Thursday, November 7, 2013
What to obsess about when you buy a condo.
Last week I discussed what to obsess about when you're buying a co-op.
There are things to obsess about when buying a condo, too.
Of course, your attorney will perform what is called "due diligence" on the property before you sign a contract, as he would with any real estate purchase, including co-ops and houses.
This means reading the offering plan (or at least certain relevant parts of it, especially the "special risks" section) and the amendments to it, reviewing the most recent two years of financial statements, reading the board minutes and investigating the property in general.
But there's information you should get before you reach that step (perhaps even before you and the seller agree on a price), and a good broker can get it for you.
Ask your broker to find out how many of the apartments in the building are owner occupied and how many are rented, and whether there are any large blocks of apartments owned by a single entity.
Yes, it's great to be able to rent your apartment hassle-free if you want to or need to, as you can in most condos, but if this is not a priority, you don't want to spend a lot of money on a condo only to be surrounded by renters.
If the proportion of investors to owner-occupants is too high, financing may be difficult. Check with your mortgage broker on this. Even if you're paying all cash, it's something to consider for resale purposes.
As you would with a co-op, check into the amount of money available for work that the building may need, now or in the future. Remember, co-ops can borrow money using their building as security for the loan. For condos, borrowing money is far more difficult. So if the building needs work and there's not enough money in the slush fund, there will be assessments.
This is not necessarily a bad thing. Owners in some small buildings with few units, condos and co-ops alike, prefer to keep their money in their pockets. And in the long run, it may be better to assess than to increase carrying charges or maintenance. But if this is how the building operates, it's best to know in advance.
At the same time, make sure you know what work has been done recently and what work may be planned.
For example, thanks to Local Law 11, the city inspects the facades of every building once every six years. If the city says the bricks need repair, the bricks have to be repaired. This can be expensive.
Of course, it's a small price to pay compared to having a brick land on somebody's head, especially if the somebody is you.
Needed and planned repairs may show up in the board minutes, which you or your attorney or both should read before you sign a contract. If they don't, have your broker or your attorney ask the managing agent for information.
If the building is new, it's also important to know if there's a tax abatement. A number of such abatements have been granted to developers by the city in order to encourage construction.
A tax abatement is a wonderful thing, as it significantly reduces real estate taxes for a given building--but not forever. The terms of abatements vary.
If there's an abatement in place, you need to know what your taxes would be if there were no abatement, how long the abatement will last, and how your taxes will increase over the years till it ends.
Any questions? Call me at 917-991-9549 or e-mail firstname.lastname@example.org, and I'll be happy to answer them. If I don't know the answer, I know how to find it.