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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When “Final and Best” is Neither
Categories: For Buyers, For Sellers, Hoboken Condos, Legal Matters
Beware When Buying a Condo in Hoboken - Final Doesn’t Always Mean Final
The Hoboken condo and real estate market is still reasonably strong and a surprising number of Hoboken condos and brownstones elicit multiple offers. When this happens, the listing agent can handle them in two basic ways:
- Competing bids
- “Final and Best”
Competing Bids Can Cause Chaos or Worse
With competing bids, the buyers bid against each other until the seller accepts one offer and says “stop - no more showings, no more offers”. Very often the seller will play one buyer against the other to keep outbidding each other to get the highest price. This strategy backfires when both buyers get frustrated and walk away. Occasionally a seller will accept one buyer’s offer, sign contracts and begin attorney review with that buyer. Then an even higher offer comes in, possibly even after the the end of attorney review when the sales contract is supposedly binding, and the seller will dump the first buyer or try to get the first buyer to top the bid again. This results in hard feelings, a disgruntled first buyer and may even end in a law suit.
The idea behind “Final and Best” is for the seller to be as fair as possible to everyone. The listing agent tells the buyers’ agents that each buyer should present their “Final and Best” by a certain deadline. The seller will then select which offer is most attractive and move forward with that buyer. “Final and Best” is supposed to avoid tangled mess of multiple bidders trying to out bid each other. It is often presented to the buyers as a way to “level the playing field”.
As They Say in Latin, Caveat Emptor - Buyer Beware!
Even when the seller’s agent says they are doing “Final and Best” in the end, it’s often entirely meaningless. Well how can that be, you may wonder? Here is a comon scenario:
- Seller has multiple buyers interested in the property
- Seller’s agent informs all buyers that they have until 5pm tomorrow to submit their “Final and Best” offer.
- 3 buyers (Buyer A, B, & C) submit bids in different amounts and with different terms (closing date, amount of downpayment, etc.)
- Seller chooses Buyer B. Buyers A and C are informed of seller’s decision.
- Seller and Buyer B sign contracts, hire attorneys and begin the attorney review process. They may complete attorney review. Buyer B may have even paid a significant deposit to Seller.
- Buyer A reappears raises Buyer B’s offer by $50,000.
- Seller is greedy, can’t resist the dough, and tells Buyer B to take a walk.
- Buyer B is furious, having now set his heart on the property, decided where to put the furniture and what color to paint the walls. Buyer B has also hired an attorney to the tune of $1,000 or so.
- Buyer B’s agent calls seller’s agent and reads her the riot act.
- Seller’s agent says “sorry - I’m obligated by law to present all offers to the seller and seller can do whatever”.
- Buyer B is left to move on to the next property or take legal action. As I recall from my days as a lawyer, property is unique and specific performance may be an appropriate remedy, i.e., seller may be forced by the court to sell to the Buyer B on the original terms. Of course, few buyers bother to incur the cost of a lawsuit but it is a possibility.
So much for “Final and Best”. Now, of course, there are some sellers with a sense of fairness that actually superceeds their greed. Upon having committed to a buyer, they will not entertain any further offers, even if higher than the accepted one. Buyers should remember, though, that just because the seller represents that they are doing Final and Best, it may be neither.
When is a Deal a Deal?
So when can a buyer relax and know that they’ve bought the property? At closing, of course. Prior to closing buyers should keep in mind that anything can and does happen. During attorney review, the contract is not even binding. The risk to the buyer is greater before buyer has put any money on the table. Once buyer has paid the initial deposit, done the inspection, obtained and delivered a mortgage commitment, the risk lessens. Chances are, the property is no longer being shown. In fact, a smart buyer will make a term of the offer be that upon acceptance of the offer the property is taken off the market. The more time that goes by, the fewer other buyers there are likely to still be floating around. But regardless of what the contract says, a seller can still change his or her mind and the buyer’s only recourse is an expensive lawsuit. We all know that when that happens, it’s the lawyers who win.
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Why You Should Never Sleep During Attorney Review
Categories: For Buyers, Legal Matters
When you buy real estate in Hoboken, be it a condo or a house, there is a particular order of events that typically takes place. Basically, you get your pre-qualification letter from a mortgage broker or bank, find your dream home, the seller accepts your offer and your realtor, if he or she is a competent agent, prepares a sales contract for you to sign. Wait! Agent’s aren’t lawyers! True - but the NJ Association of Realtors provides a standard-form sales contract that realtors routinely use as the starting point for your deal.
You go home and celebrate and start making moving and decorating plans. But - after you and the seller have both signed the sales contract it gets circulated to your attorney and the seller’s attorney and what is called “attorney review” begins. What exactly does that mean? Read on.
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The Inside Workings of a Hoboken Real Estate Transaction
Categories: For Buyers, Legal Matters
What exactly takes place when you want to buy a condo in Hoboken? Well, there is a sequence of events that takes place. Not always, but in most cases, assuming you are the buyer, it typically goes something like this:
Find out what you can afford
Talk to a mortgage lender
Check your credit report
Get a prequalification letter
Shop for properties
Find one you like
Make an offer
Negotiate the Price
Submit your contract and $1000 good faith deposit
You offer is accepted
Buyers and sellers sign contracts
Choose an attorney
Attorneys for buyer and seller receive copies of the contracts
Start attorney review
Negotiate deposit amounts, mortage committment dates, any other contingencies & closing date
End attorney review
Pay 1st deposit to seller - usually 10%
Find a home inspector
Do home inspection (termite inspection?)
Negotiate any issues that arise as a result of inspection
Bank sends appraiser to appraise property
Mortgage committment received from lender
Review terms of loan
Confirm title insurance
Confirm Homeowner’s Warantee
Final deposit paid to seller
Final walk thru
Closing
Keep in mind, this is just a brief list of what takes place in most transactions. Of course, this may vary depending on circumstances. Stay tuned for a more in-depth look at each step in the process.
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