2010 May 18th

Is Your Condo Adequately Protected?

Why Flood Insurance Is a Big Issueumbrella

One of the most important functions of  the Board of Directors of your condominium assocation is to provide adequate insurance.  This insurance differs from your own individual homeowner’s policy you have on your individual unit.  We’re talking about insurance on the common areas of the building.  Each unit owner has a proportional interest in the common areas.  This insurance  is paid for through the unit owners’ monthly maintenance charge.  What type and how much insurance a condo association should have is determined by the by-laws of the association and also by state regulation.  In addition to liability insurance, it is also necessary for a condo association to have flood insurance.  As we all know, Hoboken has an issue with flooding and, more importantly, almost all of it is located a flood zone (technically called a Special Flood Hazard Area or SFHA).  Here is an interesting flood zone map

Recently, there have been quite a few buyers who have had problems getting a mortgage for the Hoboken condo they wish to purchase because they learn that the condo association does not have adequate flood insurance.  Often times the lender requires that the condo have replacement value coverage.

This straight from the FEMA website:

Federal financial institution regulators state that the amount of flood insurance purchased for a structure in a high-risk area must at least equal the outstanding principal balance of the loan, the insurable value of the building, or the maximum amount of coverage available for the particular type of building under the NFIP, whichever is less.  However, the lender may exceed the minimum requirements, if necessary, and compel the purchase of limits that more fully protect the lender and the property owner.

What’s more, most loans being made today are sold on the secondary market and must therefore comply with Fanny Mae and Freddie Mac guidelines.  These guidelines may be even more stringent.  More specifics are available on the FEMA site or by speaking with a mortgage lender and insurance agent. 

Some buyers have the seller go to the condo board and try to convince them to increase the insurance coverage.  Of course, there is always resistance since more insurance means more premiums.  Yet Hoboken condo boards should not be short-sighted.  The marketability of each unit is at stake here.  While it may not be your unit for sale today, every unit owner is likely to come up against this issue when they try to sell.  In fact, a Board that does not arrange to provide adequate insurance coverage for the condo may find itself hit with a  lawsuit from the unit owners and Directors could even be held personally liable.

Similarly, condo associations are supposed to have separate accounts for their day-to-day operating expenses (paying the PSE&G bills, for example) and for a capital reserve account (replacing the roof).  Many Hoboken condos, especially smaller, self-managed ones do not.  Again, buyers are having real problems obtaining financing as a result. 

So at your next condo Board of Directors meeting (you do have those, I hope) it might be worth reexamining the adequacy of your flood insurance and the state of your condo’s finances.  The flood insurance guidelines are also set out on the FEMA website and are quite detailed and specific.  When you go to sell your unit, you will be glad you did.  If you are in the market to buy a condo in Hoboken, this is a question you should ask early on in the process – either during attorney review or even when making an offer.  A condo that is not adequately insured and has not kept its books correctly is certainly worth less than one that has, no?

Posted by Lori Turoff | Currently 8 Comments »

2008 Mar 17th

Hoboken Condo Buyers’ 7 Biggest Mistakes

1. Location Location Location

Location has been, and always will be, one of the most important factors in any real estate deal. From the time Hoboken was settled, the place to be was on the waterfront. That hasn’t changed. If you’re buying a condo in a marginal part of Hoboken, no matter how nice the particular unit, you’re still getting marginal property. In an uncertain economic environment, buying a Hoboken condo in the most desirable part of town, Hudson Street, Bloomfield Street, Garden Street, Hudson Tea or the Shipyard, is your best hedge against a potential downturn. So with all the inventory currently on the market why are you even considering Jackson or Harrison?
The Vanguard at The Shipyard Complex

2. A Few Thousand Dollars Over 30 Years is Not Worth Much

Buyers get all hung up over a few thousand dollars. They will be negotiating with a seller on a half-million dollar condo and walk away from the place of their dreams because they are a few thousand dollars apart. Even for $3,000, we’re talking about less than 1% of the purchase price. Moreover, when you add that $3,000 onto a 30 year mortgage and amortize it, the difference in the monthly payment is negligible.

3. Know What You Can Afford

Hoboken Mortgage Brokers
Many buyers start the house hunt without ever speaking with a financial advisor, bank or mortgage lender. They have no real idea of their budget, how much they will need to put down in cash, or how large a mortgage they can manage. They either look at condos that don’t meet their needs, not realizing that they could afford to spend more or they look at condos beyond their means and then are dissatisfied when they take a step down to those within their budget. Know your numbers before you start looking!

4. Be Committed

If you are really serious about buying a condo in Hoboken you need to do some homework. In addition to knowing your budget (#3), you should have a game plan and follow it. When you go looking at condos, bring a camera and a notebook. Take pictures and take notes. After a few dozen, they will all start to blur together in your head. Look in one area at a time. Start with the nicest part of town you can possibly afford (#1) and exhaust it before moving on to lesser areas. When you see a condo you like, go back to see it again during different times of day – in the morning to check out the light, during rush hour to assess traffic, after school to see where the kids hang out. Make a written list of your priorities and rank them. Compare your list with your spouse’s. Decide what’s negotiable and what’s not in advance. Don’t waste your time looking at units that don’t match your agreed-upon, prioritized needs. If you have a realtor who is taking you to see units that don’t have what you’ve made clear you want in a condo, find another realtor!

5. Beauty Isn’t Everything

Hoboken Condo Detail

As much as everyone wants a gorgeous condo, some units just don’t show well. You have to use a little imagination. You’re not buying the sellers’ furniture. Paint is cheap. I see buyers overlook great properties because they can’t visualize the potential. Often, the seller has failed to do the work needed to market his or her property. A unit that shows poorly may actually benefit a buyer. If the condo has been sitting on the market for a while, the seller may be getting desperate. He may be more willing to accept a low offer.

6. Beauty Isn’t Everything II

When you find a condo you like and are ready to make an offer, insist that the seller provide you with the financials for the condo association. So many buyers are fooled by the pretty appearance of a condo only to be surprised down the road when they learn the association is practically bankrupt and they are looking at a hefty increase in their maintenance. Not all Hoboken condo associations are well run or well funded. Many, especially in smaller buildings, have no reserve funds. So get the whole picture before you move forward.

7. Use a Hoboken Lawyer and Local Bank

Hoboken is a peculiar little city with it’s own way of doing things. Local real estate lawyers are familiar with the peculiarities of doing a real estate deal here. They also all know each other and have likely worked together before. Using your cousin from out of town is not going to save you anything in the long run. The same problem arises with large, national banks. They are used to lending according to certain standards and few Hoboken condo buildings meet those requirements. Yet the local lenders write mortgages for Hoboken condos all the time. Haven Savings or Hudson City Savings Bank are way less likely to have a problem with the condo questionnaire that shows that the building only has 3 units than a Citibank or Chase.

See also: Five Familiar Problems When Buying Hoboken Real Estate

Posted by Lori Turoff | Currently 7 Comments »

2007 Oct 3rd

The Secrets to Knowing What to Spend on Your Hoboken Home

You’ve made the decision to shop for a new home or condo in Hoboken. Planning is a very important part of the process. The first thing you need to do is know what you can afford. If you don’t, and you start by looking at properties that are significantly beyond your means, it’s going to be really hard to like what you can get for less. While it may seem obvious, you’d be amazed how many buyers start the search process without going through the preliminary steps. Here is what you need to do:

1. Check your credit report.

Under New Jersey state law, you are entitled to a free credit report every year from each of the three major credit reporting companies – Equifax, TransUnion and Experion. It’s easy to obtain you need to check it for errors. A bad credit score will hinder your ability to get a mortgage.

2. Count your cash.

This is something you may wish to discuss with your financial advisor, banker and significant other. Be sure the funds are readily accessible and not tied up on illiquid assets. If you are lucky enough to be able to buy a condo for all cash, you can stop reading here. Otherwise, the cash will be your down payment and you’ll arrange for financing for the rest.

3. Get a prequal.

Whether you meet with a mortgage lender in person or do it on-line, you need a prequalification letter. Website like lendingtree.com or bankrate.com have calculators that let you try out different scenarios and even shop for mortgages. All these sites have 800 numbers if you prefer to speak to a person. Going to your local bank is another good idea. They already have access to your financial information and you may have a relationship with them. Whether on-line or in person, you supply basic information about your debt, income and assets. From this, the lender provides you with a letter that states a mortgage amount for which you (probably) qualify. A prequal letter does not bind the lender – they are not obligated to give you a mortgage – and you are not obligated to use that particular lender. But it gives you an important number you need to begin your search. Normally, a prequal is free.

4. Optional – get preapproved.

To get preapproved, you must complete a lengthy mortgage application, supply supporting documentation (tax returns, W-2s) and pay an application fee. Assuming you are really committed to buying, the advantage of getting pre-approved is twofold. You will know exactly what you can borrow so you won’t waste time looking at properties beyond your means.

Getting pre-approved also enables you to move make a very strong offer that is not contingent upon obtaining financing. It lets a seller know your offer is serious. Most sales contracts contain a mortgage contingency and sellers fear a buyer may use it to back out of a deal. With a preapproval you are able to waive that contingency should you need to in a competitive bid situation. It may very well give you the edge over another buyer who is not preapproved, even if their offer is a little higher.

Now you know what you can afford. Next – the search begins.

Posted by Lori Turoff | Currently No Comments »

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