2015 Apr 10th

Hoboken Condo – Over 50% tenant occupied. Investors must have 30% down.

Here’s an interesting notation on the MLS listing for a property for sale at 920 Jefferson Street. Once a condo building has more than 50% investors, it no longer meets the Fannie Mae requirements. That means that the bank making the loan to the buyer can no longer sell the loan to Fannie. It severely limits a buyers options as to where to get a loan and it usually makes the interest rate the buyer must pay a bit higher. Allowing that many renters in a condo association therefore hurts the marketability and value of ALL the units in that condo association.

What can be done? Well, one building, the Constitution, amended its governing documents to prohibit sales of units to investors. If you buy at 2 Constitution, you better do so planning to live in your unit, at least initially. There is a possibility to rent after a set period of time, I believe two years, based on the number of rentals in the building at that time. They (smartly) just don’t want to go over that 50% limit. When I explain this to people who own in a condo building they sometimes say “you can’t do that”! Well, yes you can.

By it’s nature, condominium ownership means you are part of a group ownership situation.  The condo board is given the power to make rules which have an impact on all owners.  Changing the rules may require a vote by the board or it may require a vote by the unit owners, typically a majority of the unit owners.   Often restricting the number of rentals allowed at a given time may also requires an amendment to the Master Deed of the condominium. But in the long run limiting rentals helps maintain the value of the property.

A condo building full of renters often has more room-mate situations and the atmosphere more like a college dorm, especially in Hoboken.  It is never going to be the same as a building full of owner-occupiers. It’s just not their place and they are never going to care as much as the actual owners who live there would. Furthermore, when the market takes a downturn, investors will be much more likely to walk away from an underwater mortgage – after all, it’s not their home. Which is why banks don’t like too many renters in one building in the first place – increase risk of default. There are many, many condo buildings in Hoboken that are now on the cusp of the 50% limit. Pay attention people, too many renters in your building can haunt you down the line and come back to bite you in the wallet.

Posted by Lori Turoff | Currently 9 Comments »

2015 Apr 2nd

Attorney Review Revisited – Hoboken Buyers and Sellers Need to Know

I’ve written about this before but it continues to be a subject of much misunderstanding so here is a refresher on Attorney Review.

When you buy real estate in Hoboken, be it a condo or a house, there is a particular order of events that typically take place. Basically, you get your pre-qualification letter from a mortgage broker or bank, find your dream home, make an offer in contract form if you have a decent realtor (not just a term sheet) and, after negotiation (or more likely, these days, a final and best scenario) the seller accepts your offer. Wait! Agents aren’t lawyers! (well, I am but I think I’m the only one in Hoboken).  True – but the NJ Association of Realtors (NJAR) provides a standard-form sales contract that realtors routinely use as the starting point for your deal.  As part of a settlement agreement in the NJ courts, in order to avoid the unlicensed practice of law by real estate agents, the NJAR agreed to use this standard contract along with the “Attorney Review” language that must be included in all contracts.  The realtors can start the contract process but the lawyers must do the real legal work.  There is much confusion and misinformation around attorney review and how it works.  I hear realtors and even brokers (they run the real estate offices) explaining it incorrectly all the time!

pic-legal_docs2

Attorney review is a ‘time-out’ period of a minimum 3 business days required by New Jersey law. During this time your lawyer performs “due diligence”.  The 3 day clock begins ticking when the buyer and seller have both signed the contracts but remember, weekends and holidays don’t count.  The respective attorneys will then review the contract.  Either lawyer can, and usually should, “disprove” the contract.  That stops the clock from ticking.  They can then make changes to it by sending riders back and forth. It’s very important for you and your realtor to be copied on these riders so everyone knows what is going on.  Once everyone agrees to all the changes, you will “sign off” on attorney review and the contract becomes binding.  If the attorney fails to disprove the contract as required by the real estate commission rules, attorney review ends at the end of the 3 business days and the contract automatically becomes binding.

Sometimes, there are no issues and not much due diligence is needed.  Or a buyer may wish to avoid other competing offers from coming in and bouncing him or her out of the deal.  The attorneys can mutually agree to shorten review.

The attorney review period gives you (and the seller) a chance to “sleep” on your decision. If at any time during attorney review you change your mind you can simply walk away. No reason or explanation necessary. Assuming you paid one, you get your $1,000 good faith deposit back – no questions asked. It’s similar to when you join a health club and the papers say that you have 24 hours to change your mind and can get your money back.

Remember, though, that the seller can also change his or her mind during attorney review. In our current market, many buyers go into attorney review thinking they’d bought a new condo. In the meantime, the seller receives a higher offer and cancels the contract with the first buyer. So buyer beware – until attorney review is over, the sales contract is not legally binding. Both parties should be prepared for the worst, even if it means 3 (or more) sleepless nights while waiting for attorney review to end.

When hiring a real estate lawyer, you would be wise to ask about schedule and availability. It would be a shame to lose the condo of your dreams because your attorney was too busy to get to your sales contract before the seller changed his mind.

So find a lawyer who has the time to focus on your deal. Don’t make any irrevocable plans until attorney review ends. And most importantly, insist that your lawyer keep you and your realtor informed of what is taking place during the attorney review period.

Posted by Lori Turoff | Currently No Comments »

2014 Sep 23rd

Speaking of Real Estate Development – This is the News Here in Hoboken

The City of Hoboken posted the below information about the Monarch project on its FaceBook Page:

The City of Hoboken is continuing to oppose, through a variety of means, Shipyard Associate’s attempts to develop residential buildings on a waterfront pier, known as the Monarch project, in place of promised recreation amenities. In particular, the City is highly concerned about public safety issues associated with waterfront pier development from the well-documented flood hazard threats posed by major storm events such as Superstorm Sandy.

flooded pier

THIS IS WHERE APPLIED WANTS TO BUILD!!!

The City of Hoboken is legally challenging the Monarch project on several fronts:
1. The City is appealing to the appellate court the decision by New Jersey Department of Environmental Protection to approve a permit for the Monarch project.
2. The City is appealing the Superior Court’s decision regarding the Hoboken Planning Board, which rejected Shipyard’s application to amend a prior Development Agreement until all legal issues were resolved.
3. The City is fighting a lawsuit in federal court filed by Shipyard challenging the City’s flood hazard protection ordinance which bans the development of commercial and residential development on waterfront piers.
“Hoboken’s flood protection ordinance and our opposition to this project are in line with Governor Christie’s veto of state legislation that would have allowed new construction on existing piers in the Hudson River,” said Mayor Dawn Zimmer. “We will continue to vigorously defend the City’s interests and hold developers accountable for their promises.”
County Freeholder Meeting on Monarch – Tuesday, September 23rd
Separate from the City’s legal challenge, the Hudson County Board of Chosen Freeholders will hold a special meeting at 6:00pm on Tuesday, September 23, 2014 and vote on whether or not to uphold the Hudson County Planning Board’s denial of Shipyard’s application for the Monarch project. The meeting will take place on the 3rd floor of the Administration Building Annex located at 567 Pavonia Avenue in Jersey City. Concerned members of the community are urged to attend and voice their opinions.
Background on Monarch Lawsuit
The City of Hoboken filed suit in 2012 in order to enforce the 1997 Developer’s Agreement between Shipyard, the Planning Board and the City that provided for the construction of a multi-phased, mixed use project along the waterfront, including over 1,000 residential units. According to the Agreement, Shipyard agreed to construct three tennis courts on a waterfront pier as the last phase of the development. Shipyard has financially benefited from development of more than 1,000 residential units, however in 2012, the developer unilaterally decided to abandon the public recreation improvements and replace it with two 11 story residential buildings, known as the Monarch project.

Posted by Lori Turoff | Currently No Comments »

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