Musings Of a Real Estate Agent

Living in a condominium offers many advantages to the traveler that an ordinary house doesn’t. While we could go down in great details, I will examine two of the most pressing reasons why a condo is better than a house for travelers.

Reason One - Cost. Unless one has bought a very, very expensive condo, a 2-bedroom condo is much cheaper to run that a comparable house. The costs of everything are less. It costs less to heat in the winter and to cool in the summer. There are many, many things that could go wrong in a house that are just not issues in a condo, such as the roof leaking, the basement flooding, and more. There is no cost to remove snow or mow the grass.

Of course, you are responsible for monthly condominium fees, and the occasional special assessment, but if you have a responsible and dedicated management team, these expenses will be much, much less than that of running a house, even a small one.

If you are retired or living on a fixed income, the lower operating expenses of a condo vis-à-vis a traditional house could mean that you can actually afford one or two MORE trips during the year.

Reason Two - Ease of Escape. Of course, I say that in jest. Your condominium is as much your home as any house could be. However, it is much easier to get away from a condo for short or even extended periods of time than it would be to leave a house. Think about it.

Here is a little checklist of what you should do when leaving a condo:

• Turn off the water
• Make sure you are fully paid up on your fees
• If you’re going to miss the annual meeting (which you shouldn’t) make sure you give your voting proxy to someone you trust.
• Turn down the heat (never completely)
• Cancel your newspaper service
• Bring the plant to the neighbor

Now compare that with leaving a house unattended. If you currently own a house, I KNOW your mind is awash right this moment with insane and expensive lists of things you would need to do or take care of before leaving your home, even for a single week.

Traditional houses and Condominiums both offer advantages and disadvantages. But if you like traveling and the kids are all grown up, then a condo is the right choice for you.

When buying, or looking to buy a condominium, the same rule applies as with all other real estate transactions: there is no rush. Take the time to think before you act.

You dream of moving into a condo because it will simplify your life. You might be right but it does not mean that you should not analyze your needs in a more detached way. If you are an empty nester, you will probably want at least two bedrooms and two bathrooms. Will you be near mass transportation considering the expenses of running a car if not two? How far are you going to be from your workplace?

Do you, or will you, have children living with you? If so, chose an area that is welcoming to children. Every family has specific needs regarding sporting activities, educational requirements or religious communities, etc.

Condo living is gaining in popularity because it suits those who are not willing to spend a lot of time taking care of the lawn or the house and other menials chores that are not universally appreciated. But it is what can be described as ‘proximity living’ and it can have its drawbacks. Make sure that you are familiar with the day to day environment and that you have a ‘feel’ for the locality before making an offer on a property.

Chose a building where the owners have a similar economic profile to yours, since you will have to live and share the costs of up-keep and renovations with the other owners. You don’t want to go on the cheap, but on the other hand you want to be able to live and keep up with your neighbors.

Finally and most importantly, make sure to ask your real estate agent very specific questions regarding this property and the neighborhood. These will be covered in upcoming articles.

1) Don’t compare before buying. Fall in love with the place, and don’t check on your future neighbors. Don’t familiarize yourself with the neighborhood and just feel as if you and your family have been parachuted in this unit.

2) Don’t bother to read the minutes of the annual meeting of the homeowner’s association that the owner will supply to your real estate agent to give you a background of the activities of the condo. Don’t make a distinction between normal and capital expenditures and don’t find out about the importance of a reserve fund.

3) Don’t attend the annual meeting of the condo owners, and don’t find out what’s in store for the next year, or what happened last year. Don’t think of investing a few minutes of your time to study the financial statements of the last 5 years including the notes attached herewith that could shine a bright light on the financial status of the association.

4) Don’t be present at special assessment meetings that are often called to explain in somewhat great details the sums to be levied to pay for unforeseen or badly planned capital expenditures, and don’t ask questions about the extra fees that may be required that can last for many years

5) Don’t get involved on any committee, or on the board of administrators and don’t enquire or try to sense the degree, not of the social skills of the administrators, but of their building-management or business acumen competence

6) Don’t take care of your unit, and plan to leave before major renovations are required, leaving the mess to others. Don’t care if the other unit owners have a similar attitude and believe this “laissez-faire” philosophy.

7) Don’t read the rules and regulations of the homeowner’s association guide and let others worry about the state of the building and its management.

Of all the activities while residing in a condominium, the most important for a unit owner is to attend the annual meeting of the homeowner’s association.

Usually, great care is given by the elected administrators and the professional management firm in preparation of the annual meeting.

A notice is sent weeks prior to the annual meeting, and a condo owner has no excuse not to attend.

The administrator usually the president or the secretary of the association will read the minutes of last year’s meeting and will then present the report on the state of the building .You will learn what happened during the last year, what is planned for the next year, and if need by a five or ten year plan of capital expenditures will be presented to the owners.

The financial statements will then be presented by an outside, independent firm and you will be able to assess the quality of the management of the funds by the administrators and the manager. It is very important to differentiate the usual expenditures that are covered by the income/expenditures report and the status of the capital expenditures that should be dealt with in the most attentive way. The reports from engineers and contractors listing what has to be done on an on-going basis to ensure the worthiness of the building will give the owners   peace-of-mind since it will prevent the unit owners to face unplanned and unforeseen expenses that could prove catastrophic. To be forewarned is to be forearmed. The annual meeting is a unique occasion for unit owners to meet and find out the state of the building and the resources necessary to keep in good shape.    

A condo is in many ways a very large part of an owner’s net worth. To participate and to inquire during the annual meeting about the state of your asset is the most important responsibility for a conscientious and responsible owner.

It is amazing to see how cavalier some people are with decisional processes which can affect their lives and the one’s of their family for decades to come.

It does not take a genius to see how easy it is, in the short term, to become an owner if certain criteria are met—acceptable credit, steady job and a minimum of stability. But those lending institutions and their sales representatives, the latter receiving hefty bonuses when they sign you on, won’t be there when the chicken will comes home to roost, with your financial situation degrading by the hour due to overstepping your financial capacity. Foolish expenses need not jeopardize your well being if you know where to spend your hard earned money. For example, if you have an extraordinary urge to spend, go and buy a whole stack of bags of jelly beans and see if anybody cares. You will fill your spending craving (and maybe another craving as well!) and most importantly you will still be financially sound.

But for God’s sake if you are contemplating buying a large ticket item (and a house qualifies mightily in this category), go about it in a methodological and thoughtful manner and try to minimize the risks as much as you can. Consider giving a sizable down payment and seriously negotiate your mortgage since every point you shave on the interest rate could well mean thousands of dollars in your pocket later on.

Give yourself some breathing space to maneuver and expect every aspect of home ownership to be more expensive than you first thought. It’s in the nature of the beast.

Obviously, there are also great rewards in owning a house. It’s the place where you will live with your family and create unforgettable memories that will last you a lifetime.

Your investment in your house might also be the shrewdest move you’ll ever make and, managed carefully by building equity, will give you a financial nest egg that will be more than handy in your old age!

There is great similarity between capitalism and nature. In both instances it is to try to make the most with the least.

In nature a laying chicken’s job is to gestate an egg and deliver it into the nest. With proper care and nutrition the chicken will fabricate the egg and create the shell that will permit the yoke to be protected. The delivery which can be a daily affair requires a lot of stretching on the part of the chicken, to put it mildly. The egg attains the maximum size for the minimum space. The shell has to be firm enough to sustain the tremendous pressure of delivery but thin enough so if the chick would like to come out eventually it will not be so thick as to be unbreakable.

So much for nature. Now let’s get on with capitalism and real estate. If you are on the lookout to purchase a home in these trying times, great opportunities exists but you have to make sure that you will be able to invest enough equity in your house so you will protect yourself and give yourself breathing room in case something bad happens. Look back at the last 6 months and feel the pain for those who were not prudent and did not possess a strong enough shell.

Those past fabulous offers for buying a property with NO CASH DOWN are seen today as the height of irresponsibility. Only somebody that can prove that he is financially solid can afford to buy something with no down payment. If not, at the first whiff of financial uncertainty, the lending institutions will suddenly, and often without much notice, pounce on the unfortunate lender and demand their pound of flesh. Your home will be left unprotected and your financial shell that should also be your shield will not be solid enough to protect you.

Since we have the privilege of living in a free country and not burdened by the thought of being subjected to totalitarian authorities, we are faced with the direct consequences of our decisions.

For real estate, it means that we can purchase from a great variety of offerings that the market offers. Be it townhouses, condominiums, stand alones, rentals, etc. There such a wide range of choice that one can easily be confused.

But the basic premise should be: what do you need and how much can you afford to pay. Mind you that it’s important to view your choice in the perspective of many years, since on the average a homeowner might live 13 years in his residential unit.

Many can consider ‘buying a little too much house’ an acceptable risk. After all, a house is not only a shelter against the elements. It is a reflection of who we are, a way to show what we represent in society. It is very often considered a prized possession that reflects on our sense of importance. If we can afford such vanity, in keeping with the Joneses, well, why not? It might mean that you will be working very hard and sacrifice on other aspects of your life to dwell in a house that is a little too big for your britches.

Of course, in life we are often forced to make such choices A  bad real estate decision taken in your 30’s or 40’s can always be patched up later on, since time is still available (to most of us, hopefully). But a risky decision taken when you are in your 60’s can have disastrous consequences that could well be irreversible and that will cause crippling financial pains up to your grave. Always remember that it is always easier to buy than to sell. And real estate is a product that often needs time. And if, because of a desire and need to get out of a squeeze situation, time is not on your side, the losses that would have to be absorbed might be most painful.

The tremendous advantage that we have in living in a free society entails awesome personal responsibilities regarding how we behave in life. Getting involved in a real estate transaction is an important financial decision. Think before you act and don’t gamble years of your life on some rash and strictly emotional decisions. If you want to act that way, buy lottery tickets and see how lucky you are.

You are actively looking to buy a property. You have identified an area that will be suitable for you and your family for many years to come. You have the financial situation well in hand. Your budget for purchasing the property and a certain amount of renovating is there.

You need a good agent, who will make your dream house come true for you.

Where to find such a bird?

It is not the quantity that is lacking. The number of agents active and licensed has more than doubled during the last five years. Of course, the economic boom and the construction of thousands of units coupled with the great mobility of our citizens have permitted the real estate industry to grow beyond anyone’s imagination.

But all agents are not the same, like no two dentists work in the same manner. This is not to say that agents should be compared to dentists. No, real estate agents are not as appreciated as a group by the public and barely claw up the scale value a little bit above politicians and used-car salesmen.

It is thus imperative that you take your time before choosing an agent.

One way to start is to go into a neighborhood that could be attractive to you and search for ‘sold’ signs on the type of properties that would seem desirable to you. Call the agent that had the listing and ask him if he has other similar properties in this sector of town.

You can also inquire from friends or colleagues for the name of agents who performed well for them.

An agent usually works strictly on commission and has to apportion his time to be as productive as possible. If you give him relatively clear parameters to deal with, he won’t be chasing blindly across town to try to satisfy you if you don’t know what you want.

Dealing with an agent is a two way street; i.e. you have got to help him help you. But as President Reagan once told the Soviet leader regarding the decrease in nuclear missiles: ”Trust, But Verify”. So keep your agent under close scrutiny and help him find you the home that you want and that you need.

What dreadful words for anybody to hear, but it is the sad reality in many communities across America at this very moment.

The sub-prime fiasco has generated a torrent of negative impulses in the real estate market, and one has to be most attentive to what is happening in our country in order to survive the crucial next few months. A recession is predicted, and the sudden slowing down of the economy warrants your full attention, and strong action must be taken right away to prevent a tragedy that could haunt you for years to come. Job creation is disappearing, credit is tightening, foreclosures are at an all time high and consumer confidence is declining. All the elements are in the air for a perfect financial storm.

As a defensive measure, make a cold eye assessment of your present financial situation.

List the various sources of income that you can obtain and also list the obligations that you have to meet on a monthly basis. Get rid rapidly of any expenses that are deemed non-essential and if you have a nest-egg, protect it like life itself.

If you think that you will have difficulty in making your monthly mortgage payment, grab the bull by the horns and communicate directly with your loan officer. Do some preventive work by telling him first hand, eye-ball to eye-ball, that you might find it tough to meet your obligations but you are willing to sit down with him as soon as he is available to study ways that will give you more flexibility, and will also reassure him on your good-will and serious attitude regarding your obligation.

Motivate yourself and members of your household on the necessity to generate more income and keep on rowing like crazy to secure your home and the roof over your head. The value of your property might go down somewhat but it is meaningless if you manage to keep it by meeting your obligations. Over time the storm will have passed and the long term trend is always upward in a strong country such as ours.

The last 50 years have brought forth a true revolution in the way people see their dwelling.

While most big cities have been offering the possibility of living, sometimes in grand luxury in apartments called COOP the bread and butter offering in residential real estate was the basic single-family house.

But a few decades past and due mainly from the demographic of the city and the search for better utilization of the expensive real estate related to downtown locations, the industry borrowed the concept from Europe and started to build condominiums. They came in all sizes and all price range, but were slow to make substantive inroads in the market. The Real Estate Agents were not very familiar with this concept, and as usual, the different levels of Government were not very prompt in dealing with this new reality by adopting Laws and Regulations specifically tailored to condos.

In general, the busy lifestyle of city dwellers warrants a close look at condo living. Even though the ownership of the unit is clearly established, condo owners have substantially less hands-on responsibility than owners of single houses as regard to upkeep and capital expenditures. A condo association bonds the condo owners together and the elected administrators see to it that the condos are maintained and looked after. In certain circumstances, the condo owners can even get the exclusive use of a garden on the ground floor and it will be as close to a regular house as one can get.

Bur usually, the space available in a condo is more restricted than in a house. There are no equivalent to huge walk-in closets and a full basement to ‘store’ all sorts of goods that could end up being left there for years and years.

There is greater proximity with neighbors and condo living might not be for everybody, especially at the early stage of matrimony, when child rearing sometimes warrant available private outside space for the kids to go and play in a more traditional back yard.

But once the children are out on their own it is sometimes proper to question the need to keep such an elaborate fully equipped house that used to shelter five or six persons.

Condo living has been a God-sent solution for many aging baby boomers. They are not, as the classic expression says, “Prisoners of their possessions.” The condo owner has a greater control on his time and greater sense of freedom to ‘lock-up and go’ compare to the owner of a traditional house.

Want to go on a 3 week cruise? Simply close the water valve into the condo, disconnect the water heater and voilà, you’re ready to go. Same procedure applies if you want to go spend 4 months in Arizona. It does greatly simplify one’s life.

But, as usual there are a few caveats; it behooves you to chose a condo where the colleagues/owners have a sense of responsibility and view their living there as a oasis of tranquility and good behavior.

The condo owners are all in this project together and the decision to appoint responsible and competent administrators will go a long way to prevent complications that can be both highly annoying, and often very expensive.