Author Topic: Buy condo.... or walk away?  (Read 1699 times)

freeat57

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Buy condo.... or walk away?
« on: October 14, 2016, 06:27:56 PM »
Hello everyone!  I need some advice.  I have bought and sold two single family homes in my life, but never a condo.  I have read extensively on the subject, but am still skittish due to the horror stories out there.  I want a condo for convenience, so that I can "lock and leave" for extended periods.

The condo I have an offer on is in a very desirable location for me and in a building that I like in a hot market.  The unit itself has a couple of issues, but I can deal with those.  Here's the problem.  My offer was accepted on Tuesday evening and became "binding" Wednesday Oct 12.  (There were 3 other offers, I was told).  I am now in the 7 day due diligence period when I can get my earnest money back for any reason.  I have repeatedly asked for the association meeting minutes and financial statements to no avail.  All I get is "we are working on getting those".  I have the rules/bylaws, but those are pretty standard stuff.  My alarm increased when I got the "Community Disclosure Form" which had a box checked that said a special assessment of undetermined amount had been discussed by the board, but no action taken and no plan in place.  I shot off a message to my realtor and the seller's asking for immediate clarification and demanding the financial documents and meeting minutes.  I still do not have those!!  Here's what I did get:

"I just spoke with listing agent.  The seller is on the board.  There was a small discussion amongst the board regarding doing some exterior work.  Nothing has been brought up further than that discussion.  He is afraid he will get in trouble for even mentioning it, but didn't want to lie.  "

I only have until Tuesday  to walk away and get my earnest money back.  The unit inspection is scheduled for Monday 9:00AM.  I did not personally see any big problems with the building.  It was built in 2006. 

What would you do?

lhamo

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Re: Buy condo.... or walk away?
« Reply #1 on: October 14, 2016, 07:03:12 PM »
I would not buy into a condo or co-op without reviewing the financials and board meeting minutes. Small self-managed condo associations (which it sounds like this is) can be full of problems, financial and otherwise.   The fact that they are not willing/able to provide these in a timely way is concerning, as is the seller's explanation about the assessment.  If the assessment was discussed by the board, it should be documented in the minutes.  There is no reason he would be "in trouble" from anybody for revealing that they have discussed doing work on the building.  Unless that discussion somehow was NOT reflected in the minutes. 

Tell them you need the minutes/financials (scanned copies are fine) no later than 12 noon Sunday, or you will be withdrawing your offer and cancelling the inspection.  I wouldn't pay for an inspection on a building that can't provide these standard documents.


freeat57

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Re: Buy condo.... or walk away?
« Reply #2 on: October 14, 2016, 07:18:27 PM »
Thanks Ilhamo.  I was thinking very much the same, but since I am new to the condo market, was not sure if this goes on all the time.  I would think that a seller, who is on the board would already be in possession of those documents.

freeat57

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Re: Buy condo.... or walk away?
« Reply #3 on: October 15, 2016, 07:08:09 AM »

--- We live in a condo currently--and love the lock and leave---- our condo fee is $215 a month- it's well worth it...covers everything outside including roof replacement, landscaping, snow removal, etc...   well managed- our board president is a retired police, no big items to break (elevators, pool, etc) --  I've been to a meeting or two, but don't want to get involved because it's currently run well and I'm now friends with our treasurer, who keeps a tight grip on the purse strings...
[/quote]

Thanks inverse!  It is encouraging to hear from someone having a good experience in a condo.  Late last night, I received an email forwarded to me from the seller. It was addresses t his realtor.

 

"I apologize for not responding earlier, but I am working with a client in Boston and we have a few critical deadlines.  In response to the Special Assessment questions, Section J, of the revised “Community Association Disclosure” for Mxxxx Drive, Loft 109,  I am submitting the following supportive clarification.

I submitted the answer “amount TBD -  has not been presented to owners”  because a Special Assessment was discussed by the Board to improve the exterior envelope of the building.   An engineering firm is currently conducting an evaluation to recommend enhancements and improvements.  Since the evaluation has not been completed, a final recommendation from the Board has not been presented to the owners for voting.  I hope this correspondence clarifies my position and desire to be transparent.
"

 I edited out the exact address.  This is in Atlanta.  I still do not have the financials or minutes.

lhamo

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Re: Buy condo.... or walk away?
« Reply #4 on: October 15, 2016, 10:47:10 AM »
"Improve the exterior envelope" is code for "the building is leaking and needs to be fixed immediately."

We looked at a rental in a condo complex where they were "improving the exterior envelope."  In that case, if meant a total redo of the roof and all siding.  The owner was upfront -- he had bought at the peak of the market in 2007, just after the complex was converted from rentals, and was out not only the equity he lost during the market crash but also tens of thousands in assessments.  There was an ongoing lawsuit against the company that did the conversion and they hoped to get their money back.  The unit itself was nice, and reasonably priced for the area, but I didn't want to move into a place with significant ongoing construction.

I would run, not walk, away from this building.  In the absence of the financials and detailed minutes, especially.  You are heading into a minefield.

freeat57

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Re: Buy condo.... or walk away?
« Reply #5 on: October 15, 2016, 01:02:45 PM »
Thanks again folks!  This is a four story stressed concrete, masonry building with a flat roof.  I just got some financials and minutes.  I have a lot of reading and calculating to do.

freeat57

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Re: Buy condo.... or walk away?
« Reply #6 on: October 15, 2016, 02:04:05 PM »
"Improve the exterior envelope" is code for "the building is leaking and needs to be fixed immediately."

Thanks again for the translation!  I think you are exactly right.  This building has some penthouse units which are two story and have roof top decks.  I saw mention in the minutes of some leaking associated with those roof decks. 

Here's what I did:  If you google "cost to roof a commercial building", you will find sites with nifty calculators.  I also found an article discussing the cost to roof buildings at a large university.  I chose two calculators (one zip code based), using highest quality materials and manually calculated a third estimate based on the high end $/sq ft range given in the article.  I estimated roof sq ft by two different methods and took higher number.  The result is that one calculator and the manually calculated amount were nearly identical, ~$330K.  the other calculator (zip code based one) came in low at $170K. 

Taking the $330K number and dividing by 64 units yields a number I could easily live with for an assessment.

Flaws in my thinking?

Taking the high number and dividing by

lhamo

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Re: Buy condo.... or walk away?
« Reply #7 on: October 15, 2016, 02:14:27 PM »
The problem with large assessments is they typically require a vote of the entire ownership, and if you have a large number of people in the building who are living on the financial edge (including people living on a fixed income) then they might not approve the necessary work.  This happened with our NY co-op.  The building had not been properly maintained for years, and the reserves were limited.  When we bought, we knew it needed a new roof, repointing, and replacement windows - the latter had to be done collectively through a limited number of approved contractors because we were in a historic district.  We bought in knowing that the assessments for all these work items were going to cost us an 10-20k.  We were ok with that, but what we did NOT anticipate was the stonewalling on the part of some of our neighbors.  They kept turning down proposals and wanting to get more bids when they weren't happy with the prices.  In the meantime, we ended up with leaking in the top floor apartments, which the association had to pay extra to fix.  If the roof had been done promptly, that extra cost would have been averted.  We also eventually ended up with more or less a civil war in the building between the old owners and the new buyers.  All the new buyers were prepared to pay the assessments, and wanted to do them immediately to protect our investment.  The old buyers kept playing the limited income card.  Well, I'm sorry, but if the building falls down you are going to have to pay even more to move to a new place, so pay what needs to be paid and get it over with!  In the end we tipped the balance with the sale of one more unit and we forced the assessments through.  But it got pretty ugly.


freeat57

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Re: Buy condo.... or walk away?
« Reply #8 on: October 15, 2016, 02:52:21 PM »
The problem with large assessments is they typically require a vote of the entire ownership, and if you have a large number of people in the building who are living on the financial edge (including people living on a fixed income) then they might not approve the necessary work.

Ah yes!  The (mis)behavior of the masses.  Sad but interesting story.  Thanks for all your advice.  It gives me a lot to think about.