2009 Jun 23rd

When You Buy a Hoboken Condo You Buy More Than Just the Condo.

What is a Condominium?

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:

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.

Posted by Lori Turoff | Currently 20 Comments »

2008 Mar 8th

How a Home Inspection Can Save Your Condo Sale From Falling Apart

Was Your Hoboken Home or Condo Built in the 1800s?

It is widely assumed that a buyer does a home inspection once the property is under contract. Or at least when their offer has been accepted. Usually, that is correct. Many Hoboken buildings (and condos), however, were built in the late 1800s. That’s not a typo. Most of our brownstones and row houses are over 100 years old. Many have been converted to condos after having been rental units for a long time. In that case, there may be an advantage for the seller to have the condo unit or house inspected before putting it on the market for sale.

What’s In It For The Seller? Knowledge & Power

The seller can learn if there are any potential problems with the property. If there are, repairs can be made before the unit is listed. The buyer is going to do his own inspection and will discover these problems anyway. What do you think happens then? The buyer asks the seller to make repairs or adjust the sales price with a credit. Then the lawyers may have to get involved. It may hold up the deal. It may even give the buyer a way out of the contract and the deal may fall apart.

Nobody Wants Surprises During Negotiations

When you are selling your property, until you are sitting at the closing table, check in hand don’t kid yourself, you are still in negotiations. Just like a lawyer should never ask a witness a question if the lawyer doesn’t know what the witness will answer, if the seller doesn’t know what the buyer’s inspector is going to find wrong with your property the seller is at a disadvantage. Even if you decide not to make any repairs, doing a home inspection will let you will know in advance what the buyer is going to ask for.

Those Old Pipes Love to Ping and SingOld Pipe

Back in the day, Hoboken houses were built with a single heating system for the whole building. Over the years, many of these multi-family homes and buildings were turned into inexpensive rental units. Not all were well maintaned. More recently many were converted to condos. Due to the expense, some of these condo buildings still have parts of the original heating systems in place today. When you see a listing for a condo that says “maintenance includes heat” that is a tip off. The condos don’t have individual meters because the building has not been re-piped and probably has much older heating and possibly electrical systems.

Smart Sellers are Prepared

Buyers may hesitate to buy a condo in a building with old systems. If something goes wrong or costly repairs are needed, maintence fees increase or a special assessment be imposed. Buyers, especially Hoboken’s many first time buyers, don’t like unknown costs. The potential cost of repairs may scare some buyers away. The age of the building systems may prevent them from buying. Having an inspection report available for buyers will reassure them. It gives the seller a way to overcome objections. It makes the buyer feel more secure that there are no significant problems or that the problems have been addressed.

Pay Now or Pay Later

So as a seller you have a choice. You can pay a few hundred dollars now and do the inspection. If there are problems, you can make any needed repairs. Or you can pay later after your property lingers on the market for months and you are forced to drop the price. Worst case scenario, you finally do get an offer and get through attorney review only to have the buyer walk away from the deal because of problems discovered during the home inspection. Selling a 100+ year old condo or brownstone in today’s competitive market? Be smart, do a home inspection.

Also Read: What Everybody Ought To Know About Home Inspections

Posted by Lori Turoff | Currently 1 Comment »

2008 Feb 9th

Get Rid Of Condo Special Assessments Once and For All

What’s the Maintenance Fee?

It’s interesting that when shopping for condos with buyers, the buyers are always attracted to condos with low maintenance fees. What is not often considered, is that maintenance fees can be too low. What does that mean? Well, the maintenance fee should be high enough to fund the ongoing operating expenses of running the condo (things like the management fee, if professionally managed, insurance, utilities for the common area, cleaning the common areas, etc.). In addition, there should be some ‘left over’ each month to fund the condo’s capital account which is used for long term improvements and repairs. This account is for items with a long useful life, like the roof, heating system for the building, elevator, brick face and so on.

Let’s Make Up a Budget

Often times, when a condo is built, the developer, in order to make the property seem more attractive and easier to market, sets the maintenance artificially low. Since there is no history, the budget is just made up. There are no past year actual figures to use in order to have a realistic budget. The building is ‘transitioned’ to the unit owners when the developer no longer has a controlling interest in the condo. The transition is supposed to happen soon after the majority of the units are sold and a new condo board elected. At that time, the new board ought to look very carefully at the proposed budget and make adjustments where needed. Having maintenance fees set too low will usually result in a deficit in the future. Without an adequate reserve fund, special assessments are required to pay for building operations and repairs. Most owners prefer to know what their monthly obligations will be and don’t appreciate getting hit with an unexpected assessment.

Show Me The Money

When a condo is sold, the buyer has the right to see the financials of the condo association. The buyer’s attorney should review these documents on the buyers behalf to see if the building is in good financial standing. Sellers of units that are in condo associations where the numbers are good, meaning there is an adequate budget and decent reserve fund, should let potential buyers know that.

Posted by Lori Turoff | Currently 1 Comment »

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