Buying apartment in house without money reserve

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Hi,

 

I'm currently negotiating for an apartment which is very nice and in a good location, but the building has no reserve funds whatsoever after an urgent repair of the heating system. Therefore I'm curious to hear what experiences people have had from buying into similar situations? What amounts can I be expected to suddenly cough up in worst case scenarios? Of course I understand that amounts depends on what needs to done for each individual building, I'm just trying to get a sense of what this might entail.

 

Secondly the building has a majority owner that owns around 40% of the place. I'd also love to hear about your experiences of such situations, since I can see that it's not optimal.

 

Thanks in advance!

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I actually read here on TT about a couple who bought a condo and were faced with a 10,000€ bill in the first year because something major had to be done.  Have you asked what kind of major things were done in recent years and what might be next? Obviously they already upgraded the heating but if you know what else was already done recently, it might give you an idea what the risk is for the next years.

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Wow, that's hefty! But my offer is substantially lower than the asking price because of this, and the difference would almost cover such a situation aswell. Since the makler has not been very forthcoming regarding the documents and seems a little clueless sometimes, I have contacted the verwaltungen and am awaiting a response.

 

Thanks for your input!

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16 minutes ago, LeonG said:

I actually read here on TT about a couple who bought a condo and were faced with a 10,000€ bill in the first year because something major had to be done. 

 

That happens quite often after buying an older property - I've seen that a lot. No reserves left is basically a guarantee you will be facing not one, but several Sonderumlagen (=additional HOA payments for repairs) in the next years.

 I would recommend to take the price you can afford, and offer not 10,000, but more like 20,000 less.

And then keep the difference as a reserve in a different bank account! You will need it!

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6 minutes ago, Metall said:

 

That happens quite often after buying an older property - I've seen that a lot. No reserves left is basically a guarantee you will be facing not one, but several Sonderumlagen (=additional HOA payments for repairs) in the next years.

 I would recommend to take the price you can afford, and offer not 10,000, but more like 20,000 less.

And then keep the difference as a reserve in a different bank account! You will need it!

 

Really, that much?! Ok, thanks for the heads up! I'm curious how you know this? I'm not questioning your trustworthiness, just wondering :)

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I saw this exact case happen to a good friend.

He bought an apartment several years ago (built in the 60s), even with some reserve left.

Fortunately, he had an appraisal done (a Gutachten), and was informed a number of major repairs were coming up (roof, garage, insulation, windows etc.), so he brought the price down by 30,000. He needed most of that in the next five years. ;)

In a nutshell, try getting a Gutachten for that apartment!

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Allright, it feels more and more to me that I probably should let this one go :) I really appreciate the info!

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Buying a nice apartment in a good location - for me nice means the building is not older than 20 years - will easily cost you 200000 - 300000€.

So, 10000 - 30000€ are peanuts. If you built a house you are easily faced with additional costs in the same ballpark.

If you buy something older -an apartment in a house built in the 60's-  you don't need a appraisor. For me it would be clear that roof, heating, windows, insulation and the bathrooms will need a repair in the near future. Put 50000 to 100000€ aside.

..and you will still live in an old house with bad noise insulation etc.

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Oh my, 

8 hours ago, Metall said:

I saw this exact case happen to a good friend.

He bought an apartment several years ago (built in the 60s), even with some reserve left.

Fortunately, he had an appraisal done (a Gutachten), and was informed a number of major repairs were coming up (roof, garage, insulation, windows etc.), so he brought the price down by 30,000. He needed most of that in the next five years. ;)

In a nutshell, try getting a Gutachten for that apartment!

Oh god, when we bought our first place 12 years ago I didn't know my arse from my nose. We bought an un-renovated place in a 1960s building that had been upgraded. It was cheap and a good location but we totally lucked out as the place was very well managed with a decent reserve over the past 12 years the management company has a done a decent job of keeping the NK reasonable and encouraging the owners to upgrade the building

 

 

@Metall   Sonderumlagen or special assessment, thanks been wondering what the word was in German. Next week we have our annual meeting and they will be discussing putting new balconies, so I will "listen" for this word!

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I too have seen people come undone by buying a house / apartment

and not having any savings left over.

 

Apart from all the regular bills that the current owners may show you,

there is the stuff that an appraisor or building surveyor may spot.

ie stuff that is broken now and needs immediate attention as well as stuff that is "on the way"

and will eat your savings in the first 5 years.

 

And just to hammer the last nail into the coffin...

Look down the street ( and check the local Rathaus) if there any plans

to renovate the street drains / road "improvements" in the planning.

 

We got hit for (Factor X * metres of street frontage)  and had a bill of € 10.000 

when the council stuck every one on the street for their "share" of the street drains bill.

 

For all future property owners - make sure  you have your own reserve stashed

and don't try the old UK plan of a 105% mortgage and winging it....

 

You need to be able to sleep at night

and not work at 3 jobs just for the banks :ph34r:

 

 

 

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The only way to really tell is to request and examine the minutes from the last 3-4 owners' association meetings - preferably more. That will indicate whether there's a big repair backlog that the owners have been putting off. Major potential items are facade renovation (which might involve adding extra insulation, if the building has not been retrofitted for energy efficiency already), windows, and the roof.

 

If any of these elements have not been renovated in the last 15-20 years (25-30 for the roof), something will be due sooner than the maintenance fund can be replenished.

 

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25 minutes ago, El Jeffo said:

The only way to really tell is to request and examine the minutes from the last 3-4 owners' association meetings. That will indicate whether there's a big repair backlog that the owners have been putting off. Major potential items are facade renovation (which might involve adding extra insulation, if the building has not been retrofitted for energy efficiency already), windows, and the roof.

 

If any of these elements have not been renovated in the last 15-20 years (25-30 for the roof), something will be due sooner than the maintenance fund can be replenished.

 

I absolutely agree with reading HOA meeting minutes! You can request that the seller provide them to you BEFORE putting in an offer. This is common in Germany during a property sale, don't let the Makler tell you otherwise. :D 

BUT, also get that independent appraisal done immediately! It might cost you 400 Euros, but the clarity is worth thousands. Many.

My friend used a TÜV Gutachter, worked very well. The guy even came along and talked to the seller who was being unrealistic - not so much afterwards.

 

Let us know how things go!

 

 

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The reserve will have to be replenished either thru a special assessment or an increase in HOA... I've seen both.  The board could have considered taking out a loan or line of credit instead of spending the entire reserve and paid it back with an increase in HOA.  In your case, they did not do this.  As mentioned, there may be other, high cost work to be done and you must find out if that is the case, before making an offer.

How many units are in the building?

Is there any limits on the number of rentals?

Are any owners "past due" in their payments?

40% is "major", but not "majority".  Depending on the minutes' detail, you may get an insight into this owner's comments/interests.  Is he/she for/against proposals?  Joining a condo is like marrying into a family...sometimes (rarely) it's ok, sometimes(mostly) it can get crazy.  You should try to keep your emotions in check and be willing to back out if the bad stories outweigh the good ones.

It's easier to stay out than get out.

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Thank you all for extremely valuable info!

 

The seller just agreed to lowering the price substantially, but I realise the price needs to come down even more probably. I'm still waiting for the verwaltungen to get back to me, and I won't move forward until then. I'll let you know how it goes!

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This proves the seller *knows* there is a cash flow problem, and maybe upcoming repairs.

Get the HOA minutes and the Gutachten ASAP!

 

This still can be a good buy, just for the right price.

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With one apartment we looked at the minutes of those meetings were enlightening. Not all that many parties, but definitely disagreements about the use of the garden and conflicts over someone's dog. It became clear that we didn't want this to be our living arrangement (and that we wouldn't be able to leave our kids alone in the garden because of the afforementioned dog).  

 

It's worth the hassle of working through the notes of those meetings even if you have to get someone to help you translate! 

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I'm beginning to wonder why the current owner wants to sell, maybe he knows something you don't as yet?

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A bit off topic but noticed around Frankfurt where there is a ton of new build going up the price premium from old to brand new is about a 1000€ per square meter or around 25% more for a new build

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On 5/11/2017, 9:41:36, Tim Hortons Man said:

@Metall   Sonderumlagen or special assessment, thanks been wondering what the word was in German. Next week we have our annual meeting and they will be discussing putting new balconies, so I will "listen" for this word!

 

 

Putting in new balconies is really expensive, I definitely would listen for that word!

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20 hours ago, Dagur said:

Thank you all for extremely valuable info!

 

The seller just agreed to lowering the price substantially, but I realise the price needs to come down even more probably. I'm still waiting for the verwaltungen to get back to me, and I won't move forward until then. I'll let you know how it goes!

 

6 hours ago, Malt-Teaser said:

I'm beginning to wonder why the current owner wants to sell, maybe he knows something you don't as yet?

 

Not necessarily, maybe he just needs the money. But it's quite possible he knows way more about upcoming repairs than he is telling!

 

Dagur, it's good you are willing to let go of the apartment. Never fall in love with real estate before buying it, sellers and agents can smell that! This way, you can negotiate in a much more relxed mindset. Said friend negotiated for several months before the sale (I translated for him) - while the market is more active now, you still can go back and forth several times.

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