Evaluating Condos, Coops
Sooo, I’m starting to think more seriously about coops and condos and realizing that everything I’ve learned in my house hunt (except that sellers can be rotten scoundrels …) is almost irrelevant when I’m looking at coops. Or is it? I know a lot about roofs and boilers right about now. I don’t know how…
Sooo,
I’m starting to think more seriously about coops and condos and realizing that everything I’ve learned in my house hunt (except that sellers can be rotten scoundrels …) is almost irrelevant when I’m looking at coops. Or is it? I know a lot about roofs and boilers right about now. I don’t know how to decide whether a building has enough of a rainy day fund.
Is there a good jumping off point? Maybe something here that I just couldn’t find?
Thanks!
Having assets on paper is one thing, but if you need to evaluate real bricks and mortar, call me.
I would be glad to have a look at any property you are considering buying to give you my comments on condition and renovation issues.
I don’t charge for this service, and if you don’t like my suggestions, you don’t have to hire me to work on the place later.
gmcandd.com
In bad economic times, a well-managed coop is a good bet. basics are NO sponsor-owned units, reasonable sublet policy. And forget all that garbage about intimiately sharing financial info. Coop board members are the only ones who see it and they have to evaluate whether or not you will be able to meet the obligations of the coop. Look at capital verses operating budgets. Mortgage (coops can not get more than a 5-10 year mortage), taxes and energy are large parts of the operating budget with virtually no control by cooperators. For a larger building, look at the LL10/11 inspections and what if anything may be anticiapted in the future. Check out habitat http://www.habitatmag.com/ and the Cooperator http://www.cooperator.com/ online.
One more point about co-op underlying mortgages, you will want to know whether the mortgage is self-liquidiating or has a big balloon at the end, and how much time is left on the mortgage. Some coops keep their monthlies low by loading up a big balloon at the back end, basically on the theory that by the time the balloon rolls around it will be someone else’s problem. With rates so low, any coop worth its salt with a balloon mortgage should be thinking refi right now. Before we bought our home, we were in a four-unit brownstone coop with a self-liquidating mortgage. It was a selling point when we sold our place.
Serpentor, this should help you understand the difference between the two.
http://legalstudy1.blogspot.com/
Also, always look at the maintenance amount in coops. If you think it is rather high think twice about buying, especially now, since that usually means there is a large mortgage on the building. You are contributing to pay that loan off in your maintenance, since you own shares and not real property like in the condo.
Condos are more expansive but common elements are less a month and you own a real property. You can do with the condo whatever you wish without nobody’s approval.
Also, always go on ACRIS to check for the mortgages that were not yet satisfied. This will tell you all about the building’s stability. Here is the website. Do your search by block and lot or the property address to see what’s on record for the specific building.
http://a836-acris.nyc.gov/Scripts/Coverpage.dll/index
Hope that helps.
@slopefarm yeah. It was getting silly and there was basically no way they were going to close. They couldn’t actually afford to close and the longer it dragged out the more their bank wanted from them.
Serpentor,
Sorry to hear about your deal, but you may have avoided a nightmare. Hard to know how to count those chickens. Some good advice above on coops.
In addition to the good points made, check on J-51, 421 abatements and their expirations. Get a look at the previous year’s Minutes of a co-op. And have a decent lawyer on deck. Good luck.
There’s some kind of standard ratio — like $10,000 per apt or some such thing, can’t recall. You can google it online. There is also a book called “Buying or Selling a Condo or Coop in Manhattan.” Also check the online guides on Corcoran.com. Your lawyer is supposed to look over the finances and tell you if the building is sound before you sign a contract.
Coops are very different from brownstones, obviously. The purchase and sale process is lengthy because of the coop board approval process. And the coop board can kind of make life somewhat difficult with arbitrary rules and charges you can’t do anything about. OTOH, it’s also nice to have everything taken care of, like roof leaks.
Another big difference is that coops sometimes require high down payments and reserve funds in the bank at closing. But with all the new requirements for mortgage loans these days, that difference may be narrowing.
Ask about recent repairs (boiler, roof), what percentage of the building is owner occupied, whether subletting is allowed, and how much the maintenence is. You will also have to deal with noise above you unless you’re on the top floor, and you may have to carpet much of your apt depending on whether management enforces the rules. If you are planning extensive renovations, you will need board approval, and some coops require you to be present while the work is done. There are also charges to move in and out and so on.
Sorry about the deal falling through.
Regarding your question: It depends whether you are looking at a small self-managed building, or a larger one. You want to see that it’s mainly owner occupied–the higher that percentage is, the easier it will be for you to get a mortgage. You want to see the minutes and the amendments to the offering plan, basically to get a sense of whether the building is well run, keeping up-to-date not just on day-to-day operating expenses, but capital projects as well. You want to get a sense that there are no huge capital projects looming. You do need to see a healthy reserve, but how a building determines what is healthy varies quite a bit.
Try to get a sense of the building…go back and talk to the residents when you can. Good luck!