When You Buy a Hoboken Condo You Buy More Than Just the Condo.
Categories: For Buyers, Hoboken Condos, Legal Matters
What is a Condominium?
A condominium, or condo, is the form of ownership of real property. When you own a condo in a residentail building, typically you exclusively own your particular unit from the walls in. The ownership of the common elements such as hallways, heating system, elevators, exterior areas, the basement and the roof is jointly owned by all of the unit owners and controlled by the condo association. The condo association is made up of all the unit owners.
The association elects a condo board that governs the association and runs the building. Unit owners typically have voting rights that correspond to their unit ownership. Sometimes is it one vote per unit, other buildings allocate voting based on percentage. The percentage is determined by the square footage of the unit so people with the biggest units have a bigger vote. Sometimes the condo board will hire a management company to assist in running the day-to-day affairs of the condo, like collecting the monthly maintenance fee from the unit owners and doing the banking, paying the utility bills, arranging for cleaning of the hallways and shoveling of snow. The management company should not make major decisions that affect the unit owners – that is the job of the condo board. After all, the board was elected by the unit owners. So major expenditures like deciding to replace the roof or repair the boiler, and financial matters such as whether to increase the maintenance fees, whether to allow pets are all up to the condo board. If there is no management company the board or other unit owners have to take care of everything in their spare time.
Why Does The Condo Association Matter?
When buyers shop for a unit, very often they are very focused on features of the unit itself and don’t pay much attention to the association. It is crucially important for the buyer to recognize that they are not buying just the condo unit. When you purchase a condo, you are also buying into the condo association. A well-run condo association has made provisions so that it has money in the bank for future maintenance and repairs. That is why you, as a unit owner, pay monthly maintenance. Your maintenance is used to build up the reserve fund gradually over time so that when repairs are needed the association has the funds to pay for them. If a condo does not have sufficient reserves, the board will often decide to impose a “special assessment” on the current unit owners. Since most of us like to know what our monthly expenses will be, getting his with a special assessment is not a welcome event. This is especially important in older buildings – and many Hoboken condos are in buildings that were constructed 100 years ago. If a building has not been well maintained over the years, the chances of problems arising are even greater than in a brand new building.
What Is the Hoboken Condo Buyer To Do?
When you are shopping for a condo you should focus on more than just the physical condo unit. While it is your lawyer’s job to find out certain information during the attorney review period, after you’ve made an offer, it’s been accepted, you’ve agreed on a price and hired a lawyer, there is nothing that prevents you from asking some important questions of the seller much earlier in the process while you are still shopping. Some things you might want to know are:
- Does the condo have a reserve fund?
- How much is in it?
- Does the condo board meet on a regular basis?
- Have there been special assessments in the past and for what reason?
- Is the building self managed or has the board hired a management company?
- What major repairs have been made to the building and when?
- Does the association have a budget for ongoing expenses like insurance and utilities?
I’m not suggesting that you put the cart before the horse and demand to see all the condo documents and financial statements before you make an offer (although in New York City that is quite common). There is no reason a seller should object to answering these basic questions. If they do, that just may be a red flag and you might want to consider other options. With so many properties on the market in Hoboken today, there is no need to settle on buying a condo in a mismanaged building or one that is in financial trouble.
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Buying a Hoboken Condo? Here’s a Useful Educational Tidbit
Categories: For Buyers, For Sellers, Hoboken Condos, Legal Matters
What is attorney review?
Many buyers, especially first-time buyers, are very hesitant to make an offer on a property they’ve seen even if they’ve been looking for a while and see something they absolutely love. While it may be a general fear of commitment that keeps them from acting, often I think it is that they don’t understand the purchase process. They are frightened of acting too hastily. Instead, their hesitancy often causes them to miss out on the opportunity entirely which they later regret. In part, this is because many people don’t understand “Attorney Review”.
Attorney Review refers to a New Jersey law that was enacted in part to protect the consumer. Just like when you join a gym or health club, by law the contract gives you the absolute right to cancel within 24 hours, you can cancel your decision to buy or sell a property within 3 business days with absolutely no repercusions. These ‘cooling off’ periods let the parties sleep on their decision so that they are not pressured into doing something by sales people. There are other reasons for attorney review but that is the big one.
In brief, the process is as follows:
- Find the condo you like
- Make an offer in writing
- Negotiate the price
- Come to an agreement on the sales price
- Sign multiple sets of a sales contract & have the seller sign the same document
- Give a set of the contract to the buyer’s lawyer and the seller’s lawyer.
Once the contracts are delivered, the clock starts ticking. Only business days count so if the contracts are delivered over the weekend, you start counting the days on Monday. During this time period, each attorney will review the contract and prepare what is called a rider or letter addendum to the contract. The rider will create additional provisions to the contract, addressing any issues that have not been already addressed by the initial contract. When representing a buyer, the attorney would try to extend the deadlines for your mortgage commitment and inspection report, as well as giving you the most flexibility to get out of the transaction, if your inspection report is unfavorable or if you are unable to secure a mortgage. A seller’s attorney would make any changes possible to protect the interests of the seller and make sure the deal will go through.
The buyer’s attorney will request copies of important documents, including the Master Deed, the Bylaws, any House Rules of the Condo Association, in addition to the financial documents, including a budget, and/or financial statements, which will show the financial stability of the building and minutes of recent board meetings. This is when the buyer’s attorney is supposed to perform due diligence. The lawyer reviews all the documents for red flags and keeps the client informed of the findings. If something doesn’t look good, the buyer can walk away. But let’s assume there are no problems with the condo association or the financials and we continue our deal.
Once the attorneys and their clients accept each other’s newly added sales contract terms, if any, Attorney Review is concluded. Now you have a binding contract. It’s important to remember that until Attorney Review is completed, either party can change their mind and end the transaction. No reason need be given. The party that decides to back out simply has his or her lawyer send a letter that says “the contract is hereby disapproved” and the property is back on the market. No loss of money, except the attorney’s fee (of course).
This is important for a buyer because they can make an offer and get their foot in the door so they are the first potential buyer. When there are more than one offer on a property, this can be a big advantage. Most sellers feel some loyalty towards the first party to make an offer on their property and will usually try to negotiate with “Buyer A” before considering ”Buyer B”. Unless, of course, Buyer B makes a much higher offer in which case, human nature being what it is, all bets are off. What I see happen quite frequently is that buyers wait too long. They keep waiting for the price to be reduced (again) instead of just making a low offer. In the meantime, someone else sees the beautiful property and swoops in often with a very low offer. It may take some negotiating but in today’s market, many buyers are getting pretty good concessions from sellers on price. So rather than waiting for that price reduction, when a seller is psychologically so much less likely to want to negotiate since they just lowered the price, make the low offer, be first, and see what happens. You may get lucky and get the place you love for the price you would like to pay or very close to it!
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Help to Homeowners – Is It Fair? Is It Necessary? Will It Work?
Categories: Finance, For Buyers, For Sellers, Hoboken Condos, Legal Matters
By Lori Turoff (info@hobokensbest.com)
Is A Cram Down Coming Our Way?
More than 9% of all mortgages nationally are either delinquent or in default according to the Mortgage Bankers Association. Over 2.3 million loans went into foreclosure last year, more than twice the volume of 2006. Estimates are for 3 million foreclosures in 2009 unless something drastic is done by the government to change things.
The NY Times reports Obama’s $50 billion plan for help to homeowners to be announced tomorrow may include government subsidies to reduce a borrower’s interest rate, which the lender would have to match with its own money. Banks might refuse to cooperate, though, if they still see these borrowers as bad risks. Under current law, a borrower cannot use bankruptcy to restructure a mortgage but must seek foreclosure. If legistlation is enacted to change the power of bankruptcy courts, allowing what is sometimes called a “cram down”, it would increase the borrower’s ability to negotiate new loan terms with the lender. Some fear that investors will stop funding mortgages if the terms can later unilaterally be changed in bankruptcy. There are also fears that bond holders will sue the issuers of bundled mortgages if the value of mortgage backed securities are affected. Yet few would disagree that home foreclosures are a root cause of the economic meltdown.
J.P. Morgan and Citi have implemented a temporary freeze on new foreclosure filings, according to the Wall St. Journal. Freddy and Fannie will restructure only when borrowers are already 90 days late with payments. Something has to be done, it is agreed but what is the right course of action for the government to take to prevent the snowball of failing mortgages from continuing to grow?
There’s A Moral Hazard Here, Too
Even if we were to agree that mortgage defaults are a huge problem and that something has to be done about it there is another issue at stake here.
Many feel that the government is using taxpayers’ billions to bail out borrowers who make bad decisions. While some borrowers were deceived and even defrauded, others knowingly borrowed more than they could afford. The family home became a convenient ATM. A bailout helps the banks who make bad loans, and the borrowers who made bad decisions but does nothing to help the frugal and responsible borrowers and homeowners who are current in their payments. In the midst of an economic recession of unknown and increasing severity why should the frugal, responsible borrowers get nothing? Does it pay to act foolishly? Should we all stop making our mortgage payments if we can get a lower rate? Of course, the argument can be made that by bailing out the reckless banks and borrowers the tide of failures is stemmed even greater catastrophe prevented, ultimately benefiting everyone in the long run. What do you think of this?
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