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Apartment Buying 101

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Apartment Buying 101

Definitive Guide to Questions that Buyers Are Asking and Boards Need to Answer

Depending on whom you talk to, the real estate market is picking up, is still pretty slow, or is poised to significantly move. There is more market movement this year than last, and many shareholders and unit-owners are trying to sell. Peek behind every potential sale and you’ll find someone doing due diligence.

What’s being looked at? Financial statements, reserve funds, building litigation, arrears, assessments, maintenance, capital plans, and bed bugs, to name just a few areas. How potential purchasers view your co-op or condo’s operations can make or break deals for its residents.

That is the thrust of our 27th annual “Management Leader” survey. Forty-five management executives participated, responding in two ways. First, they answered the question: “If you were buying into a co-op or condo building, what are some of the key areas that you would evaluate, and why?” Their responses run from pages 43 through 49.

From that, we created an “Apartment Buying 101” list of the most-mentioned due diligence questions. We video-interviewed the execs about these questions and edited the responses into 14 video pieces. You can scan the accompanying QR codes to watch them on your smartphone or type in the URLs to view them on your computer.

So, whether you’re on a board that is being scrutinized or a buyer doing the scrutinizing, read, watch, and learn.

Michael Berenson
President
AKAM Associates
In performing due diligence, a buyer should consider the status of the building’s underlying mortgage. If the mortgage will mature within 12 to 18 months, I would ask about the building’s plans to refinance. The answer could impact monthly obligations, which any purchaser would want to know. Similarly, when there’s an ongoing special assessment, I would ask who is responsible for paying it when the unit sells. Often, the responsibility is transferred to the buyer, but sometimes it must be paid in full at closing, which both the buyer and seller also would want to know.

John Wolf
President
Alexander Wolf & Company
One area is anticipated system repairs/replacements. Roof, boiler, elevator, lobby, etc., replacement or renovation is costly. A prospective purchaser should ascertain if those expenses are upcoming, the plan for paying for those items, and how carrying charges could be affected. Another concern should be the percentage of delinquent owners. If ten percent or more of owners are delinquent, individual purchaser financing becomes difficult, if not impossible, as lenders are now focused on this area. High percentages might be indicative of a board inadequately addressing the issue. More arrears may lead to foreclosures, which have an adverse impact on comparable sales. And that means lower unit valuations.

Andrea
Bunis
President
Andrea Bunis Management
Anyone purchasing a cooperative or condominium in this economic climate should, without a doubt, have his or her attorney review the financials for the last three years, look at the last amendment filed, if applicable, and read the minutes for the last three to five years. If there are no minutes, do not assume the worst. Ask why. Do not assume the co-op or condo is hiding anything. A purchaser should be looking to see that maintenance charges have been increased as costs have increased, rather than in roller coaster fashion as money is needed. That is a clear warning sign. The purchaser should see how often the underlying mortgage has been refinanced. This is a very important sign; it shows a lack of stability. In addition, a purchaser should check if there have been assessments to cover maintenance charges, not to mention whether the reserves are properly funded for the size of the building. Other items to look for in the minutes include whether the physical plant of the building is being attended to (if there has been a proactive schedule for repairs, local laws, etc. and how they are funded) and if complaints are being addressed in a timely manner. Another item to look for is whether the co-op or condo is changing its professionals – attorney, accountant, etc. – or its management company frequently. This, too, raises a red flag.

Stuart Smolar
Executive Director
Andrews Building Corporation
Proper maintenance and presentation of a building’s entire management profile would be a key indicator of a co-op or condo’s proper oversight of its financial, administrative, and infrastructure components. When the facets of a building’s management, similar to those matters facing any business, are properly addressed and cleanly reported, the impression and the facts are quite evident. This is true for a building’s finances, its ongoing maintenance and capital repairs, its minutes, etc. When transparency is evident, it portrays the building in a favorable light.

Georgia Lombardo-Barton
President
Barton Management
Recently, I walked away from purchasing an Upper West Side condominium unit in Manhattan. I had conducted thorough due diligence by reviewing the building’s minutes and audited financials and finding some alarming information. Financial: a history of annual common charge increases, high leasing fees, a significant amount of common charge arrears, large plumbing expenditures. Operational: handling of nuisance issues, bed bug cases, legal matters, repairs/leaks. All of these factors will likely add to the monthly cost of maintaining my apartment, but more importantly, also affect my right to the quiet, peaceful enjoyment of my apartment.

 

Don
Wilson
President
Blue Woods Management
For me, the key areas are the size of the reserve fund and the physical condition of the building. When brokers, attorneys, or prospective buyers call me about a building, I bring this up so that there is a clear understanding about what major work has been done, or will need to be done in the future. The reserve fund usually plays a major role in scheduling these projects, and many buildings sweep money into their reserve accounts each month, which is good to see. There are some buildings with relatively small reserves, but if they have recently completed a number of major projects, and there is a savings plan in place, the current reserve fund balance should not be viewed as a negative.

Martin
Kera
President
Bren Management
Financial status: examine financial statements, frequency, and amount of maintenance and assessment increases and projected increases. Physical condition of the building: major repairs completed, in progress, or projected. Read board meeting minutes; talk to manager of building about issues raised in minutes and general financial conditions. Hang out in front of building, see who goes in and out, perhaps talk to staff or residents. Combined apartments: make sure seller has a “Letter of Completion” for combination so it can remain. Check New York Department of Buildings website and Housing Preservation & Development website for violations and permit filings.

Steven Birbach
Chairman
Carlton Management
Many buyers and their attorneys primarily focus on the financial statements of a cooperative or condominium when making a purchase, in order to determine whether sufficient reserves exist. Look at the expiration date of the mortgage. Clearly, the interest rate must be considered when making a purchase. If an underlying mortgage is coming due in the next 24 months and the current interest rate on the mortgage is less than what the new mortgage will cost, owners will pay considerably more on their mortgage payments. Each $1 million financed will cost $10,000 more annually at a one percent increase in interest rates. I would also recommend the minutes be reviewed to gauge the existing issues the board is dealing with. Are there local law projects coming up? How will they be funded? Has the board engaged an engineer to construct five- and ten-year plans? How old are the elevators, windows, roofing, and boiler systems? Generally, these capital projects are discussed at board meetings and the minutes would inform prospective purchasers of the current status of these items.

Brian Rafferty
Director of Operations
Century Operating Corporation
We all know the usual areas prospective buyers examine when doing their due diligence. Most of their attention is focused on the finances and physical condition of the building, as it should be. I would expand my research to include looking at the Department of Buildings website to see what major projects have been completed or, maybe more importantly, not completed, in the last several years. Have the boiler, elevators, or A/C equipment been replaced? What is the status of the last filing on the building’s exterior façade? Does the building have a lot of outstanding violations? I would then move on to the Department of Finance website and review the real estate tax history for the property. Real estate taxes have been the major component increasing maintenance charges in the past few years. Once I have all this information, I can compare it to the current finances of the property, estimate what my future expenses might be, and make an informed decision on my purchase.

Jeanne
Bauer
Managing Agent
CFA Management
Many prospective purchasers seem to forget to inquire into the logistical day-to-day services and amenities offered by a building, such as trash removal and the super’s responsibilities. Many times, people buy into a building with the expectation of services that don’t exist. With regard to repairs and services, they should find out what is the purchaser’s responsibility and what is the building’s. Prospective purchasers should also be clear on what requires board approval and what the application process is for items they may seek out in the future. Examples of this are alteration work, refinancing, and subletting. After closings take place, these are areas where new owners many times seem surprised.

 

Meryl
Sacks
Managing Director/VP
Charles Greenthal Management
There are several areas buyers should focus on. Finances of the building: buyers should be aware of the operating and capital budget. A history of maintenance increases and special assessments should be obtained in order to determine if the building has sufficient funds to balance its budget and fund future capital work. Buyers should check that boards and management have been developing five-year capital plans. Compliance: this would incorporate all of the new laws that are in effect for façades, elevators, and benchmarking. Legal: pending lawsuits? Are these lawsuits covered under the building’s insurance policies and will they have a monetary effect on shareholders or unit-owners? Are there any major areas of concern for the apartment being purchased, such as leaks or noise complaints?

Dan
Wurtzel
President
Cooper Square Realty
The first impression you get when you walk up to the building, enter the lobby, and make initial contact with the front door staff (if applicable) is the basis from which to begin your evaluation. If the building’s initial “curb appeal” and corresponding amenities meet your standards, and the apartment is within your budget, it’s time to drill down to the details. Those include how residents view the level of responsiveness provided by the managing agent and building staff, any safety and security issues, what the building is doing to be more economically and environmentally proficient, and the overall reputation of the building. Obviously, no building should be considered without a thorough review of its finances, including reserve funds, stability of maintenance or common charges, and past and future special assessments.

Pamela DeLorme
Principal
Delkap Management
Apartment sales have indeed been increasing, but so have the demands from lenders involving the much-needed financing on these apartments. As a management company, we need to expedite an application for sales. We need to answer all bank questionnaires as thoroughly as possible. A cooperative with good reserves, qualifying insurance, and no pending litigation is easy to process. But we, as management, need to make sure that the prospective purchasers are qualified to make timely payments on all debts, including monthly maintenance and mortgage payments. The board of directors must review all credit reports and interview on a timely basis. Purchasers must be denied if employment and credit do not meet the established sales criteria. Inconsistencies in employment, credit, and bank reports as well as poorly rated references send up the red flags that would deny the buyer. If they have inconsistencies in their application, what else are they hiding? It is imperative in today’s volatile market that management as well as the board of directors establish procedures and guidelines that protect the cooperative against defaults.

Alvin Wasserman
Director
Fairfield Property Services
Experienced professionals can find potential problems camouflaged in seemingly positive numbers in the last three years of financial statements from an independent accountant. A red flag goes up when monthly charges have not increased in years. Although most buyers might think the opposite, drawing from a reserve fund to balance the operating budget brings short-term happiness and long-term disaster. If capital expenditures are absent from the budget, that may indicate deferred maintenance that will come back to bite a buyer. Other potential problems related to governance and management can be found in board meeting minutes. It is also of utmost importance that buyers read the offering plan and learn about what they are buying.

John
Bonito
Co-President
Garthchester Realty
Things to examine: the percentage of owner-occupied units, sublet policy, size of the reserve fund, history of assessments and what they were for, and capital improvement plans. Does the property have a five- or ten-year plan? Look into the building’s recent history of maintenance or common charge increases and the underlying mortgage on the co-op, particularly its amount, term, and interest rate. Find out about the pet policy, smoking policy, move-in and move-out fees, garage policy and availability, any lawsuits against the co-op or condo, the alteration policy, the number of years the superintendent has been employed, the opinions of the staff, the relationships among board members (do they get along?), arrears, foreclosures, administrative fees such as flip taxes, and neighbor disputes.

Gerard j. Picaso
President
Gerard J. Picaso Inc.
I would want to examine the annual financial statements. I would look for whether assessments were used to offset what should have been maintenance increases. Other items to check in the statement: litigation, mortgage information, arrears, unusual amount of payables, reserves, and past capital expenses. These will give you an overall view of the stability of the finances of the co-op. A review of the house rules, bylaws, and building policies such as sublet guidelines will give you insight into the type of building it is. A thorough examination of the minutes might disclose problems such as bed bugs and how they were handled. All buildings have basically the same troubles; in a well-run co-op the minutes should show the actions taken to solve them.

Steven Hirsch
Director of Management
Goodstein Management
In a buyer’s market, a purchaser can be more selective using due diligence to evaluate different areas. Financial health and fiscal snapshot: patterns of increases/assessments; current reserves; payables/receivables; and operating and capital obligations. A fiscally sound building will likely be a more solid investment. Energy: a strong energy blueprint with efficiency planning and procurement can save significant money (and protect the environment). Legal actions: is there a history of legal issues? Being a party to a lawsuit can drain building finances and impact community harmony. Quality of life: how will a buyer be personally affected? Consider air and water leaks, noisy neighbors, and pet and guest policies. Amenities: does the building fulfill a buyer’s “wish list”? 24-hour doorman, gym, storage and bicycle facilities, roof deck, etc. Communications: how are issues communicated to residents? A well-informed community speaks volumes about building management and how residents are treated.

Bram Fierstein
President
Gramatan Management
Many owners are so enamored with their potential purchase that they don’t look closely enough at the co-op’s or condo’s audited financial statements. Purchasers need to look carefully at reserve funds, mortgages, lines of credit, accounts payable, and accounts receivable. I would suggest they show the last two to three years’ audited financial statements to their personal accountants for an opinion before going to contract.

Mark Hoffman
Principal
Hoffman Management
If I were purchasing a cooperative or a condominium, I would focus on three main areas. First is the underlying financial condition of the building – are they budgeting and operating properly, and are they planning for any future capital projects? The second area is the physical condition of the building – is it being properly maintained? I would walk the common areas and even ask to look at the boiler room. I would investigate the age of the major building systems – roof, boiler, etc. – to get a sense as to what work would need to be performed in the mid- and long-term. Finally, I would learn about the policies and procedures of the building for alterations, refinancing, sublets, etc.

Josh Koppel
President
HSC Management
I would first evaluate the finances of the co-op or condo. I would look to see if income meets or exceeds expenses. I would look to see how many assessments and maintenance increases there have been over the last few years, and if there are any anticipated increases in the near future. I would ask for reserve account balances and review the budget. The next thing I would look for is an engineering report on the building structure and the systems of the building. Look at the useful life of the major components of the building; that information can be used to determine future expenses. A visual inspection of the building and its major systems would be helpful.

Greg
Cohen
President
Impact Real Estate Management
As a prospective buyer in a cooperative or condominium, I would want to review two years’ financial statements and board minutes, in order to ensure that the association is in good financial health. I would also call the managing agent and ask if there are any unit-owners who are more than 30 days behind in their maintenance, and if there are any planned assessments. I would look on the Department of Buildings website and see if there are any outstanding building violations, and on the Department of Finance website to see if there are any unpaid real estate taxes and/or tax liens.

Peter
Lehr
Director of Management
Kaled Management
Being that I am the operations person, my questions would lean toward the nature of the physical plant. I would find out the age of the roof and, if applicable, I would request a copy of the Local Law 11 report. I would ask questions about the elevator equipment and the boiler. I would question board members about how they plan to reduce energy costs and what control systems they have investigated to achieve energy savings. Finally, I would ask about the building staff – is the superintendent responsive to the needs of all the residents? Are there any issues with staff members that I should be concerned about?

Arline
Kob
Principal
Key Real Estate Associates
In these difficult economic times, the finances of a building are even more important than usual. The financials must be studied carefully, with an eye on the reserve fund. Capital improvements that are anticipated or planned should be investigated, including their financing. A history of maintenance or common charge increases and assessments should be obtained. The city Department of Buildings website should be checked to learn if any violations are on the building. It is also very informative to speak to the superintendent or resident manager. They often have insights about the building that are not necessarily published.

Anton
Cirulli
Managing Director
Lawrence Properties
Before you buy a co-op (or condo), I would advise knowing how healthy the building is. Look at it from all perspectives. First, financially. Make sure monthly maintenance historically meets budget needs and that there is a reserve fund sufficient to cover capital improvements. Assessments can be costly. Ask questions. Would the building be in need of expensive work? Are there any lawsuits? How well is the building being run? How good are the staff and managing agent? Get answers. Read the house rules and bylaws. Know its past. Buying an apartment is a lot like falling in love. After the first attraction, it would be wise to be aware of both the adored characteristics and the shortcomings. This is an important investment.

Ellen Kornfeld
Vice President
The Lovett Company
The most important thing to know about a property is its financial condition. That would include knowing how much money is in the operating and reserve accounts and whether the co-op is going to be refinancing its underlying mortgage any time soon. The ratio of ownership to rental tenants is also important to know, as this might adversely affect the co-op’s ability to refinance. Does the co-op have a line of credit available to it for projects and repairs, or will it assess to handle unforeseen expenditures? Also, ask whether any alterations were performed in the apartment; if there have been any leaks in the unit; and if there is any history of second-hand smoke, noise complaints, or bed bugs in or near this apartment. Also, check to see if any sex offenders are registered in the immediate neighborhood and make sure the school district, if you have children, meets your criteria.

Steven Greenbaum
Director of Property Management
Mark Greenberg Real Estate
I would look at the last few years of financial statements and budgets. That would give you an insight on how well the building is being run. Is the building running at deficit? Are there collection problems? Are there unpaid bills? Is there any pending litigation? Is there a balanced budget? Additionally, a prospective purchaser should read three years of the co-op board’s minutes. Minutes will let the purchaser know many untold details about the building’s past and future. They will talk about planned projects, increases, assessments, new rules and regulations, trouble with the staff and neighbors, and the building plant. Lastly, a would-be purchaser should try speaking to residents and staff. If they are happy, a buyer will be too.

 

Ira
Meister
President
Matthew Adam Properties
I would stick to the basics and also see how green the building is. This would include reviewing inspection reports about the plant’s physical condition (including Local Law 11) and seeing if there is a five-year plan for capital improvements. I would not want an unanticipated assessment or steep increase in maintenance. Two questions about the financials would get special attention: has there been a sharp spike in maintenance over the past five years, and how large is the reserve fund? I would also check to see if any legal action is pending, and if there are unit-owner or shareholder arrears. Finally, I want a green building and would ask about plans to reduce energy use and operating costs.

Robert Freedman
President
Maxwell–Kates
Assuming the apartment and building meet your needs (physical condition, amenities, location, sales price, and monthly charges), it is important to have your attorney and accountant examine the prospectus, bylaws, house rules, board minutes, and at least two years of audited financials, including history of maintenance increases and assessments; the balance in the capital account, including projects completed and paid for, projects pending, and plans to finance them; what percentage of apartments is owner-occupied; the status of arrears; details as to real estate taxes, including actual and transitional assessments; any pending lawsuits; and if the building qualifies for mortgages under current federal guidelines.

Beth
Markowitz
President
Merlot Management
To me, the key to any co-op or condo is the board.

Do they conduct business professionally, either in a formal or informal way? Do they meet regularly and only conduct business at a board meeting, or do they do so by other means such as e-mail, conference call, or Skype? Do they get along and work well with each other? Are they proactive or reactionary with goals and projects they want to accomplish – or both? Are they all reasonable and interested in maintaining and improving the building, or do some have their own agenda and interest they want to serve? Are they open and responsive when things come up, or closed off and set in their ways? Do they all fully understand their fiduciary duties?

A good board is like a chorus. While from time to time someone takes the lead and sings solo, most of the time they sing together and in harmony.

Steve
Osman
CEO
Metropolitan Pacific Properties
First review three years’ audited financial statements, and see how many assessments have occurred and for what. If the building in question is subject to Local Law 11, make certain it is in full compliance, as that could result in a large assessment if not. See if the building has an excessive turnover of board members. Also, check to see if the management company has changed more than two times in the last 10 years. The same for the attorney and CPA. Excessive turnover of the professionals retained to operate the condo or co-op can become an ongoing issue. No one really wants to purchase in a property where there is infighting between the board and shareholders. This greatly affects market value. They will just look elsewhere to purchase.

Michael J.
Wolfe
President
Midboro Management
Major concerns for any purchaser are how future board decisions will affect the unit-owner’s carrying expenses. Having your team – broker, accountant, and attorney – evaluate the global condition of the building is invaluable in analyzing any investment. Some questions to ask include: Is the debt ratio in line with other similar properties? Is the board constantly assessing owners? Have increases in maintenance/common charges been in line with industry norms? Does the building have an adequate reserve fund? Are there any large pending capital projects, and if so, how will they be funded? These are all signs pointing to how well or poorly the building is managed. A careful analysis of the age of building systems will provide a clear understanding of near-term financial demands requiring possible contributions to projects planned or obviously necessary. A team approach is the best approach.

Stephen Nardoni
President
Nardoni Realty Company
For a co-op, there are five points I would consider. First, assessment history. Is the board committed to maintaining the building, or are assessments being used to keep maintenance artificially low? Second, mortgage history. Has the board used refinancing to fund capital improvements and avoid large assessments? Third, maintenance history. Is the building’s maintenance history consistent with actual operating cost increases over the years? Fourth, professionals history. Has the building retained quality management, accountants, and attorneys for years, or is there a constant turnover of these professionals? And finally, approval history. Does the board have a reputation for being capricious or overly strict? Has an application for the unit in question been recently denied?

Peter Von Simson
President
New Bedford Management
Purchasers and their attorneys in general do a good job of reviewing board minutes as well as the building financials for potential issues such as building litigation or a building’s overall financial health. Nonetheless, one item that often flies under the radar, but needs to be understood, is why a building does not raise maintenance or common charges over multiple years. The lack of an increase may be a result of additional building income, such as building-owned commercial space or a real estate tax refund, or it may be a red flag that indicates the building is delaying regular maintenance or pushing operating expenses down the road.

Neil Davidowitz
President
Orsid Realty
The single most important issue in evaluating a purchase of an apartment is the financial strength of the building. The audited financials may be stale at the time of the sale and provide minimal benefit. You need to ascertain the current reserve fund, maintenance/common charge history, and the reason for current and pending assessments. It is crucial to understand the building’s mechanical systems and façade. What capital projects have been completed, and what remains on the horizon? What are the estimated costs and what is the building’s position on funding those projects, i.e., borrow or assess? Understand the policies that will affect the use of the apartment. Review the policies for rules about sales, sublets, refinancing, apartment alterations, and pets.

Jack
Lerner
Vice President
Plymouth Management
Caveat emptor – “let the buyer beware.” Take your time for a thorough, informative review. Investigate building systems, read board minutes, and review the annual financial report. Make inquiries on-site and in the management office and compare the responses for accuracy. Identifying problematic mechanical or structural issues against the finances of the corporation and learning how a board and manager operate, in advance of a purchase, are the elixir to buyer’s remorse.

Alex K. Kuffel
President
Pride Property Management
The admissions process is a key indicator of the caliber of the property – a comprehensive application and admission process, while onerous, is critical. As a second glance at the inner workings, one should take note of the decision-making process while reviewing the minutes. Are discussions noted? Is there a healthy degree of dissension among the board? If so, how are dissenting viewpoints resolved? Lastly, one should review the first impression of the property after reviewing the financial and cooperative documentation. Does the first impression reflect the cleanliness and physical condition recorded in the documentation?

Fred
Rudd
President
Rudd Realty Management
When preparing to buy an apartment, most people would look at financial stability, how sustainable the building operates, and how the building staff performs. However, the most important aspect, from my point of view, is the surrounding environment of the apartment. I would visit the apartment at various times during the day and evening to assess not only noise levels but also other conditions that would negatively affect my ability to enjoy my new home – for instance, smoking odors, dogs barking, musical instruments playing, and children running in the hallways or in surrounding apartments. I would also observe noise from sources in the outside environment, such as traffic congestion and garbage pickup by the sanitation department.

Louis Sandberg
President
Sandberg Management
I would look at the building’s history of assessments. Boards sometimes keep maintenance artificially low and impose assessments instead to cover operating shortfalls. This eventually catches up to the building and then large percentage increases are imposed. I would also hire an engineer to inspect the apartment and general building systems. This adds a layer to due diligence that most buyers don’t think about, relying instead on the reading of the minutes and speaking with the manager.

Sami
Najjar
Partner
Sandra Greer Real Estate
I would definitely want to know the financial status of the building, past and present. A building that has consistent increases in monthly fees along with assessments indicates money problems and poor planning. I would also look at the major components of the building, such as elevator, roof, boiler, windows, sidewalks, etc., to see if they are taken care of and if repairs or improvements are planned for the future. I wouldn’t want to buy in a building that is only for the here and now. A look at any legal issues the building may have would be of interest as to what they were and how they were handled. I’d also want to know that the building is being managed well; the minutes would show if there were problems there. These are key areas that give you a picture on whether to invest.

Howard Landman
Vice President
Siren Management
I would inquire as to the status of the last and next Local Law 11 condition, and ask whether the building has already accomplished any repairs necessary under the last cycle, and whether the board is aware of what the possible repair costs will be during the next (seventh) cycle. I would ask for the balance of the unrestricted reserve account(s), and ask when the elevators, roof, and heating plants were last upgraded. I would ask for the last five years’ maintenance or common charge history, and I would ask to examine the last three years’ financial statements. I would ask what capital improvement projects, if any, are foreseen over the next three to five years and the funding preparations for them.

Jordan
Kurs
Partner
TKR Property Services
When buying a co-op or condo, you should review the meeting minutes and sit down with the property manager to get an idea of the building’s financial and physical well-being. You want to look for important items such as whether there are any planned assessments or maintenance increases, any major capital projects being planned (e.g., roof replacement, elevator replacement or upgrade, boiler replacement, etc.) as well as the financial stability of the co-op or condo. In addition, you will likely want to investigate the house rules – specifically, any sublet policy and associated fees. It is important to know what the policy is and how it works should you ever need to sublet your apartment, be it short-term or long-term.

David Goodman
Director of Business Development
Tudor Realty Services
Of primary concern would be to get a complete understanding of the age and condition of the physical and mechanical components of the building. I would use this information to figure out how long it would be before replacements were necessary. I would then check the capital budget, reserves, and other available funds to understand what an owner might be called upon to contribute and in what period of time.

Carl Borenstein
President
Veritas Property Management
Buying a home is the largest investment most people will make in their lifetimes. The due diligence required when buying an apartment goes beyond its bricks and mortar. Effective boards and their property managers know that purchasers should evaluate a co-op or condo’s viability, looking at minimal “unsold” units, positive sponsor rent vs. maintenance cash-flow, whether the sponsor/developer is still directly or indirectly in control, and a high owner-occupancy rate to maintain a stable community. A co-op or condo’s financial statements, stability of maintenance increases, and meeting minutes are key to gauging the adequacy of reserves (at least 10 percent of a condo’s budget should go toward reserve replenishment).

Jeffrey Friedman
President
Vintage Real Estate Services
My first questions would be, when were the major components of the building – elevator, roof, boiler – replaced? How much money is in the reserve fund? In the last 10 years, how many assessments have there been, and for what purpose? These questions will tell me which components may need upgrading in the near future and how they may be funded. When was the last Local Law 11 inspection? What was the dollar amount for the repairs? If a building spent a sizable amount of money on the prior LL11 repairs, it is likely that this time around will be less, and vice versa. What type of fuel does the building use to operate the boiler? If it’s gas, then no additional expense can be anticipated, unlike with boilers that burn No. 6 oil. What is the history of fee increases over the last six years? This will show whether the board takes larger increases less frequently as opposed to smaller ones more frequently. If the building is a co-op, is there a ground lease? Stay away if there is one! Has there been a bed bug infestation in the last 12 months? Was it in or near the apartment I’m buying?

Jeffrey Weber
President
Weber-Farhat Realty Management
Has any money been withdrawn from the reserve fund to finance deficits in the operating fund? This would indicate that an increase in the maintenance or common charges should be implemented. Any leaks from the façade of the building? Very expensive to repair. I would like to see the Local Law 11 report, if possible, in a building over six stories.

 

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