Co-op Quick Fix: Changing the Flip Tax in an HDFC building

We were recently discussing an upcoming maintenance increase. In truth, the maintenance increase was no longer part of the discussion. An increase was necessary, end of story. What we were discussing in our meeting was how well (or not) the rest of the co-op were going to take this increase.

“They shouldn’t complain,” said one board member. “They are living in apartments that are worth so much more than what they paid for them! The maintenance is so much lower than in regular co-ops!”

This is a case when two truths make a lie: We have indeed all paid way below market rate for our amazing, spacious, pre-war apartments. And it’s true the maintenance is here is much lower than in regular co-ops. But in reality: an apartment is only worth what somebody is willing to pay for it. And our maintenance is low because the income restrictions that have allowed us to buy here dictate how much we can afford in monthly living expenses.

Still, the increase will and must happen. It’s reasonable. But it was a signal of changing times. The co-op is starting to look forward, to the next generation of residents who must inherit a sound building, with sound financials. I mention this because, before we got to the building three years ago, the maintenance hadn’t been increased in nearly a decade. (Or maybe seven years). Meanwhile, oil and water rates have gone up, the building continues to take the wear and tear of life, and old residents have died leaving several embattled estate situations in the co-op.

Apropos of the flip tax: The building has survived all these tumultuous times by levying a hefty 45% flip tax on the profit of any sale of an apartment. Keep in mind: these apartments were sold to the shareholders for $250. So, 45% of your net profit going to the building is quite substantial. And justified, I would add.

Now, the aforementioned change in our community has brought up the question: should we lower the flip tax? A flip tax is set by the co-op, after all. We can change it by resolution. Unless you apply for an 8A loan and have a regulatory agreement hoisted upon you by HPD, dictating a 30-70 flip tax.

That was the quick fix, in our case. For the building, it’s not great. A lower flip tax means imagesless funds to replenish our reserves. And also, the difference may just be enough to encourage buyers who aren’t really sincere about living in an HDFC, but like the prices enough to go for a 30% loss on their profit. It may encourage people in the building to sell up and leave. Worse, it may encourage MANY people the sell and leave.

But maybe that’s where are headed anyway. If the future is all about mobility, then a coop like ours needs to remain agile.

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How to buy a HDFC Apartment: Are you qualified?

Yeah, maybe.

People who read the New York Times while also being interested in buying an apartment in Harlem, probably read their recent article on how Sugar Hill is still sweet and affordable, bla, bla, bla. While you need to do nothing more than check the NYT listings for available HDFC co-op units, you may need some help in figuring out if you qualify for one.

First, basics: how do you know a listing is an HDFC. Well, is the price ridiculously low for a NYC apartment? That’s your first clue. Your second will be toward the end of the listing where it says: this is in a HDFC building that has the following income restrictions…

15__Qualifying_YourselfWhile different HDFC buildings have different rules (and HDFC rules are just that: rules, not laws set by the city) most, I believe, will look at your current income, as well as the past two years tax returns to determine if you fall within the income restrictions. Few listings will list the minimum requirement, but it is entirely possible (though rare) that you be rejected for having a too-low income. Why would somebody without income even consider buying an apartment? Why, if they have cash, of course! Maybe you won the lottery, maybe you inherited or were gifted money. Or maybe you are retired and live on a fixed income but have a ton of savings.

But in that case, more often than not, accepting your offer will be at the building’s discretion. If you have lots of cash at your disposal through family connections, I personally don’t think you should be allowed to buy an HDFC because your situation is not what the program was intended to accommodate. But different HDFC’s will feel differently about that.

If an HDFC is requiring “ALL CASH DEALS ONLY” (as many listings pronounce) then that HDFC will likely welcome a trust fund baby. On the other hand, requiring an all cash deal may be due to weak or even distressed building financials – do you really want to buy into a distressed building? Don’t say ‘yes’ right away. Here’s what can happen to distressed HDFC’s. Clue: they can be foreclosed and turned into rentals.

When you go into an open house, I suggest asking the broker right away if a building can get financing from a bank. If the answer is yes, that’s good.

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Back to Business: How to ascertain the health of your building and co-op board

It’s forever and half since my last post and maybe that’s just as well. Because since I last posted, I’ve learned tons more about lotsa stuff. You guys: our pre-war, HDFC, Harlem co-op life Just Got Real.

For one, I joined two committees in our building: the beautification committee and the tenant selection committee. That was fun for a while. Now I’ve left the beautification committee because I’ve become a board member.


Guys: if you want to know what’s going on in your building: join a committee or the board. But just be aware that once you do join a committee, that’s it. The curtains are lifted for you, and you’ll start seeing all the little behind-the-scenes crap that nobody has time for. Like: board members who don’t get along with each other. Projects that have been on the books for ages and still haven’t been tackled. And also: in what ways your building is – if not entirely broken – bent, when it comes to its management.

So, of course, before buying any co-op, you must have your lawyer examine the minutes and the financials of the building. Make sure there aren’t any red flags. Your lawyer will check the financial reserves to make sure the building is financially sound. And they will scrutinize the minutes to see if there are any peculiarities. (For example: any lawsuits? Any incidences of  tenants violating house rules and how the board dealt with them? What about unapproved renovations? Any weird new house rules?)

But there is another aspect of the building’s health that I think more people need to consider when buying.  We certainly overlooked it. Didn’t even think to ask. I’m talking about how the Board of Directors of the co-op conduct business.

First: How long have the various board members been serving?

I didn’t know this, but ideally, board members should only serve in any position for a few years only. Two, maybe three. It’s generally not good for a building for only a handful of people to always be in power. You know what they say about the corrupting power of, well, power. I don’t like to think that our board makes corrupt dealings financially, but there needs to be a healthy turnover to get new ideas and energy. I’ve heard this sentiment uttered by several people in the building. Our president has been at it so long, she no longer feels the need to explain all of her actions. Bi-annual meetings are moved without consulting anybody for example. There’s always a good reason, I hear. But there’s never a discussion or push back.

More importantly, in the case of our building, low turnover also shows lack of interest Funniest_Memes_meeting-at-930-am_797from the other shareholders. That’s why the president has been in this position for so long in the first place : she keeps getting elected. Elections barely make quorum in this building, too. People. Aren’t. Engaged. Nobody cares to run and get stuck into the nitty gritty. They prefer to act like rental tenants instead of shareholder tenants, and just want to be lead by the hand. Let somebody else look into important manners, make decisions, and carry the responsibility. When I got elected I was thrilled and felt very accepted by the building (or at least by those who bothered to vote). But one guy who ran (the first “new guy” in AGES to run for the board) did not get elected. People don’t want new things. That may require them to think about the state of affairs in the building and consider if a change is in order. And too many are just not willing to do that. So, the board remains largely as it has for several years.

imagesExcept now I’m here too and I truly hope to make some kind of impact. While I’m really looking forward to doing some work in this capacity, however, I’m afraid I’m first going to have to work on bringing out my political animal side.

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There is a God. Otherwise, the airlines would be F****d.

God is real, absolutely real. You see, my flight out of Las Vegas to NYC was cancelled by an act of God. I didn’t imagine that, it really was cancelled. I’m not getting a refund, reimbursement or any return – neither in kind nor in kindness – from Delta Airlines. All because the Nor’easter snowstorm that hit NYC was not their fault, but an act of God. And who can argue with God and his great plan?

If the Nor’easter Snowstorm was a non-accidental, divine-mystery, God’s-will type plan, then I can respect that. At least God has a plan. Delta sure doesn’t. They overbook flights. And when those overbooked flights were cancelled, and everybody came rushing to their website to find out what gives, they bungled that, too.

Clicking “Find Other Flights” just lead to “An Error Has Occurred, Try Again”. “Try Again” lead to “An Error has Occured, Contact Us.”

“Contact Us” lead to a page wherein was listed all the numbers for customer service in various territories. Under “North America” we had the following: Haiti, Mexico, Dominican Republic… No United States or Canada. They pulled the number? Doesn’t matter because their office hours are Monday to Friday from 8am- 6pm or something like that, which isn’t very helpful when your flight has been cancelled at 8pm on a Friday.

Dig around the website and finally find a number for Customer Care (like they do) in the United States. “All representatives are busy.” You can get them to call you back instead of waiting on the phone for “a wait time of greater that Three Hours.” So, okay. They’ll call you back in “greater than Three hours.”

Meanwhile, the website says that you must schedule your flights before January 8. Further down that page it says extra fees or the difference in fares may be charged if you fly on or before January 9. Hm…what?

Twitter! Online, apparently, people have taken to twitter. @DeltaAssist, the hardest Screen Shot 2014-01-04 at 4.52.54 PMworking person in Airline Biz has started taking people’s ticket confirmation numbers via DM (direct message) and checking up on their bookings. Nice. But I have to follow them first in order to DM. Argh. Will definitely UNFOLLOW as soon as I’m back home.

Back alley way: I call technical support. And why not? After all, this error message I get when trying to find a flight online is technically a technical glitsch. (Eventhough I know it’s not. It’s on purpose. Just like they pulled the U.S. customer care number. I mean, how can “North America” not include the U.S. or Canada?)

Technical support! After 15 minutes in the phone queue,  I’m finally through. They don’t even blink. Don’t even ask if I”m having technical difficulties. I say “I’m calling because my flight is cancelled and I can’t find a flight online.” She asks for my  confirmation number and proceeds to find me one fortnight journey on Delta after another. Finally I just agree to fly out three days later, on a direct flight.

I’m lucky. I work from home. Right now, Las Vegas is home. 1525075_579740508776772_2076064054_n



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How To Buy A HDFC Apartment, Or: 3 Major Misconceptions

“How much did you pay for this apartment?” It’s the question we get most often. I can’t count the number of times we’ve heard that questions – mainly because people ask it so many times in a single conversation. Like so:
“How much did you pay for this apartment?”
“$ XX”
“I’m sorry, HOW much?”
The person mouths the number to themselves, trying to visualize the digits, then: “You mean ‘million’.”
“Ha! Nope.”
“So, how much, again?”

Like that.
The second most-asked question then is usually: How did you find this apartment? And P1030546usually, they are also surprised to hear that we found it the way anybody finds an apartment: through the internet. Here are some misconceptions about buying an HDFC that I think are born out of ignorance, snobbery, and racism.
1) HDFCs are for poor people and poor people are all minorities, and minorities are unruly, loud, violent. Basically, you’re going to be living in the project.

Don’t be silly! That’s just your ignorance talking. Or your racism. Something. We are just like any other co-op in Manhattan. We are a community, we like our neighbors (some of them). We have shareholder meetings and we have barbeques in the summer.

2) They are a bad investment because you’ll never make a killing on the re-sale. The apartment isn’t really the investment here… it’s the HDFC’s that are investing in YOU as an individual. Letting you buy a piece a home in this city that you can actually, easily afford is an investment in you as a person. They expect their investment in you to pay dividends. That’s why there are qualification guidelines. Duh.

3) Most HDFC’s don’t really care about income guidelines or qualifying their buyers. They just say that to get tax breaks. Um, no. I’m not saying those don’t exist. But such a crooked HDFC is comprised of crooked board members and you should ask yourself if you should be buying in a coop that is run by crooks, if it’s being “run” at all.

And as somebody who has not only a vested interest in keeping our coop tidy but also is a position now to review any crooked application, I can say that I take application very, very seriously. So be warned.


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How To Deal With A Coop Board: What came first? the Chicken or the Coop?

I was scared of our first board interview (there were two interviews in all). From our search for an apartment to buy, I knew – just knew – that we were the creme de la creme of buyers. I mean, I didn’t meet all the buyers out there, and I’m sure they were lovely. But I knew what we were bringing to the table: security.
Again, all the buyers out there, I’m sure you all are great. But also knew that the board had rejected co-opboard071210_560somebody before they let us offer on the apartment we ultimately bought. So, it stands to reason that somebody out there was simply not as good as we were. We don’t know anybody else, but we knew ourselves: We had good credit, and we were only looking at apartments in the lower range of our budget. We knew we could afford the monthly expenses and we knew we could afford the improvements the apartment needed. What’s more, we knew we were ready to buy: financially and emotionally mature.

One potentially dicey moment: The question of a visa. As an expat (an actual one, not just spiritually, like my third culture kid self) there was the question of my husband’s ability to stay in the country.

They put the question to my husband, who is the primary breadwinner: What happens if you lose your job?
My gallant man immediately launched into a speech about how he’s never met a more resourceful, talented, smart cookie as me. He knows, said he, that I could support us. He knows I will always be able to earn more money – my money earning abilities know no bounds!!! He has no fear WHAT.SO.EVER that…
“…Um, honey… I think they just mean, what happens if you lose your visa from work…”
“Right!” said the board member “It’s just a question of your visa status.”
“Oh, right. well, we’re married, so my visa isn’t tied to my work. I’m a permanent resident, green card holder.”
And that was that. But good thing they know they have a solid couple on their hands.

Onward! More of our virtues: We knew we’d be good, non-nosey, non-loud, considerate neighbors. One of the ladies who was present at our first interview is our next door neighbor. I remember in the interview, she had been quiet the whole time. They had been asking us questions, getting to know us. And vice versa. Then they asked us, “Is there anything else you would like to ask us?”
And we put the question back to them: “Is there anything else you would like us to know?”
And Mrs. Barker raised her head (I thought she had been napping, actually) and said: “There are a lot of old people on your floor.”
In other words (well, then she ended up saying these words a few minutes later): We don’t like loud sounds.
No problem. Neither do we. See what I mean? We weren’t pretending one thing in the interview. We were a seriously good fit!
After that, the interview was reversed. They stated telling us about aaaalll their committees. The beautification committee, the pre-selection committee (for potential residents), the christmas parties they have in the lobby, and of course, serving on the board.
It became clear to me: They want us. They need us. They need new blood in the building and they need young energy to carry on caring for the building. I knew we could do this community some good, even just be being the kind of neighbors we were. And they knew it, too. I very quickly relaxed. That same afternoon, the broker for the apartment called us and said the board had declared us the perfect fit and we should proceed with the contracts.
A good thing we all knew this about each other, because what followed was seven months of due diligence and financing/ underwriting H-E-Double Hockey Sticks.

Chicken_LittleBut if all worked out and here we are today, happy and healthy! But now, chicken little sees the sky falling again.. After a year of living here, I’m afraid – very afraid – that the time will soon come that I will be called upon to serve…on the board.

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How To Get A Real Estate (Closing) Lawyer in NYC

I often get asked how I found the real estate lawyer my husband and I used for the  imagespurchase of our apartment. Before I get into that let me just make clear that – at least in New York City – you will need a lawyer to follow through the purchase of an apartment. (In our case, a coop.) So any imaginings you may have had of saving yourself the money and just reading up on things yourself can be put to rest. Get a lawyer. If, after you’ve exhausted all your personal resources, you can’t get a decent referral to a good, cheap lawyer, go it alone. There are a lot of guides out there on how to find an attorney. Use them. This is how I found ours:

1) Go online. Streeteasy, Trulia, BrickUnderground. Sites like these are a repository of not only information, but experience. I don’t mean just that people with experience are online. People who are or have experienced what you are or will go through are there. You know how they say there are no original ideas? Yeah. That. Many people have already asked your questions for you and many people may have already answered. If you’re looking for a lawyer recommendation, somebody will have recommended one.

Find a few recommendations online make sense for your situation: They must be based in New York City (or whatever area you are buying in). They must have experience with your particular type of purchase (co-op, condo, loft, HDFC, etc.) Your loan officer (if you go directly to a lender) or real estate broker will also be able to recommend somebody. But do not let yourself be pushed into using them.

girl-talking 2) Speak with them. Call them all up and speak to all of them. Yes, all of them. Even if you think you’ve found “the one” on the first call. Consider the time you spend on the phone to be a learning experience that you have to see through to the end. Be sure to notice their phone manner. How quickly they return your call after you leave a message is already noteworthy. How confident are they (“oh, I’m sure we can figure this out together” does not cut it.) And are they forthcoming with information like: their fee structure, the general timeline of a purchase, etc. I personally liked how willing my lawyer was to share his knowledge with me before we even officially hired him. He was not pushy at all and spoke with me at length, answering my questions as if I were already his client. At the end of our conversation (during which he laid out his fee structure very clearly) he merely said “good luck with the search, and let me know if you have more question, let me know if you’d like me to work with you.”

Be sure you are comfortable with how responsive they are to you. You must have access to your lawyer.

3) Pay them a deposit once they actually start working. Your lawyer is not your real estate broker. Unless they feel like it, they won’t be giving you advice every step of the way through negotiation. That being said, if you can’t ask them simple questions via email before you go to contracts (the official time to bring in lawyers) they are probably not the lawyer for you (you first-time buyer, you). But our lawyer only officially became so at contract signing. We only ever paid him a small deposit when we went to sign contracts. The rest of the money was due at closing.

It goes without saying that a recommendation for a lawyer from a friend or acquaintance is great. But many of us don’t have any of those. Do not despair. The internet is there for us all.

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