When I’m pitching ideas to news outlets…
the advice that I’ve been is that they want trends. For something to be considered a trend, I had better find at least three examples. It seems safer to use the rule of three (which also applies to comedy) for the confirmation of a trend, so I have no issue with it. When I find three examples within my own business, not just from my conversations with colleagues and other agents- then it’s most certainly a trend worth discussing.
Let’s talk about the surprises that sellers are facing when they go to sell right now. They may be surprised with the interest from the market to their apartment. They may be surprised how long co-op and condo boards, and managing agents, especially- are taking to get deals closed. We have one deal that’s already board approved- and it had already taken nearly two months to get a closing scheduled. This is madness!
Both of these examples I would group in the annoying-but-tolerable category. One is simply a pleasant surprise, when it’s easier to sell your apartment. The second assumes that you have a buyer for your apartment- and it’s just taking a long time. Again, fun! Manageable.
But the trend I’m seeing is definitely not a joyride. We’re seeing buyers all over the place uncover construction permits that weren’t closed by the contractors or architects who did residential renovation. This seems to be the result of a new, more comprehensive digital lookup system that the Department of Buildings has implemented. While this may seem like a wonderful transparency- and something of benefit, it has created mayhem in residential real estate deals. I’ll give you some examples!
Example 1- Longstanding Condo Owner Who Bought in 2000
We represented a seller who was the first owner of a 5-room Prewar condo the Upper West Side. It had converted from a rental building in 2000. Over the years, my client served on the condo board, had great relationships with the original developer, the managing agent for the building, for over twenty years! During that time, they refinanced their apartment three times, riding the mortgage wave to the bottom. Now, I met with them, ready to set sail towards their new home upstate.
Little did they know, or any of the banks who had held mortgages on their home, that there remained an open permit from before they bought, from 1999. Their unit, which was the original configuration from this building built in the 1910’s, had been cut up into two smaller units- then reunited when sold in 2000. And somehow, this permit which shows the recombination had never been closed.
What did it take for our deal to close? First, the seller had to agree to hold $50,000 in escrow after closing, were the permit not closed by the time they got to closing for the sale. Second, the sellers, who just happened to be involved in real estate, leveraged every relationship they had with the Department of Buildings, the managing agent, the original developer, and a really savvy expediter (the people who in theory speed things along at the Department of Buildings). They managed to get the permit closed in record time, closing the sale before the end of 2021. For most sellers, this would have taken at least another three months. Crisis averted, barely, but very luckily.
Example 2 – Seller Who Did a Kitchen Renovation in 2005
Here’s the picture. Gorgeous, high floor three bedroom condo with an open kitchen, and even more open views of the Manhattan Skyline and the Hudson River. Our buyers are delighted to have an accepted offer. They are ready to sign contracts, and then? Their attorney discovers another open permit. A kitchen renovation that was done in 2005 was never closed. That is, it was never inspected and signed off by the city departments that do this- the Department of Buildings, primarily. What are the ramifications of this? My buyers were all-cash. If they didn’t care, they could have closed with an open permit. However, if they ever sell to someone who is financing, their lender would certainly care! The bank doesn’t want the risk that construction might not have been done to code. After all, it is their money they’re lending for the purchase.
So, my buyers demand that the permit is closed prior to closing. And fast forward, three months later, we’re still awaiting the final signoff. Not pretty. My buyers are in a friend’s house upstate. Thank goodness for good friends, and retirement. Otherwise, there would have been quite a battle.
Example 3 – Seller Who Did a Renovation 5 Years Ago!
These poor sellers. After waiting six months to find qualified buyers for their gorgeous three-bedroom home- that just happens to be on the third floor of a walkup, and therefore kryptonite to many wary purchasers- the buyers’ attorney discovers yet another open permit. This time, the architect of record had not only forgotten to close the permit, but neglected to file a permit in the first place for the gas work in the unit. Short of ripping out their entire gorgeous kitchen, they opted to replace the gas cooktop with an induction (electric) cooktop. Now, this buyer is satisfied, but would you be? And we still aren’t sure if this permit is going to take three weeks, or three months, to get closed. A whole school year will have passed before this apartment gets sold. Stay tuned for more…
If you are doing a renovation…
or you did one a while ago- Take note!!! Be careful to ensure that every t is crossed, every i dotted, and by the love of God, make sure your architect sees the renovation through to the very end. If you just completed a renovation, or did so within the past 5-10 years, engage your architect or competent attorney to confirm that all permits are closed. Lastly, if you have a combined apartment, be sure to speak to a mortgage specialist to find out if you might want to pursue getting your stocks & leases combined by the coop.
None of this is easy, none for the faint of heart, but each wrinkle has the potential of derailing your sale, should you not address it in a timely fashion!
Don’t say I didn’t warn you- S