About Suze, Home Buying, Homeowners Insurance
July 11, 2021
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On today’s podcast, we go to Suze School to learn about the five rules you need to follow before buying a condo. Knowing what they are, could potentially save you a great deal of time and money.
July 11th, 2021. It's already a week after July 4th and July 4th, as you know, is Independence Day. And so many of you are writing me saying Suze. Suze, I miss the offer on July 4th. I just didn't listen to the podcast right away. Please, can we have that? Well, rules are rules, everybody. And what can I say? But listen closely in the future because you never know when I may make that offer again. And for those of you who don't have a clue what I'm talking about, a week ago, if you listened on the day that the actual podcast dropped, you would have gotten a passcode that allowed you to get for free my Nine Steps to Financial Freedom course that normally sells for $199. And everybody that listened that day and got that code, they were able to download it for free. So, what does that tell you. Tells you that you should all really try to listen to this podcast on the day that it drops, because shortly I'll have other news coming up for you as to how many of you, if you do what I tell you to do, could very possibly win either $10,000, $5,000 or five people will win $1,000 each. So, that's altogether $20,000 if you're just willing to follow some directions and ideas that I have for you. But today, this really is all about what I'm calling, Suze stories. But Suze stories that lead into a Suze school all about purchasing a condo. Now, the reason that I want to do this today is that it's such a heartbreak what happened in Surfside, Florida. Where a condominium collapsed as all of you know, and so many people lost their lives. So, many people lost all of their possessions. And it's probably one of the biggest disasters that one could even think of. And of course, my heart and I know all of your hearts go out to those people as well as the animals that were lost and those who are just, what do I do now? What really got to me about that story, was this, some of those people purchased those condos two months ago, a few months ago, and it's like, are you kidding me? When they purchased didn't they realized what was going on in that building? Didn't they know that there were assessments coming of at least $80,000 per unit or up to 300,000 per unit. Did they know those things where those assessment fees taken off the price? So, everybody thought that it was such a great deal and they bought in and now they've lost their lives and that didn't have to happen. None of that had to happen. And so, condo living is a very, very interesting phenomenon and I myself totally have experienced it because KT and I also live in a condo in South Florida, not far from Surfside. And what goes on in that condo seriously, absolutely is mind boggling, if you ask me. The fights between residents, the fights that were on the board, the fights with the management company, the firing of the management company, the management company walking out and this was just like a month ago and nobody there to run the building. So, the tenants of the building had to literally take over running the desk and doing this. I mean, it's just an amazing thing what goes on in a condo. So today, I really want to talk about five rules that you should all look deeply into before you purchase a condo. So, it's almost like you have to look before you leap, especially in times like now when everybody was jumping on the real estate bandwagon. Although I do think it has slowed down just so you know, I also think we have to see what's going to happen on July 31 when the eviction moratorium absolutely ends. So, even though I know there is a lot of money to help renters that's all caught up in how does it even get to the renters? So, these are all things that are happening right now. But I really think that if we can learn from what happened in Surfside, then many of those deaths won't be in vain, doesn't make them any less painful to those people who lost their loved ones. But I always think there's a lesson to be learned, no matter what. So that's what today is about, and the story really begins with me all the way back in like 1998, and I was looking to buy a condo in New York. I was already the owner of a co-op, but I was thinking I wanted a bigger place, I was just thinking this at the time. So, I found this incredible condo around 23rd Street or so in New York City and I loved it and this condo had nothing in front of it, it was just an empty lot and the highline was on one side and it was a fabulous neighborhood and I was like, I have to do this. And I asked the real estate agent, I said, is anybody going to build in front of me? I have this tremendous view. And the real estate agents and no Suze, there is no building planned, everything's great. And it is how you see it. And I'm thinking oh my God, I could have a view in New York, I could live here. And I'm thinking all right, I'm going to make an offer on it. But for some reason I thought, you know, Suze, before you make an offer, you better go down to City Hall and make sure that what your real estate agent just told you is correct, that nobody is planning to build in front of you. Because I was thinking there's no empty space in New York City and when there is somebody buys it, and they build a building. So, I went down to City Hall and I looked up records and sure enough, somebody was going to start construction on quite a tall building in the next two or three months, which meant I would have construction number one, in front of me and right next to me for probably two years or so. And there goes everything that I thought I would have because the lines of that building were right next to where my front balcony would be, so I would be looking out directly on somebody else and I was like, I don't want that. And I realized, oh my God, somebody didn't tell me the truth. Somebody was more interested in simply doing what, making a commission. I'm not saying all real estate agents are like that, everybody, but in this particular case, either the real estate agent seriously did not know even though it's their job to know, or they didn't want me to know. So, of course I ended up not buying it. But then as time went on and then I met KT and we were living in a really, small apartment, my apartment, which was the co-op, and I think it was only like 800 sq ft. We decided, let's move, let's move to a little bit bigger space. And we did, it was 1250 square feet, but still that was bigger. But we moved into this building that was being converted into a condo because we were told that it was going to have a swimming pool. And KT loves to swim every morning because she has a bad back and that keeps her back totally great. So, she hasn't had a bad back now in years because she swims every day. So, we thought, yeah, let's buy into this building. So KT can have a swimming pool. Well after the building was completed, guess what? No swimming pool, none of the amenities that we were supposed to have. And we went, what? And once again I realized, oh, the real estate agent told us all of that was going to be there, showed us plans for it, but never let us know that really the developer was going to cut back on a lot of the stuff because they were short on money. All right, so, we moved in, we bought the condo, we found a place close to our condo where KT could swim. But it was really like really? So, I'm telling you these stories because it really affects you after you have already made a purchase, especially if you're using all the money, you have to buy something that the intent is for you to really love. And so that's important. And here are the five things that I want you to understand. So, the very first thing is that owning a condo, buying a condo is very, very different than a home very different because in essence, you are owning this building with all these other residents and all these other residents really can affect what happens to you. And a lot of times there are people who live in the building that just don't want to spend money, they don't care, they just don't want to do it. And so, then things happen such as happened in Surfside where these things need to be repaired, but some people don't want to do it. You have an association who makes that decision. So, the very first thing you need to do when you find a condo that you like, is you better talk to the residents. You better talk to the residents that live there and you should ask them all about the building. Like I'll never forget in the building that I currently live in, there were people looking at apartments in there and they saw me, and they went Suze Orman do you live here? And I said you bet I do. And they said tell us about it. And you know what I said to them, I said if I were you, I would not be buying in this building. The fees are too high for the services that you get. People argue all the time, things don't get done. The management is horrific, at the time, because now management has changed. So, I don't know how, if they're good or not, and I went on and on and the real estate agent was like, don't do this, you're killing my sale. And that's what I was doing because from the bottom of my heart, I believed that people should not buy at that time, in that building and I was absolutely right. So, when you talk to residents, you find out a lot of things. You find out are there arguments? What's the board like? Do they argue with one another? How quickly our renovations made? You ask them all kinds of questions as to what are their greatest complaints not, what do they love about living there? But what do they hate about living there? Does the pool break all the time? Does the hot tub work? Is it anything you need to know? So, the very first thing you need to do after you fall in love with something that you think you want to buy, is talk to the people that live in that building. Two, management teams you want to know, is it a good management team or not? Now, condos can be managed by a professional management team. Or sometimes condos choose to have the residents managed the building themselves. So, you just have to look at that and decide, do I want to live with people, my neighbors who are managing this building that I may disagree with. And then you all start fighting and when you're fighting with the people that live in your condo, chances are you're not going to like living in that condo. So, what happened in my condo in Florida is that just a little bit ago because of arguments and everything else, 14 and there's not that many units in this building, right? 14 apartments went up for sale and people moved out. Why? Because they couldn't take the arguments that were happening between all of the residents and the board. They left. And that was with the professional management team, by the way. So, you really have to understand the management of your building. And when you talk to the management team, it is really, really, important to find out from them about everything that's going on in that building. Are their major repairs that need to be made? Is their litigation going on with that building? Is their past litigation that's gone on with that building? One of the more important things that you can do and listen to me closely. Everyone on this one is I would not move in, to a condo or buy a condo unless I was able to see the condo minutes meaning they have meetings. Usually the board has a meeting every, you know, month or two months whatever it is. And it is by law that they have to take minutes, of what happened in that meeting minute by minute. And I would want to see and look back on at least six months of minute reports to see what is really going on in that condo. What is the board talking to the members about? What are the arguments about? All of that will be in there and they are in the minutes, will give you an idea as to what is happening in that condo. I mean, I would just be amazed to see the minutes of our building. We've been trying to renovate the joint area when you come in and everything because the building now is 20 years old. Good luck. This has been going on for two years, two years and they've been fighting over it. No, I like this design. I don't like that design, but it's in the minutes that you will see the flavor of. Do the tenants all get along? Are there arguments? Is everything in harmony? Does anything need to be repaired? Do the repairs that need to be made or other tenants say no, we're not going to pay for those assessments. But it would give you a really, good look into what is happening in that building. You would also ask, by the way the tenants, are they happy with management? Is management responsible, when you ask them to do something or do they just sit in their offices and they never come out and you're paying them a fortune to really do nothing. Are there any lawsuits? You need to know all of these things, past or present with the condo. You should be taking notes everybody because there will come a time most likely in your life. Especially as you get older that you may want to switch from home, that you have to take care of the grass and all the stuff that goes wrong and you want to then move into a turnkey like a condo, which is why KT and I went from homes to a condo even though we have a home on the island different because they don't have condoms on the island, but it's really nice to be able to just have a building that takes care of everything and you just don't have to worry. So, there's a big difference that as you get older, you may find that's where you want to move. So, you need to know what to ask before you do it. Next number three, you need to understand what does your insurance policy cover. Obviously, you have association fees. Again, an association is a group of people that run the condo, those usually are made up of the board members that you elect. And so, the association has insurance coverage. You need to understand exactly what that insurance covers, that if the building isn't good and it needs to be repaired. Does the insurance cover what it will cost to bring it up to code? You need to know everything. If there's like in Florida, there's a hurricane and the buildings destroyed, what does the insurance cover and what are you responsible for? And if you don't understand everything about the insurance policy that you should ask to see for the building that you're going to be part owner of, then you might have an insurance agent that you use for other things. Ask your insurance agent or an insurance agent that you may know, to just look at the insurance policy and tell you everything that you need to know. Number four, you need to understand is the building that you're about to move in, are they in litigation? Were they in litigation? Or do you think they may be in litigation? And you have to check all of that out, because if there's litigation pending, meaning neighbors going to sue another neighbor and owners of each condo, trust me, they sue one another. And so, you just need to know is there litigation against the management? Is there litigation going on? How far has it gone within that building, that really may come down to where you get assessments. Because what all of you really have to understand is that when something goes wrong in that condo, then you are financially responsible for it. And the way that you pay for it usually is in assessment fees. Now, at the beginning of this podcast, you heard me say that for the condo in Surfside, they were assessing $80,000 for the smallest unit in there, all the way up to $300,000 for the largest units in there. Where were those people going to get that money? That's like buying a whole another unit on some level. So, you either have the choice of paying it upfront or you have the choice of paying it monthly because the condo itself will probably take out a loan to do all the fixing that the building needs and you get to pay for it over a specific period of time, 15 or 30 years. So, you got to think about that. And what does that do when you go to sell it? Are you all understanding that it's really, really important when you go to buy a condo that these are just a few things by the way, that you look into. Last but not least, I have to tell you the most important thing is the repair funds, how much of your monthly assessment gets put into a fund that's either a reserve fund for when repairs are needed or sometimes it's called a repair fund. Now, I have a rule of thumb. So, when you're looking at your association fees, here's what I think you want to see. You want to see that if you're building that you're about to move into is less than 10 years old, Then you want to see at least 10% of the association fees going into a reserve fund or a repair fund for things that need to get done in the building. If the building is 10-20 years old, I think 25-30% of your association fees should be going into a reserve fund. And if it's more than 20 years old, I think almost half of the association fees or 50% believe it or not, should absolutely be going into a repair or reserve fund, whatever you're building calls it. And that way when repairs are needed, you're not seeing this huge assessment come where $80,000 as all of a sudden presented to you to fix everything that has gone on, because the Condo Association did not have the money to do it before or people were arguing over it because they just didn't want to pay an assessment or more money. So, that's just something that you should really look at closely. Because if you're moving into a condo that doesn't have reserve funds, that is the biggest warning sign of all. So, it's really important that you say to yourself, all right, I move in here and now something goes wrong, the pool cracks, the hurricane comes, a tornado is hit whatever it may be. You need to know that there is money to repair things, to rejuvenate things, and where is your money going to? So, for instance, here is just another example for you. You move into a condo like we did and we have a terrace. So, the question becomes you think you own that terrace, but if you own it, that means if the terrace, let's say starts to leak for whatever reason, and water is dripping down to the apartment below, their terrace, you're the one responsible for fixing it. Or even though you get to use that terrace. Does that terrace really belong to the building? So, if there are leaks or cracks or something happens, who is responsible for fixing the terrace? These are things, just little things that I want you all to think about, from again talking to the neighbors. Probably the most important thing to do is talk to the residents in that building and don't let them just sugarcoat it. Find out how many units are for sale, find out how many of the units that are in that condo are occupied by owners versus renters. You want to make sure that if you buy into a condo, you're buying into a condo that the majority of the condos are lived in by the owners of those condos. You do not want to move into a condo that has renters. You want to check again all the minutes of the board meeting to find out what has been going on in the past six months in that building. You want to make sure that people like the management and that there's no complaints about the management. Again, you want to look at, how much are the association fees, how do they compare to the other association fees of condos that are near you? Because if your association fees are really high, like they are in my building, your property will not increase in value at the same way that other condos will, whose association fees are lower. You just need to take that into consideration. Again, you need to make sure that the repair fund, a reserve fund is absolutely adequate and what does your insurance cover? So, you really need to look before you leap and that's what today's podcast is about, because when you buy into a condo or any piece of real estate, that really is the most major purchase you will ever make. So, real estate is really your home and you want to know that nothing can happen to your home. And even though your home may look great and it may look beautiful, you want to make sure that is on solid footing and none of us, none of us are ever to forget what happened in Surfside. Because if we forget what happened in Surfside, that on some level we forget the loss of lives that happened there. So, to honor those people, every one of those people, we need to learn from what happened. And we must make sure that it never happens again. And especially you don't want it to happen to you. So, that's the podcast today. So, until this Thursday, when Miss Travis will join us again at Ask Suze and KT anything. And by the way, you can join us for that by simply writing in a question to email@example.com. And then if chosen, we talk about it, answer it and I think you'll be quite happy with learning, from what you really need to know. So please write in. All right, everybody just know I want all of you to be strong, smart, secure and, of course, healthy. Alright bye bye now.
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