Subscribe in a reader

Category: Do Your Diligence


Speeding up the Due Diligence Delay!

December 20th, 2011 — 12:00pm

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Due Diligence is one of the greatest time vampires slowing down the signing of a co-op or condo contract.

In the ordinary scenario, the seller’s attorney emails the contract to the buyer’s attorney within hours of receiving the broker’s deal sheet.  The buyer’s attorney then sends comments and a rider to the seller’s attorney and then the lawyers hammer out the contract terms.  In most cases the contract could be signed and delivered within two or three days of the issuance of the deal sheet. Continue reading »

But wait.  Slow Down!  Something has to happen before the contract is signed.  That something is the necessary evil called “Due Diligence”.  The buyer rightfully wants to know what they are buying into.  Is the co-op a defendant in an uninsured lawsuit?  Are there lot line windows in the bedroom which could be sealed up?  Is there enough of a reserve to fund that major façade work which needs to be done next summer?  Has there been a bed bug problem?  The list goes on and on.

One of the basic starting points for the due diligence is the offering plan and its amendments.  Quite often the sellers simply don’t have the plan and those that do rarely have all of the amendments.  In that case, the plan and all amendments have to be obtained from the managing agent at a cost of a few hundred dollars and a few days.

In the meantime, the brokers are whispering and sometimes yelling “TIME KILLS DEALS” and soon enough everyone’s hair is on fire.

In an effort to ease the pressure, some companies have been putting copies of the plans they do have on line.  TitleVest is one and they have a rather good system.  They offer a ninety (90) day look see for free and a hard copy option for about $150.00.  The searching is easy and I applaud Titlevest for its clarity of use.  On another note, they also have the best system for creating ACRIS forms that I have come across.

The Attorney General’s Office (where all the offering  plans are filed!) also has a database related to Offering Plans. While I take my hat off to the AG’s office for doing this, I must say the site is a disappointment.   It’s just so 1.0.   Like a rotary dialer in this fast paced digital world. It is  tricky to use (you need to either know the plan ID which is rarely readily available, the sponsor’s name or the address in the exact way the AG’s website can read it) and even after you finally get to the plan it simply doesn’t provide what is needed.

Instead of providing complete copies of the plan, the site simply provides summary information.  As to amendments, the site only provides the highlights (i.e. if there was a change in the escrow or an increase in the maintenance).  This can be helpful in situations where an amendment is missing and the purchaser’s attorney needs to know the import of that particular amendment but it really does not substitute for the entire plan.

I think the AG’s office should bite the bullet, get with the program and offer entire plans for on line viewing and downloading.  They could easily start with current plans by requiring Sponsors to file electronic copies of the plans and all amendments.  This would obviously not help with respect to plans that need not be amended but it would go a long way to accelerate the “due diligence” delay.

 

Comment » | Do Your Diligence, News

What to Do When There Aren’t Any Records!!

May 28th, 2011 — 5:10pm

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

The Blank Slate: It comes up every once in a while- often in the 4-story brownstone type co-op.  The handshake is made and the seller’s lawyer sends the contracts.  The buyer’s lawyer calls to make an appointment to review the minutes and guess what? There aren’t any minutes or maybe there are just a few from a couple of meetings a few years ago when they bothered to keep the minutes.  Even worse, the building is self-managed so there is no manager to get information from.  What’s a buyer to do? Continue reading »

The easy answer is run for the hills- find another co-op-just forgetaboutit!!!  But what if you simply love the apartment and just have to have it?

One solution is do as much due diligence as is possible and then see how you feel. Start by having a frank face-to-face  discussion with the seller about what has been happening at the co-op.  Find out if there are any major repairs or renovations planned- try to weed out problems (i.e. thefts, strange neighbors, lawsuits, leaks, when the mortgage is due, what sort of repairs are upcoming, etc.)  Definitely have both your apartment and the entire building inspected by a reputable engineer so you can really find out what is going on with the structure of the building and your unit.  Take a VERY close look at the financials over several years and have a call with the co-ops accountants. Have your lawyer search for litigation about the building.  Check out the Department of Buildings website- see if there are violations, open building permits, etc. Try to make sure that the renovations the seller was so proud of and you are paying a pretty penny for were done legally. Speak to as many other owners as you can (especially those surrounding the unit) –separately- basically you will be interviewing them and not the other way around. If after all this you want to move forward, at least you are doing so with somewhat of an open eye.

A word of advice if you are in one of these smaller somewhat mismanaged co-ops.  Do what you can to make all of the apartments more appealing to buyers.  I don’t see any reason for anyone to lose a buyer or get less of a price because the Board doesn’t keep minutes.  Make sure that the board meets at least once a month and appoint someone the scribe to keep an official set of minutes.  That will make it easier on the buyers and increase the marketability of every one’s unit.  It is all good-except that it is a bit more work than you may have been doing in the past.

Comment » | Do Your Diligence, Get the Co-op in order, Simple Solutions

Financial Statements: The Good, The Bad and The Ugly

March 8th, 2011 — 6:24pm

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Keep Your Eye On The  Ball:   When purchasing a co-op apartment, a purchaser is actually buying shares of a corporation and not just an apartment.  I imagine that most people would not invest a large sum of money in any other business without knowing the financial condition of the business.  Yet, when it comes to buying a co-op, most people never think of asking how the co-op’s business is doing. Continue reading »

After your offer is accepted, your attorney will receive a proposed contract and most likely several documents among them being a few years worth of financial statements.  These statements will show the co-op’s balance sheet and net income or loss. An accountant with knowledge of co-ops should review the financial statements, but you, the buyer, should also take a look to get at least a general idea of what is going on in the business of running the co-op.

As a general rule, you will receive at least three years of past financial statements. For example, if buying an apartment in 2011, you will have the 2010-2009 and the 2009-2008 financials.  By looking into the past, you are attempting to predict how the co-op will operate in the future.

Here are some basic tips of what to look for:

1)    Changes in Maintenance.  The maintenance receipts should be more or less constant.  If maintenance has been increasing each year then you should question why.  It might be that overall costs have simply gone up throughout the City (like fuel and taxes) and that should not be of concern.  But it could also reveal poor management.  Similarly, in the unlikely event that you see a decrease in maintenance, you should find out what happened.  For example: Did several shareholders not pay their maintenance?  If so, did they have a good reason or did they just run out of money?  If the former, make sure the reason no longer exists and if the latter, be prepared for this problem to continue and think about the consequences if the co-op needs to raise more money by way of assessments or further in maintenance.

2)    High Legal Fees: This can be the Ugly.  Find out why.  When legal fees are high it may be an indication that the co-op is involved in litigation that is not covered by insurance, and if so, try to get a handle on the merits of the lawsuit and the possible negative impact.

3)    Decreases in Expenses: This is generally the Good but might be the Bad. A decrease in expenses usually indicates that the co-op is well managed. For example, if heating costs went down, either everyone is freezing or more likely the co-op implemented some energy saving methods or devices.  However, a decrease in wages could mean that the doormen are no longer 24/7.  It is important to find out why the expenses went down.

4)    The Notes:  The devil is in the details.  The financial statements will almost always have references to notes located at the end of the statements after you are dizzy from the read. Yet these notes are important and the good news is they are often the most readable.  Written in prose for the most part, they let you know how many apartments make up the co-op (think how many people will share an assessment if there is a big problem), whether  there were recent major repairs, when the mortgage is due and other information which you might want or need to know about.

These financial statements are not easy to decipher and sometimes will not make any sense at all.  But they can be indicators of how the co-op has been and will be run in the future.  I think it’s a good idea to see what they reveal so you can have a knowledgeable conversation with your accountant and attorney before you sign on the dotted line.  After all, after you close the apartment these will be the numbers of YOUR BUSINESS.

Although this post focuses on co-op apartments, a purchaser would have many of the same concerns with the purchase of a condominium apartment even though you are technically not buying shares of a corporation because condo owners still have to deal with, among other things, common charges, assessments and repairs to the building.

2 comments » | Do Your Diligence, Financial Statements, Financials, News

Local Law 84/09 and Benchmarking

February 6th, 2011 — 4:15pm

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

It’s Not Easy Being Green.

Just when you thought you were starting to get a handle on this market, there is now something new to ponder.   New York City Local Law 84/09 requires that by May 1, 2011 buildings that are 50,000 square feet or larger will have to report to the City their usage for electricity, gas, fuel oil, steam and if equipped with an automatic meter reading equipment, water. Continue reading »

The Department of Buildings has generated a list of all buildings that must make such reports

This information will be available to the public for residential buildings starting September 1, 2013.  It will be interesting to see what influence, if any, this will have on prices of individual apartment units.  I suspect it will have an affect in buildings having an energy usage that varies widely with other similar buildings. It will be one more factor for buyers to consider in this age of increasing energy costs and so sellers should be thinking about this data in determining the selling price.  It could be a positive or negative depending upon the situation.  I can just imagine a broker advising a client about the benefits of being in an energy efficient building so that maintenance or common charges wouldn’t be as likely to increase. I can also hear a lawyer warning a client about the possibility of maintenance or common charge increases due to the energy inefficiency of a building. This seems like a good time for co-ops and condos to consider the costs and benefits of becoming more energy efficient so as not to hamper sales in the future when this information goes viral.

3 comments » | Do Your Diligence, Financials, Going Green, News, The Sellers World

Whose View Is It Anyway?

January 30th, 2011 — 2:49pm

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Warning: Illegal string offset 'status_txt' in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/share-and-follow/share-and-follow.php on line 1243

Stop and Breathe The Air.  Imagine you are considering buying an apartment on the 8th floor which has a fantastic southern view.  It is right over the roof of a 6-story building, which is on a corner, and so you get a rather wide-angle view.  And you’ve heard that a southerly exposure is great for your exotic plants.
May I suggest before you sign the contract and plop down 10% of the price that you stop and take a breath of fresh air out that window? Continue reading »

Take a moment (or several) to explore whether that you can lose that southerly exposure.
A concern is that if your window is on a lot line (the boundary line of your buildings property) then chances are you have a lot line window.  If so, then if your neighbor decides to construct just two more floors on that 6 story building, your coveted southerly facing windows will have to be bricked up.  Did I say “bricked up”?  Yes, I did.  You will lose the view, the air, the window, and the whole enchilada. Now try and envision that room with just a wall rather than a window.  Not a pretty sight is probably what you’re thinking.
By the way, if that airy room happens to be a bedroom with no other windows, then it will lose its “bedroom” status in the process.
But, it doesn’t have to be that way.  If you are very lucky, then that 6th story building sold some of its “air rights” to your building (or another building) and in doing so granted an easement of light and air and promised never to build higher than 6 floors.  Or perhaps the building is landmarked so any roof construction cannot be viewed from the street.  Either of those scenarios should give you and your buyer (when you eventually try to sell the apartment) reasonable comfort that the great view won’t be blocked.  But if none of these building roadblocks exist you need information to help you assess the risk of losing that view.
Some of the questions you should know the answer to are: Who owns the building?  What is its use?  Was it recently sold to a developer?  Are there any building permits filed to increase the height?  Are there any applications before landmarks to build some extra floors?  What does the building’s Certificate of Occupancy say?  Do the zoning rules prohibit that building from going higher without a variance?  Does that building have any available “air rights” so that it can build higher?  Do any of its neighboring buildings have any available “air rights” which can be bought by that corner building? The answers to these and other questions will help you measure that risk and figure out if this is the apartment for you or if you should at least reconsider the price.

Comment » | Do Your Diligence, News

Back to top


Warning: mysql_query(): Access denied for user ''@'localhost' (using password: NO) in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 17

Warning: mysql_query(): A link to the server could not be established in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 17

Warning: mysql_fetch_row() expects parameter 1 to be resource, boolean given in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 17

Warning: mysql_query(): Access denied for user ''@'localhost' (using password: NO) in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 45

Warning: mysql_query(): A link to the server could not be established in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 45

Warning: mysql_query(): Access denied for user ''@'localhost' (using password: NO) in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 47

Warning: mysql_query(): A link to the server could not be established in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 47

Warning: mysql_fetch_row() expects parameter 1 to be resource, boolean given in /home/talkla5/public_html/talknewyorkcityrealestate.com/wp-content/plugins/vsf-simple-stats/vsf_simple_stats_shutdown.php on line 47