo Sales To Date:
So How Much is My Condo Worth?
This is the question I’m most frequently asked. Here is the best answer: If your condo is in average condition, in an average location, and shows decently it is worth about $515 to $520 per square foot. If it is better than average with respect to condition and location you may get a bit more. If worse, a bit less. The best way to know where your property falls is to go out and look at similar units currently on the market. Even better, bring a friend with you to give you an objective point of view. Owners are usually skewed towards overvaluing their property because of their emotional attachment to it. So get a second opinion as a reality check. Is there a real estate agent who will tell you your property is worth more than it really is just to get your listing? Absolutely, more than one. Remember, they can tell you it’s worth a lot more than it really is and you can ask for anything but that doesn’t mean you’re necessarily going to get that price. What you will get is determined by the market so the better you know the market, the better you will be able to price your property when time comes to sell.
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Fed Drops Rates - 30 Year Fixed at 5.74%
Categories: Finance, For Buyers, For Sellers
Good News For Buyers - Real Estate Rates Tumble
Inman News has just reported that real estate rates tumble.
The 30-year fixed rate is at 5.74%;
10-year Treasury yield at 3.31%
Read the full interest rate story here.
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Where NOT to Learn About the Real Estate Market
Categories: Finance, Market Analysis
There is no Wall Street In Hoboken
There was a recent article in the NY Daily News by Peter Siris, the “Guerilla Investor” to which I take exception. In the interest of full disclosure I will tell you that I know Peter because many years ago, I worked for his wife. I am sure he doesn’t remember me. Peter wrote about the difference between investing in stocks and real estate e. He starts out by saying that “there are big differences between investing in stocks and buying and selling in real estate” and then completely ignores his own statement. Peter’s argument, as I understand it, is that real estate is riskier than stocks because margin requirements force an investor to maintain a greater equity stake in stock purchases. Housing prices may continue to drop and a large number of homes may be worth less than their equity. (I take it he means that the mortgage obligation on these properties will be greater than the market value of the property). According to Peter, that may precipitate a crisis.
You Can’t Live In Your Stock Portfolio
There is a primary, fundamental difference that Peter ignores. Stocks are an investment. Real estate, for the most part, is where people live - it is their home. Investors may buy stocks hoping they will appreciate or pay income in the form of dividends. People buy real estate to have a roof over their heads. If stocks go down and the investor takes a loss it’s still purely an investment. Real estate is different. All those homeowners whose value dropped can’t just sell their homes and not have another one. They still need a place to live. If they do sell, even at a loss, chances are other properties in their community have been similarly impacted and the new property they buy can be bought at a commensurately lower price. Some may refinance and get a mortgage more suitable for their financial situation.
Investors can Rent and Profit Rather Than Sell
What about people who purchase real estate as an investment? They, too, do not necessarily need to sell and when housing prices fall rents tend to rise. Real estate investors typically earn greater rental income even when their properties value has declined. That has certainly been the case here in Hoboken.
Sellers Can Be Greedy
I recognize that there are buyers who over-reached and now can’t make their mortgage payments and may even face forclosure. It’s true that there were innocent (typically lower income) buyers who were misled by unscrupulous mortgage lenders and have had balloon payments become due or interest rates reset. How many homeowners, however, have put their homes on the market not because they must but because they are curious to see how much they can get above what they paid? When they learn that they can’t get what they had hoped for, they decide not to sell. They wait until the market improves or don’t sell at all and just keep living in their home. Not every homeowner with a drop in value is going to sell their home.
Apples are Not Oranges
There is difference between the margin requirements for buying stock and the mortgage requirements to get a home. An investor can walk away from a stock purchase and write it off as a loss. Even if homeowners have no equity in their homes, if they don’t have to sell, they haven’t lost anything. They still need a place to live. Stocks and real estate are like apples and oranges. The comparisons Peter tries to make just don’t hold.
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