Q: I want to buy a condo and just received an "offering plan." It looks rather daunting, what’s it all about, and what do I need to know to help me make a decision about purchasing?
A. If you want to buy a coop or condo, you’ll receive an offering plan, which looks like a small telephone book and includes the history of the residence and rules and regulations. The following are key questions -- although not a complete list -- for you and a lawyer specializing in this area of real estate to consider, says Steven Schnall, chair and chief executive of Quontic Bank in Great Neck:
-What percentage of the units are sold and owner occupied? Many banks will not lend on units in a condominium in which the sponsor or developer still owns greater than 30 percent of the units, says Schnall. Also, if more than 30 percent of the units are owned by investors (as opposed to owner occupants), that could also cause difficulty in obtaining financing. The risk? “If one entity owns a high percentage of units and that entity is unable to pay his share of the buildings maintenance/common charges, it could become financially burdensome on the other owners,” says Schnall.
- Has the condominium been pre-approved by Fannie Mae, Freddie Mac or the U.S. Department of Housing and Urban Development? Not all condos obtain pre-approval, but when they do it makes financing, and thus resale, somewhat easier, says Schnall.
- How much is in the reserve fund? Be sure there's an adequate reserve fund to cover current or future capital improvements.
- Are there maintenance arrearages of other owners in the condo?
-Are there tax abatements? “If there is presently a tax abatement, it is important to understand what the full real estate tax will be when the abatement ends and how long the abatement lasts,” advises Schnall.
- Is there Information on lot line windows? If your unit overlooks an adjacent shorter building or vacant lot, the offering plan should contain information which details what, if anything, can legally be built on the adjacent property and what impact that will have on your windows and/or views, warns Schnall.
- How’s the insurance coverage? Be sure that the property not only has adequate insurance for liability and physical damage, but also for theft and employee or agent dishonesty, he says.
- What are other rules and regulations? Look for restrictions on renting out your unit, such as pets, having barbeques, smoking, etc.
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