Building with 10/24 units in arrears

Run away!

How is that even possible?? That's nearly half the building. Beyond being a poor choice financially, I have to assume there is a lot of emotional conlict in that place. Sounds awful to me.

Search this board for what happens when co-ops start getting litigious, which is what this building will need to clean itself out.

Maintenance is used to pay the bills: heat, electricity, water, property taxes, super, building maintenance. If 42% of the building isn't paying their share of the bills, either the building is being neglected or bills aren't being paid. I have to assume that some of these deadbeats are Board members. In the coops/condos I've lived in, the Board would immediately go after these people through their lawyer with fines and warnings about eviction/liens on the property that could lead to foreclosures. The one I'm in now publishes the name of these people in a public spot along with the amount in arrears.

So "run away" is sound advice.

Any buyer's attorney who lets his buyer purchase into such a building should be dis-barred.

Thanks for all the feedback. Yes, her attorney is discouraging her, saying: "do you want to live with people like that?"

Of course, she is a bit desperate, the current market is difficult, and it's the first time she's found a deal that looked good... until the problems surfaced.

I forgot to mention: it is a condo.

Is the market really that bubbly that, despite everyone thinking she should run away, the apartment already has several offers above ask? Or is it just broker talk...

If, and when she gives up I will post the link. I just don't want to interfere with the process right now.

Every real estate situation is attractive at a certain price. The problem with this situation is that, as jelj pointed out, the building probably isn't being maintained. Your friend probably wants the building to be maintained, so the question that she should have is: at what monthly maintenance cost (to her) will that happen?

Just guessing that "doubling" would be okay is not the way to arrive at the answer.

She needs a really good financial person to read the building financials to her, and tell her what that number would be, and then she can proceed if she wants to.

ali r.
DG Neary Realty

These are not people you want as neighbours.

Is it 1492 Bedford? That qualifies as condo/units/location. If it is, strange that the board hasn't filed Liens of CCs against the ten. There're only a couple, from many years ago.

Your friend would be better off not buying at all in a rising market, as we're told that another slump will come along any year now.

1. condo common charge liens are subordinate to lenders mortgages

2. that means the longer the HOA waits to assert its lien, the greater the likelihood that part
or all whct is owed it on a particular unit will be lost

NWT, really. Superpowers are to be used wisely, not rudely. Or do we need to put a kryptonite police lock on your internet device?

lostintransaction:

"Of course, she is a bit desperate, the current market is difficult, and it's the first time she's found a deal that looked good... until the problems surfaced."
This place could very well LOOK good -- perhaps even to many people. However, even with the PLACE looking good (the apartment, the price), it is the SITUATION as a WHOLE that must be examined. When buying an apartment, it's not just about the sale price and the unit. Whether co-op or condo (but probably more for co-op), you are buying into a community/company. A community always has issues, some big, some small. It's up to the buyer (and, in this case, hopefully a good attorney and broker -- a broker who is SCUM if they are pushing your friend to buy this place) to determine if the issues are big enough to walk away. In this case, I'd say YES, they are.

"Is the market really that bubbly that, despite everyone thinking she should run away, the apartment already has several offers above ask? Or is it just broker talk..."
I'd say there are, probably, 1 of 2 possibilities happening here. One (the more likely one, IMO) is that YES, this is broker talk, plain and simple. The selling broker KNOWS what a bad situation it is, and must throw all the fastballs s/he can. They are desperate. They need to make it sound more attractive.
The second possibility is that there are indeed been over-ask offers. The seller may be being honest. It IS a possibility!! :) HOWEVER!! That does NOT mean that the people making these offers are INFORMED BUYERS. In this market, it is not uncommon for someone to go to an open house, get excited, and make an offer that evening. Really, it doesn't mean shit. Sometimes a first offer is made and then you never hear from them again. And you have no idea (nor does the selling broker) know how much, if ANY, due diligence has been done before that offer was made. Maybe the people looking don't have a buyer's broker yet, are new to NYC, and have no idea what's going on in the world of NYC real estate. Maybe their attorney is a dimwit. Maybe they are impulsive. Whichever it is, they are in for a WORLD of hurt (to say the least!) eventually. Sure, they may love living in the place for the first year or so, but once litigation, fees, and carrying costs pile up, they are NOT going to be a comfortable, stress-free environment.

Sorry that was so lengthy, but in short, yes, I'd say: run!

"I forgot to mention: it is a condo."

OMG.

RUN
AWAY
NOW.

All good advice above. This would never be tolerated in the building of which I am board prez. To be additive to the discussion, let me say that being in arrears can have many degrees. While I am a stickler to having all owners current, a tenant can be in arrears but be current. In other words, pays late. Or there are back late fees. A better view on this can be found in the financials. Take a look at the accounts receivable (common charges) line vis a vis the total rent roll (total common charges). If it is less than 5% (my personal estimate of risk threshold), then I would not "run away". Also is the ratio trending upward over the years? What is the economic profile of the unit owners? Are the arrearages just a monthly lag on payment (showing just a lack of collection discipline) or are the unit holders in economic distress. The fact the the maintenance is "low" suggests to me that the arrears are a timing difference only. Needs more work before a blanket "run away" answer. Finally who is the managing agent? A mom and pop management agent will not have the collection discipline of one of the more professional managing agents. We charge a $150 late fee in our building. If a person misses payment, the $150 gets charged. The late fee put the account in perpetual arrearage category until it is paid. So, again needs more insight on the financials nod the owner profile. Good luck.

"....A friend of mine is looking to buy a unit in a building where 10 out of 24 units are in arrears on maintenance payments, one of them since 2009.....I forgot to mention: it is a condo...."

CALLING MIBNYC, yikes, gcondo, and all the others!! Where are you?

THIS is why I prefer living in a well maintained co-op with a reasonable board that vets its potential shareholders in the corporation carefully. Even if it does require a post purchase liquid multiple of net worth in relation to the cost of the apartment, advance escrow of maintenance, and the like.

"...10 out of 24 units are in arrears on maintenance payments, one of them since 2009.....I forgot to mention: it is a condo...."

me? i have happily owned in several well-run coops. have no problem with coops with reasonable tenants and boards.

no problem with extremely tight all cash coops even.

big problem with coops with problems--incl bad, stoopid boards, oversized underlying mortgages, poor
financials.

any risk the coop is a bad one i run away. like land lease. spare me the details, i go elswhere. so many places, why buy in a bldg with any risk of trouble. RE trouble blows. Avoid.

Thanks again everyone! My friend is thrilled to have received so much advice.

front_porch (Ali) and oldgreyhair, could you recommend a professional whom my friend could hire to take a close look at the financials?

why did everyone here suddenly turn gray

Any good real estate attorney conversant in co-op and condo transactions will be able to assist on the financial due dilligence.

Good luck!

Good point about "10 in arrears" maybe just being owners who're habitually late, but not actually owing more than one month plus fees at a time. Good for the building, as those late fees rack up.

There was a funny letter in the Cooperator last month, from an owner who wants to pay by the 15th rather than the 10th: http://cooperator.com/articles/2631/1/QampA-Without-Warning/Page1.html

The response should've been "Duh, just get a month ahead and never again pay a late fee."

If we are talking about 10/24 owners truly behind on their maintenance (not just perpetually 10 days late with it every month), there is no price at which this should be considered since the likelihood of ending up in relatively short order in an unlivable building is substantial. Buying such an apartment out of desperation? Please. Keep looking.

Breaking news! While I was away, my friend made an offer 6% above ask that was accepted (after making an offer 6% below ask that was rejected). She will put 30% down to get financing.

NWT, where were you able to find information on filed liens?

I won't stop her from buying (it's her decision after all), but I am urging her to get more information before signing.

Does anyone know if she can pull out of the contract in case the financials are much worse than expected? How much due diligence can or should the attorney do before (as opposed to after) signing?

Thanks!

All of the due diligence should be done before contract signing, and not after. Once that contract is signed, a buyer can't typically get out of the contract without a contingency written into the contract or without loosing their deposit. If the activity on this apartment is as strong as you write, seller likely will not be granting a contingency of any kind...

Your friend is making a very bad decision, I'm afraid. This building sounds like a real mess. And 6% above ask? Oy.

I hope she has an attorney who will take the time to research and then explain to her, in a way that she'll really listen, learn, and integrate, what exactly the situation is. Risks, best vs. worse progression & outcomes. That sort of thing.

This is a surprising and very unfortunate update. Your friend seems to be very new at all this and very, very naive. All indications say that this will be a disaster, if not soon, then several years down the line. On top of the building itself being an entire mess, the mere fact that she doesn't know the order of basic things (due diligence, THEN contract signing) is very troubling, and indicates that the people she has working for her (broker and attorney) do not have her best interest in mind (let me guess: she got her attorney through her broker). She is ill-prepared and being taken advantage of, all signs point to, about perhaps the biggest single purchase of her life.

Aboutready bought in a building where there was at least one owner who was behind in his mortgage payment, and look how that all worked out for her.

Sonya:

1. buildings like this 10/24 can sometimes be great investment oportunities
2. but you are correct: it depends on what the due diligence reveals
3. and buying without investigating in great detail is very foolish

Perhaps she can at least hedge her bets with clever contractual contingencies up the wazoo? And if seller won't grant those, she might then see that she's being trapped.

Thanks for the insightful comments again.

Does anyone have links to Streeteasy discussions that would illustrate for my friend the kind of trouble she is stepping into? That might help...

http://streeteasy.com/nyc/talk/discussion/36015-building-with-1024-units-in-arrears

this is common for HDFCs which original owners are more than half of all tenants.

actually being deadbeat is the best choice in US society, and deadbeat buildings get a lot of special benefits from the city and utility companies. (similar to low income households gets more from the government)

also, things will improve slowly as more new owners buy in, so it's a great investment opportunity

This is a condo. HDFCs are coops.

High income households get the most from the government.

it doesnt matter, many old condos convert decades ago have the same special benefit treatment from the city

and analfart, you are retarded