The level of distress among apartment sellers is increasing rapidly, according to the latest Capital Trends Monthly report on the apartment sector, released by Real Capital Analytics (RCA). The continuing effects of the collapsed condo conversion market have elevated levels of distress since 2006, but the recent spike indicates that financial troubles beyond the failed conversions are starting to emerge. Over eight percent of recent apartment sales can be linked to a distressed seller, and this percentage has quadrupled over the past year.
By dollar volume, distressed apartment sales have ranged between four percent and six percent for much of the past year and peaked at just under 10 percent in fourth quarter of 2007. Recent trends indicate that a greater number of smaller properties are facing trouble. By either measure, the distressed sales are well above reported mortgage delinquency rates and indicate that pressure among all sellers is growing, according to the report.
Even so, the sales volume as well as number of sales in the apartment sector are both down by more than 50 percent. In the past 12 months, 4,430 apartment properties have been sold nationally, equaling $115.53 billion.
In fact, cap rates for closed deals ticked up slightly to over 6.5 percent while asking cap rates averaged 6.2 percent, underscoring the large gap in pricing that separates buyers and sellers, according to the RCA report. Meanwhile, the volume of apartment properties listed for sale exceeded closings again in August. Year-to-date, offerings have exceeded closings by a ratio of 1.5-to-1 nationally and are rising. The oversupply of property offerings in tertiary markets is even greater, although large inventories of properties for sale have recently started accumulating in primary and secondary markets as well, the RCA report finds.
At the beginning of September, closed sales in the third quarter totaled $4.5 billion, with another $6.5 billion reported in contract and the market was on pace to easily exceed the $9.3 billion in transactions recorded in the second quarter, according to this report. However, the uncertainty surrounding the takeover of Fannie Mae and Freddie Mac, followed by even greater upheaval on Wall Street has stalled the market. Reports are already surfacing of another wave of deals delayed, re-traded or called off. Sellers are also shocked and the seasonal surge in offerings that is typical each September has been modest.
Showing posts with label condominium association. Show all posts
Showing posts with label condominium association. Show all posts
Wednesday, October 22, 2008
Thursday, October 16, 2008
7 Questions You Must Ask Before Buying a Condo
You've found your dream condo, and you're ready to relax among the mango trees and swaying date palms. Hold everything. To keep from getting stuck with a lemon, you've got to do some homework. Here are the seven most important questions you need to ask before buying a condo.
1. "What's the Beef?"
Take a look at the minutes of the condo association board meetings to see what the owners have been griping about. If everyone was complaining about the faulty plumbing or the gardener's absence, you know that the complex is having management difficulties. Even if there aren't any complaints, reading the minutes will reveal the sorts of projects that are under way at the complex -- projects the seller may have neglected to mention.
2. "Who's Been Naughty and Who's Been Nice?"
Find out the delinquency rates of present owners. If people aren't paying their association dues on time, that is either a sign of discontent or an indication that the association might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a reserve-fund review in the past five years. Lester Giese, the author of The 99 Best Residential & Recreational Communities in America, recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that amount should be 50% or above. Residents who brag that they don't pay much in maintenance may be in a complex that either is not being kept up well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association's policy. First see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Then make sure that the policy has a building-ordinance clause, which means that the insurance will cover the cost of bringing the building up to code if there is any rebuilding to be done. On older buildings, there may have been many code upgrades since the time of construction. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. The smart condo owner will insure his or her personal belongings, along with any other items within the unit that are not covered by the association's policy. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.
5. "Does the Association Present Any Legal Problems?"
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, there's so much more involved. Contact a local real estate lawyer and have him or her go over the bylaws of the association. Do they make sense? Are they consistent with the state laws? Giese, the author, once found that the association bylaws of a large garden-style condo complex had been lifted from the books of a high-rise condo, leaving confused tenants with rules about shared hallway space and the correct use of garbage chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your lawyer screen the association at the local courthouse, to see if any owners have filed suit against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Does the management company find renters for you? If so, do they get enough good renters? Ask other tenants about their experience. In addition, ask to see the association's rental lease, and have a real estate lawyer look it over. Keep one thing in mind, though: An association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent, the less chance that will happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners manage the place themselves. Although many are operated efficiently, self-management can lead to more hassles for owners -- especially those who live thousands of miles away. If the complex is professionally managed, check out the management company as thoroughly as you check out the association. Ask other owners. Ask people in nearby buildings. And be sure to interview the day-to-day manager directly. If you hook up with a bad manager, you can be sure of this: Your dream condo will keep you up at night.
1. "What's the Beef?"
Take a look at the minutes of the condo association board meetings to see what the owners have been griping about. If everyone was complaining about the faulty plumbing or the gardener's absence, you know that the complex is having management difficulties. Even if there aren't any complaints, reading the minutes will reveal the sorts of projects that are under way at the complex -- projects the seller may have neglected to mention.
2. "Who's Been Naughty and Who's Been Nice?"
Find out the delinquency rates of present owners. If people aren't paying their association dues on time, that is either a sign of discontent or an indication that the association might be underfunded.
3. "How Much Is In the Repair Fund?"
Ask if the community has done a reserve-fund review in the past five years. Lester Giese, the author of The 99 Best Residential & Recreational Communities in America, recommends the following formula: If the complex is one to 10 years old, the reserve fund should have 10% of the cost of replaceable items (roofs, roads, tennis courts, etc.). Between 10 and 20 years old, the repair fund should be at 25% to 30%. At 20 years, that amount should be 50% or above. Residents who brag that they don't pay much in maintenance may be in a complex that either is not being kept up well or is living beyond its means.
4. "Can You Cover Me?"
If you look at nothing else, get a copy of the certificate of insurance, which is a summary of the association's policy. First see if the replacement costs covered by the policy are an accurate estimate of the cost of rebuilding. Then make sure that the policy has a building-ordinance clause, which means that the insurance will cover the cost of bringing the building up to code if there is any rebuilding to be done. On older buildings, there may have been many code upgrades since the time of construction. Finally, make sure that you understand exactly what the association policy covers and what you are responsible for. The smart condo owner will insure his or her personal belongings, along with any other items within the unit that are not covered by the association's policy. If you have trouble understanding the insurance lingo, take the insurance certificate to an agent whom you trust and who understands the state laws.
5. "Does the Association Present Any Legal Problems?"
Buying a single-family home without a lawyer is no big deal for many people. But with a condo, there's so much more involved. Contact a local real estate lawyer and have him or her go over the bylaws of the association. Do they make sense? Are they consistent with the state laws? Giese, the author, once found that the association bylaws of a large garden-style condo complex had been lifted from the books of a high-rise condo, leaving confused tenants with rules about shared hallway space and the correct use of garbage chutes. Benny Kass, a Washington real estate attorney, recommends that you also have your lawyer screen the association at the local courthouse, to see if any owners have filed suit against it.
6. "Is the Complex Renter-Friendly?"
If the renter population is over 10%, there should be clear rental policies, either listed in the bylaws or tacked on as an amendment. Does the management company find renters for you? If so, do they get enough good renters? Ask other tenants about their experience. In addition, ask to see the association's rental lease, and have a real estate lawyer look it over. Keep one thing in mind, though: An association can change its bylaws to prohibit or restrict renting at any time. The more owners who rent, the less chance that will happen.
7. "Am I My Community's Keeper?"
Watch out for a condo whose owners manage the place themselves. Although many are operated efficiently, self-management can lead to more hassles for owners -- especially those who live thousands of miles away. If the complex is professionally managed, check out the management company as thoroughly as you check out the association. Ask other owners. Ask people in nearby buildings. And be sure to interview the day-to-day manager directly. If you hook up with a bad manager, you can be sure of this: Your dream condo will keep you up at night.
Monday, October 13, 2008
How to Avoid a Bad Co-op or Condo
Co-ops and condos can be a good option for first-time home buyers. They are also attractive alternatives for people who own a house but want to downsize because they don't need the space anymore. But while co-ops and condos generally cost less than free-standing houses and require less upkeep, there are still some potential pitfalls.
First, some definitions: When you buy a condominium, you get a deed and title to an apartment and contribute funds for the upkeep of common property such as the grounds, building exterior, lobby and elevators. Condo owners pay real estate taxes and in general can rent or sell as they wish.
With a co-op, you are buying stock in the company that owns a building. You don't actually own any real property, but the stock entitles you to a lease for a unit in the building. As with a condo, you contribute funds for the upkeep of common grounds, but your monthly fees also cover the real estate taxes and insurance for the building, among other things. Co-op boards also can restrict your ability to sublet your unit.
In either case, you are living at close quarters with other people in the building and may be subject to rules and policies you don't like, such as no pets or mandatory carpeting. Just as important, you will be co-mingling your finances with everyone else in the building, since co-op and condo owners may have to foot the bill if their neighbors fail to pay their monthly fees. It can also be harder for you to sell your unit if others in the building default on their mortgages.
For this reason, lenders take a close look at the ownership structures and finances of co-ops and condos -- and you should, too.
Ed Fusco, an attorney based in the Park Slope section of Brooklyn, N.Y., says, "Banks ... want evidence that the sponsor doesn't have a controlling interest and also that the building is owner-occupied. Often, in a new conversion, the units aren't completely sold and banks will put restrictions of loans."
For example, he says, a bank would be reluctant to finance the purchase of an apartment in a 25-unit building if only two units are sold and the rest are in the hands of the sponsor, since these remaining units might eventually be rented, rather than sold.
Fusco says this dates back to the last real estate downturn in the 1980s. Back then, sponsors who owned too many units and got into financial trouble often stopped paying the maintenance, causing the building to default on the underlying mortgage. When the underlying mortgage gets foreclosed, then everyone in the building stands to lose his or her apartment, including the banks that have those apartments as collateral.
These days, in many new conversions, the sponsor will approach banks and make deals upfront. Many times applicants can get a mortgage anywhere they want but must at least apply for one with the lender specified in the building's offering plan.
If you're buying a co-op, getting a mortgage is just the first step; you may also need to be approved by the co-op board. Even in today's market, when many banks are tightening their lending criteria, getting past the co-op board can be much tougher.
Barbara Fox, a Manhattan-based real estate broker, cautions, "Buying an apartment, and in particular a co-op in New York, is a cumbersome and personally invasive process. Your net worth and investments are stripped down to almost the penny."
Fox says that while other cities have co-ops, New York instituted a system that is "similar to joining a private club. Early on, when the co-op concept came into focus, the people who were living in these very expensive apartments wanted to be able to know that they could control who was living next door to them."
But another reason for the scrutiny is that "the board needs to know that a buyer will be a constructive entity; most important to the board is the status of your finances."
Jonathan Raboy, real estate agent at Citi-Habitats, tell the story of a client who was unable to buy an apartment on Manhattan's West Side because the co-op board -- not the bank -- felt his finances didn't pass muster. "The board there required an extremely low debt-to-income ratio, and although my client was a professional and had a good ratio, it at the time was more than this board would have liked to see," he says. Before his client could satisfy the board, another prospective buyer came along and outbid him.
Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.
Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."
In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."
Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatement's, which can keep your real estate taxes down for a certain number of years.
First, some definitions: When you buy a condominium, you get a deed and title to an apartment and contribute funds for the upkeep of common property such as the grounds, building exterior, lobby and elevators. Condo owners pay real estate taxes and in general can rent or sell as they wish.
With a co-op, you are buying stock in the company that owns a building. You don't actually own any real property, but the stock entitles you to a lease for a unit in the building. As with a condo, you contribute funds for the upkeep of common grounds, but your monthly fees also cover the real estate taxes and insurance for the building, among other things. Co-op boards also can restrict your ability to sublet your unit.
In either case, you are living at close quarters with other people in the building and may be subject to rules and policies you don't like, such as no pets or mandatory carpeting. Just as important, you will be co-mingling your finances with everyone else in the building, since co-op and condo owners may have to foot the bill if their neighbors fail to pay their monthly fees. It can also be harder for you to sell your unit if others in the building default on their mortgages.
For this reason, lenders take a close look at the ownership structures and finances of co-ops and condos -- and you should, too.
Ed Fusco, an attorney based in the Park Slope section of Brooklyn, N.Y., says, "Banks ... want evidence that the sponsor doesn't have a controlling interest and also that the building is owner-occupied. Often, in a new conversion, the units aren't completely sold and banks will put restrictions of loans."
For example, he says, a bank would be reluctant to finance the purchase of an apartment in a 25-unit building if only two units are sold and the rest are in the hands of the sponsor, since these remaining units might eventually be rented, rather than sold.
Fusco says this dates back to the last real estate downturn in the 1980s. Back then, sponsors who owned too many units and got into financial trouble often stopped paying the maintenance, causing the building to default on the underlying mortgage. When the underlying mortgage gets foreclosed, then everyone in the building stands to lose his or her apartment, including the banks that have those apartments as collateral.
These days, in many new conversions, the sponsor will approach banks and make deals upfront. Many times applicants can get a mortgage anywhere they want but must at least apply for one with the lender specified in the building's offering plan.
If you're buying a co-op, getting a mortgage is just the first step; you may also need to be approved by the co-op board. Even in today's market, when many banks are tightening their lending criteria, getting past the co-op board can be much tougher.
Barbara Fox, a Manhattan-based real estate broker, cautions, "Buying an apartment, and in particular a co-op in New York, is a cumbersome and personally invasive process. Your net worth and investments are stripped down to almost the penny."
Fox says that while other cities have co-ops, New York instituted a system that is "similar to joining a private club. Early on, when the co-op concept came into focus, the people who were living in these very expensive apartments wanted to be able to know that they could control who was living next door to them."
But another reason for the scrutiny is that "the board needs to know that a buyer will be a constructive entity; most important to the board is the status of your finances."
Jonathan Raboy, real estate agent at Citi-Habitats, tell the story of a client who was unable to buy an apartment on Manhattan's West Side because the co-op board -- not the bank -- felt his finances didn't pass muster. "The board there required an extremely low debt-to-income ratio, and although my client was a professional and had a good ratio, it at the time was more than this board would have liked to see," he says. Before his client could satisfy the board, another prospective buyer came along and outbid him.
Although board approval is waived for an apartment owned by the building's sponsor, the downside is that, in New York at least, the buyer has to pay the seller's transfer tax and certain other fees.
Ideally, you should know as much about a buildings finances as the board knows about yours. "You need to be comfortable with the financials of the co-op," says Steven B. Schnall, the president of New York Mortgage Co. "And you need your realtor and attorney to help you assess that. If the building is only 20% owner-occupied, it still could be a sound building financially."
In an older building, one thing to look for is the reserve fund. "An older building will need repairs sooner than a new building will," Schnall says. "You need to be sure the building is reserving for future capital improvements."
Some other things to be aware of: An older co-op that has paid down its underlying mortgage significantly might have lower maintenance. On the other hand, Schnall says many new condos have tax abatement's, which can keep your real estate taxes down for a certain number of years.
Monday, October 6, 2008
Give Renters What They Want Most at Home: Safety & Security
The people have spoken. The top two features people look for in housing are security and fire safety, says a study by the Bethesda-based Society for Fire Protection.
The study says 43% of those polled answered with one of those two categories as the most important. With such overwhelming numbers behind security and fire safety, landlords should pay close attention. Chris Jelenewicz, an engineering program manager with SFPE, says landlords can, and often should, make simple changes that will have a high impact on both security and fire safety.
“When security and fire protection aren’t coordinated, it can lead to devastating affects,” Jelenewicz says. “It can be an issue at any property, really.”
Among the simplest improvements a landlord can make is ensuring all exits to a building are clear of obstructions/ blockages of any kind. This can include plants, stored equipment, etc.
Jelenewicz says it is shocking how many buildings, especially high-rise buildings with auxiliary staircases, use areas such as back staircases to store boxes and random items occasionally needed on site.
Another somewhat easy fix it is arming auxiliary doors with alarms, so they can not be accessed to enter the building and only will be used as exits in emergencies. A similar renovation would be installing technology that forces a 10-second delay before a door will open in a low-traffic part of a building. Jelenewicz calls the measure a key new crime deterrent.
“If someone stealing a TV or a laptop in that situation, they’ll likely drop it and leave [through a more accessible/ more public exit], says Jelenewicz.
If the landlord is involved in building or overhaul of a rental property, it would behoove him/her to consult a fireprevention engineer during the design phase to make sure new safety issues aren’t being created, says Jelenewicz. Remember, spending money up-front could save a lot more money down the road.
The study says 43% of those polled answered with one of those two categories as the most important. With such overwhelming numbers behind security and fire safety, landlords should pay close attention. Chris Jelenewicz, an engineering program manager with SFPE, says landlords can, and often should, make simple changes that will have a high impact on both security and fire safety.
“When security and fire protection aren’t coordinated, it can lead to devastating affects,” Jelenewicz says. “It can be an issue at any property, really.”
Among the simplest improvements a landlord can make is ensuring all exits to a building are clear of obstructions/ blockages of any kind. This can include plants, stored equipment, etc.
Jelenewicz says it is shocking how many buildings, especially high-rise buildings with auxiliary staircases, use areas such as back staircases to store boxes and random items occasionally needed on site.
Another somewhat easy fix it is arming auxiliary doors with alarms, so they can not be accessed to enter the building and only will be used as exits in emergencies. A similar renovation would be installing technology that forces a 10-second delay before a door will open in a low-traffic part of a building. Jelenewicz calls the measure a key new crime deterrent.
“If someone stealing a TV or a laptop in that situation, they’ll likely drop it and leave [through a more accessible/ more public exit], says Jelenewicz.
If the landlord is involved in building or overhaul of a rental property, it would behoove him/her to consult a fireprevention engineer during the design phase to make sure new safety issues aren’t being created, says Jelenewicz. Remember, spending money up-front could save a lot more money down the road.
Resident Feedback - Turning Negatives Into Positives
No matter how expansive a company’s efforts toward improving resident experience may be, resident feedback is the most efficient means of evaluating a community’s overall viability.
Resident feedback is essential to maintaining a viable apartment community. Whether it’s a four-unit apartment building or a 25,000-unit, nationwide portfolio, properly addressing resident concerns should play an integral role in any property manager’s strategic plan.
Unfortunately, while resident feedback is undoubtedly a valuable tool, the vast majority of it is negative because a satisfied resident is typically a quiet resident. The true challenge exists in communicating openly with these residents, addressing their issues and continuously searching for ways to improve the resident experience through information gathering.
Keeping it Personal
While access to new technologies and up-to-date research materials has significantly bolstered property managers’ communication capabilities, the most effective means of resident communication remains one-on-one dialogue.
Despite the expansive size of the community and the potentially high number of resident concerns, taking the time to listen and respond to residents’ issues through interpersonal communication will foster goodwill among the resident population and increase residents’ confidence in their property management firm.
Resident feedback is essential to maintaining a viable apartment community. Whether it’s a four-unit apartment building or a 25,000-unit, nationwide portfolio, properly addressing resident concerns should play an integral role in any property manager’s strategic plan.
Unfortunately, while resident feedback is undoubtedly a valuable tool, the vast majority of it is negative because a satisfied resident is typically a quiet resident. The true challenge exists in communicating openly with these residents, addressing their issues and continuously searching for ways to improve the resident experience through information gathering.
Keeping it Personal
While access to new technologies and up-to-date research materials has significantly bolstered property managers’ communication capabilities, the most effective means of resident communication remains one-on-one dialogue.
Despite the expansive size of the community and the potentially high number of resident concerns, taking the time to listen and respond to residents’ issues through interpersonal communication will foster goodwill among the resident population and increase residents’ confidence in their property management firm.
Thursday, October 2, 2008
Introduction To Absolute Property Management
Our company's mission is to provide the highest quality, cost effective management services your homeowners or condominium association deserves. If you have a new community, we can set you up with everything you will need, without any headaches. We also specialize in assisting condominium and homeowners associations which may be in financial or other difficulty as the result of poor service from a prior management company. That is, in fact, how Absolute Property Management came to exist.
There are many qualities that are important to a company's success. At Absolute Property Management, Inc. we believe the most important is the guiding philosophy that forms the character of our organization. Absolute Property Management Inc. has a written philosophy that guides our organization and our business relationships. Every person in the Absolute Property Management, Inc. organization knows our philosophy and is accountable for insuring that these standards are consistently maintained. We also encourage all of our business partners to hold us accountable for maintaining these standards by informing us if we ever fail to meet these commitments.
HONESTY
Honesty is the foundation for all activities of the Company.
Absolute Property Management, Inc. personnel will be honest and ethical in all of their activities.
Absolute Property Management, Inc. personnel will not lie or distort the truth regardless of the consequences.
Honest mistakes will happen. We will acknowledge a mistake and correct it to the extent possible.
RESPECT
We will show respect for each and every person with whom we come in contact while performing our duties.
CUSTOMER SERVICE
Our commitment is to provide outstanding service to our customers.
We will promptly and courteously respond to all phone calls or other inquiries.
We will meet our commitments and follow through on all of our responsibilities.
We will continually update our knowledge and professional training to maintain the skills necessary for the highest level of service to our clients.
TEAMWORK
We will support and help one another.
ATTITUDE
We will be courteous and friendly at all times.
We will strive to have fun and enjoy our work.The owner and founder of our company was deeply frustrated by the treatment they received as a board member dealing with their association’s management company. They never answered the phone, they let the grounds and facilities deteriorate, they were frivolous with funds, major projects (i.e. hurricane repairs) never got completed, etc.
There are many qualities that are important to a company's success. At Absolute Property Management, Inc. we believe the most important is the guiding philosophy that forms the character of our organization. Absolute Property Management Inc. has a written philosophy that guides our organization and our business relationships. Every person in the Absolute Property Management, Inc. organization knows our philosophy and is accountable for insuring that these standards are consistently maintained. We also encourage all of our business partners to hold us accountable for maintaining these standards by informing us if we ever fail to meet these commitments.
HONESTY
Honesty is the foundation for all activities of the Company.
Absolute Property Management, Inc. personnel will be honest and ethical in all of their activities.
Absolute Property Management, Inc. personnel will not lie or distort the truth regardless of the consequences.
Honest mistakes will happen. We will acknowledge a mistake and correct it to the extent possible.
RESPECT
We will show respect for each and every person with whom we come in contact while performing our duties.
CUSTOMER SERVICE
Our commitment is to provide outstanding service to our customers.
We will promptly and courteously respond to all phone calls or other inquiries.
We will meet our commitments and follow through on all of our responsibilities.
We will continually update our knowledge and professional training to maintain the skills necessary for the highest level of service to our clients.
TEAMWORK
We will support and help one another.
ATTITUDE
We will be courteous and friendly at all times.
We will strive to have fun and enjoy our work.The owner and founder of our company was deeply frustrated by the treatment they received as a board member dealing with their association’s management company. They never answered the phone, they let the grounds and facilities deteriorate, they were frivolous with funds, major projects (i.e. hurricane repairs) never got completed, etc.
541 S. State Rd. 7 #12 • Margate, FL 33068
Phone 954.984.8200 Fax 954.984.4211
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