Uncovering Costly Building Assessments That Apartment Sellers Want to Hide
Nasty Surprises Await Condo & Co-op Buyers Who Don’t do a Little Detective Work
Isn’t it a nice surprise when you reach into your pocket or purse and find a couple of $20 bills you forgot you had? Those are the type of surprises we wish happened more often. There are, however, surprises that we can do without, particularly if you are a condo or co-op buyer. In many instants, sellers hide costly repairs that the building plans to undertake. They hope the new buyer will be stuck with the bill after the property is sold.
Often these repairs are quite costly. The new condo and co-op owners will be “assessed” to pay for them. No buyer wants to open their mail, shortly after moving in, to see a $10,000 assessment to redo a roof or repair the elevators. If buyers knew this beforehand, many would simply walk away. Others will demand a major price reduction. It’s little wonder that sellers want to keep this stuff under wraps.
An Assessment Bushwhacking
New buyers who get bushwhacked by “surprise” assessments usually have only themselves to blame. The law says sellers must provide “full disclosure” about their property prior to a sale. However, many will not mention an upcoming assessment, assuming, that is, they know of it themselves. It’s up to the buyer to do their due diligence and find out if a nasty surprise awaits them after the closing.
This is particularly true in cities like New York and L.A. where a large percentage of the housing stock consists of condos and co-ops. New York, in particular, is prime territory for assessment bushwhacking because it has a lot of aging buildings, many in need of costly repairs.
Become a Detective
There are a number of ways buyers can uncover pending building assessments. Buyers have to put on their Sherlock Holmes cap and do some digging. The first thing to do is take a close look at the building itself. Does it look rundown and not well maintained? Is the lobby furniture dog-eared? Is the exterior in need of cleaning or a paint job? These a sure signs that either the building is being neglected or that the current board of directors is not charging owners enough in monthly maintenance fees to properly maintain the building. If this is the case, you may get whacked twice. Once for an assessment and another in increased monthly maintenance fees.
A little personal sleuthing can uncover upcoming problems as well. If the building has doormen, ask them about the place. These guys know everything. They know if elevators are constantly out or if people are complaining about the heating system. They are typically the recipient of tenant complaints.
Tap the Gossip Channel
If you know other owners in the building or have a friend who does, they are a great source of building gossip. People often talk about problems within the building. Also, current owners have access to building newsletters which are often used as forums to address shortcomings such as leaky pipes, faulty air conditioners or barking dogs.
Hire a knowledgeable buyer agent and lawyer
Perhaps the best way to determine if an assessment is pending is to hire a seasoned real estate agent. They usually know the right questions to ask and can research the history of the building or may have had the experience of working with the building before.
Some states, including New York, but not California, require that a lawyer be involved in this transaction. An experienced real estate lawyer will sift through the building’s financial statements to see if there are any red flags indicating upcoming repairs.
Check the Reserve Fund and Boardroom Minutes
These financial documents also show how much there is in the building’s reserve fund. These funds exist to cover unforeseen expenses. Many buildings underfund their reserves so when something breaks down, the only way to pay for it is to assess owners.
A lawyer also can examine the minutes of the building’s annual board meetings. This often reveals persistent problems or upcoming maintenance projects. Buyers usually have five to seven days after the offer has been accepted to conduct this sort of due diligence.
It is never a bad idea to hire a lawyer, even if you’re not required to do so. Buying an apartment is likely a person’s largest single financial transaction. Nobody wants to find something costly was overlooked after the closing. When agents and lawyers work together as a team, it can only benefit the buyer.
Sellers Almost Always Hide Problems
Most condo and co-op sellers won’t hesitate to put a potted plant over a scuffed-up floor to hide a blemish. Others have no problem hanging a picture over a hole in the wall put there by a hockey puck gone astray. And some will go to great lengths to keep upcoming owner assessments from coming to light before the ink dries on the sales contract.
It’s left to buyers to uncover these omissions.
The post Uncovering Costly Building Assessments That Apartment Sellers Want to Hide appeared first on ELIKA Real Estate.
