Building with arrears

First apt sounds like a bad bet unless you are willing to set aside some $ for an assessment. Plus it sounds like a not great board.

Yes, i was trying to speak to someone on the board to ask about the financial situation but i was told to speak to the management. I understand the board members are all investors except one owner occupant. The majority of the owners are investors most owning multiple units. One of the investors owe about 100K with 9 units and 3 parking spaces. Total arrears 500K+ The manager is saying the loan is in the maintenance but he also said the maintenance has not been increased in years.
I am buying it about 20K below asking. I will have to do some repairs and renovation and the neighbourhood is great, so i was hoping that would justify moving forward but this is my first home and very nervous to make a big mistake or that it will end up costing me more than renting (i am rent stabilized)where i am now.

It's really worth your while to speak to a real estate lawyer that can look into all of this. If you're happy with your r/s apt. consider buying somewhere and renting out your purchase apt.

I wouldn’t touch the first one. $500k arrears for $1.3mm is way too high. I am assuming these are not just one month overdue. That is really why they have to take a huge loan.

I do have an attorney he said the arrears are significant, the accountant said i should definitely pass. But units in this building go in contract in days and he location is very desirable. That's why i was hesitant. 300_mercer - yes, they let the arrears snowball so it seems nothing was done for years, i am assuming corruption and someone must have stole money or was on the board and cold not go after him. Now several years later, the management said they changed the management company and they are being aggressive with collecting but he cannot say which units will go to foreclosure or what will happen. I asked for a list of arrears to see how long and much much each unit owes but was refused.

While the area may be changing, the owners will not be and that is the real issue here. It sounds like many are struggling to pay maintenance now and that it's not likely they will vote for increases that will allow the building to pay off its debts. Meanwhile, the high share of investors is a really bad sign, particularly if they dominate the board - this can often mean they want to spend as little as possible on the property since it is not their home. These are problems you really do not want.

Pinpin, Not sure why you are trying to convince yourself that “dodo” does not smell.

I should say “may not smell as bad”.

300_mercer i think i am just struggling to understand why anyone would buy there and the amount of demand that there seems to be. Is it because people think it will appreciate? Or are they just not reading the documents and buying on impulse without seeing this obvious financial issue with the building? Someone must see an opportunity there but i don't know what that is.
And nycseller , it is a condo building so they don't seem to have a control over anyone buying into the building. There are bunch of foreclosures, flippers, investors under LLC's, lots and lots of rentals. And yes, they do dominate the board.

Pinpin, My philosophy is that if you have to try to hard to understand the situation with your primary residence, it is best left to professional investors with large risk appetite or "greater fools".

A building with this much arrears affronts. (Sorry being silly for a friday)

Leave roulette to gamblers.

Exactly.

If management is refusing to be transparent, that is a giant red flag so walk away. It sounds like this building is a laundering machine.

stache- I wasn't sure if they were not being transparent or if that is as much info that they are supposed to release but in other buildings i looked at, financials came with a breakdown of arrears and for how much and how long, if any. I am a first time home buyer with a very limited budget so this has been a nightmare to navigate. I am buying all cash so no bank is involved hence i have to do all the work. If a bank asked for this info, i am sure they had to be more clear with their answers. But the management said they changed the management company a few years ago and that's when they took out the loan. The current property manager was with the old management company so even though they change the management company, they still have the same property manager, which i thought was strange, he said the arrears were double the amount with the old company so that means 1 mil . Is this type of building at all common especially in condos or is this an extreme example like everyone else seems to be suggesting?

If you sit down at the poker table and you don't recognize who the sucker is, then the sucker is you. You are wading into a pool of sharks here.

A number of decades ago, 160 Bleecker St was in deep trouble because the Sponsor was in arrears and still owned the majority of the units. The Sponsor was also in trouble on other projects and had filed for bankruptcy. The arrears were enough that that Coop wasn't able to pay it's underlying mortgage and Lincoln Savings bank had moved to foreclose.
The Coop was able to get the automatic stay of foreclosing on the unsold shares owned by the Sponsor due to their bankruptcy filing lifted and went to sell them at auction. My partner and I attended that action and attempted to buy a good number of the units, but the Coop Attorney blocked our attempted purchases and later referred to us as "bottom fishers" in the NY Times. So instead the Coop sold all the units to a known slumlord who turned the building into an illegal hotel (renting units out furnished on hotel websites for less than 30 days), controlled the managing agent, and made it virtually impossible for any of the other unit owners to sell their units.

And to this day the building remains a very difficult sell while most other buildings which were in similar circumstances back then got turned around (and had they not blocked us we would have turned this building around in rather short order).

30 yrs RE 20 In REO- this building had a sponsor with 30 units but currently owns none. The biggest investor owns 9 units and 3 parking spaces and stopped paying maintenance (not clear since when) all units are under an LLC, according to tax records, were bought in 2010 for 50k. I searched the address under the LLC and he is a huge investor with lots of court cases. Sounds like a similar situation.

Remember that it's a condo and if a bank forecloses the common charges arrears gets wiped out. So letting unit owners ride on arrears is a huge risk for condos.

just curious - what if they were bought cash and now are worth so much more -ie bought for 50K now worth 350K market value

pinpin your lawyer should be answering all of these questions regarding what is normal/ordinary/expected etc. My opinion is go with the second apartment.

Any building where ownership of units is concentrated in non-resident, sponsor, or investor individuals increases representation risks (they may vote against the interests of the resident owners), and financial risk (they may be in arrears, thus pushing the operating costs of the building onto other unit owners). From your description, both these risks have been realized.

Since you want to be a resident owner, and have mentioned that the building has a "bunch of foreclosures, flippers, investors under LLC's, lots and lots of rentals", and that you are a "first time home buyer with a very limited budget", it would seem that the overall ownership and operation of the building is not aligned with your situation, and you should buy something else.

thank you for your comments - stache - yes i have an attorney, he said no building is perfect but the arrears are significant, therefore he says a maintenance increase or assessment is in the future but says ultimately i have to make the decision. I also have a buyers agent but she said "she cannot give legal advice" and that her condo building has three loans. So here i am, because i see often other homeowners or buyers share their experiences here without necessarily thinking of it as a liability. Ultimately i find i have to do all the research.

> pinpin - you have had some VERY experienced people give you their input, all of whom have basically said buying in this building as a resident is a very bad idea. But just stumble into trouble all on your own "research"

thanks ph41 i am just explaining why i am looking for advice - opinion here after discussing it with my attorney and realtor. I appreciate what everyone is saying.

pinpin I get where you are coming from. I inherited and paid cash for my place. You realize your lawyer can't tell you what to do, (s)he can only point to obstacles. There are ethics involved. This place sounds attractive on the surface but it does not sound like a safe bet by any means. I sense you "want" this to work out but that does not appear likely. You have to make your own judgement about this. People can only help with that to a point, then it's up to you.

stache, yes - but i cancelled the contract now. I think it was my fault to not request the financials before. I am sorry to let it go but seemed like the right thing to do!

You made the right decision and good luck.

Pinpin, So you started the thread after signing the contract?

300_mercer yes, i was under contract and when i received the financials from the building, thats when i started losing sleep and eventually lost my deposit but got out.

ps- it was my fault not asking for the financials even before making an offer.

Very sorry about your deposit. A good attorney will find a way to get your deposit back.

that's ok, that's partially why i was trying to make it work. That was the only way the seller was letting me out of contract. This condo is in NJ (Hudson County) and i am not sure if it is the same in NY but basically you sign the contract, which the realtor prepares, when your offer is accepted. Then you have 3 days to take it to an attorney and the attorney looks at the contract to make sure everything is ok, this is called attorney review. Then you give your deposit and you are locked. Then you have 10 days to do the inspection and during this time you request the building info (financials, minutes etc) In my case i received this AFTER the inspection, so i basically had two weeks until closing. I had a 30 day closing. It was insane. So by the time i received and reviewed all the info, i had made and had an offer accepted, did inspection and now i get to find out about the building. I had asked the broker to ask the management about any upcoming work and how it was going to be paid and she told me they had a reserve and so no worries. Turns out they have no reserve but a 2m loan and all these arrears. It was such a nightmare.

Your broker told you there was a reserve? Was this in an email?

yes, the management said there was - it was on an email.

ps -BEFORE making an offer

pinpin you need to speak to a lawyer, OTHER than the lawyer you have been using. You can sue and get your deposit back due to the falsehood the board led you to believe.

How is living at 300 Mercer now? I lived there 30 years ago and they were the happiest days in my life. My daughter is looking to move there.

Marsha, Have not lived there for a while but the area has only gotten better. Many apartments have been renovated and plaza outside has been fixed. Rents also have gone up significantly with the increased popularity of the area and 8th street being nicer than before.

Even though it's further down, I don't think anyone knows yet what the ultimate impact the NYU super-blocks project is going to have on the area.

I think 8th street getting many nicer restaurants and bars between 5th and 6th will far outweigh that. Hopefully it will spread to 8th street between Broadway and University. There is very little new supply in this area and NYU student base who have graduated and would like to live in that area keeps on increasing.

8th St went from being one of the most vibrant shopping blocks in the entire city to a virtual ghost town where it feels kind of creepy at times it used to be hopping, and has huge amounts of turnover and vacancy. Look at the 2 corners of 6th Avenue where the former Barnes & Noble vacant for over 6 years, and University Place where after a long run Dallas BBQ was displaced by Capital One who didn't even make it past the first lease renewal and is vacant for ?4 years?.
And the strip of stores at the Southwest corner of MacDougall has been vacant for how long? I understand there is a small project which was recently announced for the site, but over a decade of vacant retail for a taxpayer? I think there's still a sign for MLBKaye International Real Estate on one of the storefronts and I must have testified at their bankruptcy almost 20 years ago.

How about I say the crowd who visit the current establishments is more upscale. Marlton Hotel, Loring Place, Neta sushi and even Chinese massage parlors who do not have shady business or elements.

Chinese massage parlors which do not have shady business or elements? Now that's funny!

Number of female and couple clients is very high. Also mix of male and not so young female masseuse. Nothing shady for sure.

No siree Bob! Nothing shady here! : P