79 Crescent Ave Condo Association

Protecting Your Investment & Preparing for a Future Sale

While all of us can agree that we were “taken” on some level by the seller and we are all incurring costs that we did not expect this early in the game (or ever), we also have to admit that each of us signed the contract of our own free will.  As hard as it is to swallow, we must accept the fact we are now OWNERS and have issues we need to work through together. We must do our best to work through ALL of them not only as soon as possible, but in the best way possible for the entire building.

 

I think its pretty safe to say that most of us will, at some point want to move on and sell our unit. Until that day comes we all have the responsibility to protect our investment so that when the time comes we can get the biggest return on our investment  (ROI) possible.

 

Most of us learned about the factors that go into a home/condo’s price when we started looking into buying this property.  Now, as a potential seller, some things may become more evident and more important than we first learned about as buyers.

 

Here are some key points in determining your unit’s worth or “Fair Market Value”

 

1. LOCATION

            - As our surrounding area improves so does our property value. Are you familiar with the Monticello Main Street Project? You should be.  If the project is completed as envisioned it could greatly improve our property values. Its to your advantage to get involved in the community and work towards improving it in some way.

http://www.jcedc.org/Pages/mainstreet.html

 

 http://www.facebook.com/pages/Monticello-Community-Development-Corporation/77820543714#!/pages/Monticello-Community-Development-Corporation/77820543714?v=info  

 

2. YOUR UNIT

            - Have you maintained and/or improved your unit? It will be compared to similar units in similar buildings with similar amenities.

 

3. The Building

            - Is the building in good shape with no outstanding major repairs?

 

4. FINANCIALS

            - Are the current monthly dues being collected enough to run the building AND adequately pad reserves?

            - Are all fees being paid on time?  If a potential buyer sees late/unpaid fees from owners it’s a red flag - YES you must provide this info to potential buyers.

            - Are there a large number of renters in the building?  While its fine to have renters, and it is allowed in our bylaws you should be aware of how this looks to potential buyers & lenders.  Buildings with a high number of renters are sometimes harder to get mortgages approved on.  This is seen as a liability because an owner is naturally more vested in maintaining the property value than a renter. You, as an owner, are responsible for renting to a “good” tenant and ensuring that all fees continue to be paid on time.  The Association is responsible for enforcing the Bylaws along with the  Rules and Regulations concerning these collections should you fall behind.

            - Has a complete reserve study been done recently? Think about it, if you were considering 2 buildings and only one has ever had a reserve study done - so you have a complete report listing current & potential issues along with a financial plan to take care of these issues as they arise - which would you prefer?  Some states (not NJ) require these be done on a regular basis. This means that you should also see that this study was accounted for in the building’s annual budget. If it hasn’t been budgeted for how will it get paid for?

 

So, in a nut shell, if you would like to get your money back (and possibly even make a profit) one day when you sell your unit you must work hard now to help get the building “Ready to Sell.”

 

 

Below are some articles written by experts in the field to further explain some of the above points.

 

 

How healthy is your HOA?

Part 2: Avoiding the bad condo blues click here to read all articles By Bernice Ross
Inman News July 28, 2009

Editor's note: This is Part 2 of a three-part series. Read Part 1:"Condo rules a deal-breaker for some."

Before buying a condominium, one of the most important areas to investigate is the financial health of the Homeowners Association (HOA). It's important to know the financial health of the HOA.

Part 1 of this series looked at two important questions to ask if you are purchasing a condominium: "What type of ownership are you purchasing?" and "What obligations and restrictions do the CC&Rs (covenants, codes and restrictions) place on you?" A third equally important issue deals with your HOA Dues.

Is the HOA healthy financially?

All condominium associations assess a homeowner's association fee. I live in a planned-unit development (PUD) where we have title to our land and improvements. The city maintains the streets. Our HOA fees go for the maintenance of the tennis courts, pool, recreation room, and the landscaping of the common areas. Our fees are low since the HOA doesn't maintain the streets or the structures.

I also have lived in a guard-gated PUD in California. The HOA was responsible for maintaining the streets, the common areas, plus paying for the 24-7 guard service. That meant that we had to maintain the guard shack plus two patrol cars. The fees were substantially higher.

The budget included "reserves" for car maintenance, guard shack facility maintenance (electric, air-conditioning, water, etc.), plus money for brush clearance. We also had to maintain the electric gates. This was an ongoing problem that resulted in a special assessment.

A special assessment is a fee voted by the HOA over and above the monthly maintenance fee that each homeowner pays. Once the HOA approves a special assessment, each homeowner is sent a bill to cover the additional expense.

If the HOA has done a good job on planning and managing its money, then special assessments should be rare. For example, my former HOA voted to provide earthquake survival kits for every one of our residents.

Our accountant analyzed our budget and determined that we did not need to raise our association dues to cover the additional expense. The HOA did add this as an additional budget item for the following year.

HOA fees increase substantially when your association is responsible for maintaining the exterior of all condo structures. In most states, the HOA is required to put money aside to pay for repairs ahead of time. As you look through the association budget, make sure there are funds for items such as roof replacement, pest control, painting and other maintenance.

Difficulties arise when some homeowners default on their fees. This is one of the most important items to investigate prior to purchasing a condominium or PUD.

The HOA I belonged to in California was aggressive about pursuing people who were delinquent on their dues.

Our CC&Rs granted us the right to institute a foreclosure proceeding against the delinquent homeowner. Since our area was still being built out, we had several builders who decided they weren't going to pay their dues.

After numerous requests and attorney letters without any result, placing a lien on their properties worked. This meant that in order for the builders to sell the property, they had to pay the HOA fees.

This system worked when the market was in an upswing. Today, it's a different story since so many owners have "negative equity" (i.e. the condominium or house is worth less than the liens against it).

If an owner is going bankrupt, facing a foreclosure sale, or the property is bank-owned, there's a high probability that the association dues are not being paid. The HOA could place a lien on the property, but if there's no equity there's no money to collect.

Besides, Internal Revenue Service, state, and local property tax liens normally have priority over association liens. The existing loans on the property may have priority as well.

If you are purchasing a condominium or PUD, ask for a copy of the budget and the reserves, as well as how many owners are delinquent. It would also be smart to investigate how many foreclosure or bank-owned properties are for sale in the local multiple listing service.

Also, check other online resources such as real estate company Web sites, Realtor.com, Foreclosure.com, RealtyTrac.com, Trulia.com and Zillow.com.

If you find a number of owners are delinquent, the HOA may be in trouble. If this is the case, it could translate into higher costs for you. For example, most HOAs are required to have a certain amount of cash in reserve.

If the reserve level dips due to nonpayment of fees then the HOA may have to do a special assessment to cover the shortfall. This translates into more money out of your pocket.

It could also mean that the HOA elects an insurance policy that provides less coverage for owners or that it cuts back on the maintenance of the property. Both of these decisions can negatively impact your property value.

Need more questions to ask prior to buying a condominium or PUD? If so, see Part 3 of this series.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of "Real Estate Dough: Your Recipe for Real Estate Success" and other books. You can reach her at Bernice@RealEstateCoach.com and find her on Twitter: @bross.

 

 

 

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THE DIFFERENCE BETWEEN AN APPRAISAL AND A

COMPARATIVE MARKET ANALYSIS (CMA)

Appraisal

Only a licensed, trained appraiser, with no interest in a property, can do an

appraisal. An appraisal looks at similar properties which have sold recently. To

be similar it should have the same square feet, same acreage, same age and

be in a similar neighborhood. In Greenwich, it is rare to find an exact match, so

the similar properties are adjusted to more closely match the subject property.

Adjustments take the form of placing a value on square feet and acreage, and

then adding or subtracting value so that a more exact comparison can be

made. In addition, the appraiser looks at the current condition of the subject

property and will adjust its value to reflect its depreciation. Because there is

judgement involved in making these adjustments, even appraisals using the

same properties for comparison can vary in their result.

CMA (Comparative Market Analysis)

CMAs are typically done by licensed Realtors. CMAs look not only at recently

sold properties but at properties on the market and ones which did not sell

(withdrawn or expired listings). Sold properties give a view of the market

during a specific time period, but they do not give much guidance as to the

direction of the market. How properties have been selling in an area, the price

of comparable properties currently for sale and the size of the inventory of

properties in that price range are some of the factors the Realtor uses to price

a home. For a more complete list see the first chapter, What should be

Considered in Pricing a Home. Realtors who are active in the market also have

another advantage. They have usually had the chance to view the homes which

have sold and are for sale. Based on having seen a home, they can more easily

decide if it really is a comparable. Appraisers do not go to open houses and do

not place any weight on house style and street appeal. This limits them in

someways. House purchases, like almost all purchases, are made on an

emotional basis, even though the purchase is usually justified on an intellectual

basis. As a result of the different approaches, appraisals often have different

results than CMAs. The difference can make an appraisal come out higher or

lower than a CMA. Presently there is little CMA training provided to Realtors,

as a result the results can vary even more widely than appraisals. This is why it

is so important to choose the right Realtor to help your price your home and

not just the one that suggests the highest price.