Red Flags When Buying an Apartment in NYC
As you can well imagine, there are certain red flags to look out for when buying an apartment in NYC. While everyone’s risk tolerance is different, here are a few key things to watch out for once you’ve honed in on a place you think you want.
Big Maintenance Increases
Maintenance increases are fairly common. And according to top real estate attorney Michael Zadjelovich of Weidenbaum and Harari LLP, it’s fairly typical to see increases up to 5% each year. It’s also not unusual to see a large jump every once in a while, especially if property taxes and other building expenses have increased significantly.
But it’s a red flag if the building has seen big increases several years in a row or with some frequency. That could signal some financial issues and more maintenance increases in an owner’s future.
Banks really don’t like to see pending litigation in buildings. Why? Because lawsuits can be very expensive. And that could lead to depletion of the building’s reserve fund or increases in monthly charges.
Not all litigation is equal, however. Some kinds of litigation won’t scare banks off, especially if it’s a type of case that’s likely to be covered by insurance, according to Zadjelovich. But if it’s not, tread carefully! And make sure you understand the risks you may be taking on if you decide to move forward. Make sure you speak to your banker as a lender’s tolerance for litigation can vary from bank to bank.
Low Reserve Funds
All buildings should have a reserve fund – a stash of cash that they can dip into to take care of expenses, repairs and updates, especially unanticipated ones.
But if a building doesn’t have enough reserve funds to operate for more than a few months, that’s not a great sign. It could signal that an assessment or maintenance hike might be in your future.
This one probably doesn’t need much of an explanation. No one wants to live in a place with known pest issues!
But having said that, it’s important to consider what kinds of extermination and prevention measures are in place. If the building is handling it well and consistently, and there haven’t been any recent reports of the issue, then the situation might be acceptable.
It’s important to keep in mind that we DO live in a city that’s populated with way more than just us humans. So it’s very likely that an unwelcome critter or two may make an appearance in your home at some point.
However, if a building has consistent pest issues, don’t walk – RUN AWAY.
If a building has a number of violations with the department of buildings (or a few major violations), then you should definitely reconsider your decision. Even if a building is well intentioned in getting the issues resolved, doing so could prove costly. And that could lead to yet another assessment or maintenance increase.
How to Get in the Know
Now you might be wondering, how on earth am I supposed to even find out most of this information?
Luckily, you don’t have to do it yourself. That’s what your attorney is for! During due diligence (conducted prior to the signing of the contract), they’ll be on the lookout for these red flags so that you can know if a place is really the NYC apartment of your dreams. Or a nightmare that’s best avoided 🙂