Latest / The Loan Daddy Podcast / 023 - Dealing With Difficult Co-op Management Companies (3 Strategies for NYC Agents)

Transcript

023 - Dealing With Difficult Co-op Management Companies (3 Strategies for NYC Agents) · The Loan Daddy Podcast

• 0:00
  SPEAKER_00: In real estate, when the transaction closes, everyone wins.
• 0:04
  SPEAKER_00: I say all of that to say this.
• 0:06
  SPEAKER_00: Both agents will serve their clients much better if they work together to get what's needed from the management company.
• 0:15
  SPEAKER_00: What's up, everybody, and welcome to the Lone Daddy Podcast episode 23.
• 0:19
  SPEAKER_00: In every transaction, there's going to be a barrier or a hurdle that can significantly delay a closing from happening, or in some cases, prevent a closing from happening entirely.
• 0:31
  SPEAKER_00: And you know, it can be the mortgage, it could be the attorney making a mistake, it can be a number of things that can act as that barrier.
• 0:39
  SPEAKER_00: And one major barrier that we all face in New York, specifically when it comes to buildings, co-ops, and condos, is that of management companies.
• 0:47
  SPEAKER_00: Management companies are the worst.
• 0:49
  SPEAKER_00: We are so reliant on management companies to provide us with the accurate information so we can get a building approved for financing.
• 0:59
  SPEAKER_00: Prior to a transaction going into contract, the attorney is reliant on the management company to complete their due diligence, which is needed before a contract can be signed.
• 1:09
  SPEAKER_00: I'm working on a purchase right now where from the time the offer was accepted until now, it's been four weeks.
• 1:17
  SPEAKER_00: We don't have a signed contract yet.
• 1:19
  SPEAKER_00: And it's taken that long because the management company is taking their sweet time with providing the due diligence that the attorney needs to get this file into contract.
• 1:29
  SPEAKER_00: And the attorney can't complete what they need to do because of the management company.
• 1:35
  SPEAKER_00: And every day that this contract is not signed is another day the buyer can think more about this, whether or not it makes sense for him to buy.
• 1:47
  SPEAKER_00: And he may very well back out of the transaction as it's taking so long to go into contract, or maybe he's still looking out into the market at the other properties and may bail on this one.
• 2:00
  SPEAKER_00: On top of that, a lot of these management companies don't know what's happening with their own buildings.
• 2:05
  SPEAKER_00: We've received questionnaires over the years that have had incorrect information on the questionnaire, which has significantly delayed closings.
• 2:16
  SPEAKER_00: We had a situation recently where the insurance coverage for a building was insufficient.
• 2:22
  SPEAKER_00: You know, banks have certain guidelines that they're looking for when it comes to buildings, and the insurance was well below what a bank would need for this specific building.
• 2:32
  SPEAKER_00: When we went to the management company to see if they could increase the coverage, they said to us that that's impossible.
• 2:41
  SPEAKER_00: That will not happen.
• 2:43
  SPEAKER_00: After digging into that, pushing back, getting the appropriate people on the phone, three weeks later, magically, they increased their insurance coverage.
• 2:52
  SPEAKER_00: Now, this took countless phone calls, countless emails, and something that was impossible got done.
• 2:59
  SPEAKER_00: So getting buildings approved these days and dealing with these management companies is a very heavy lift.
• 3:05
  SPEAKER_00: So I want to go through a few strategies that we've used in dealing with specifically difficult management companies, but nowadays every management company seems to be very difficult.
• 3:16
  SPEAKER_00: And hopefully you can implement these strategies into your process.
• 3:20
  SPEAKER_00: Number one, management companies work for the building and the board.
• 3:25
  SPEAKER_00: And I want to illustrate this point by sharing a story of clients that we're working with right now.
• 3:32
  SPEAKER_00: So we're working with clients right now who are selling their unit and they're buying another unit in the same building.
• 3:39
  SPEAKER_00: Like most people in a situation like this, they want to sell their place first, receive the funds, and then purchase the new unit after that.
• 3:50
  SPEAKER_00: The problem here was the purchase was moving along a lot faster than the sale of their place.
• 3:57
  SPEAKER_00: And to make a long story short, the closing for the purchase got scheduled very quickly, and it got scheduled before the closing of the sale of their place.
• 4:10
  SPEAKER_00: And the sale of their place got scheduled, I think, two weeks later.
• 4:14
  SPEAKER_00: Now, the attorney went to the management company and requested that the date be moved up for the closing for the sale of their place, to which the attorney heard multiple times from the from the management company that the calendar is full.
• 4:32
  SPEAKER_00: There's nothing that they can do about that.
• 4:34
  SPEAKER_00: So I told our buyers, let's get the board involved here.
• 4:38
  SPEAKER_00: So they first emailed the president of the co-op board and then eventually got him on the phone.
• 4:45
  SPEAKER_00: And the board president then sent one email to the management company.
• 4:50
  SPEAKER_00: And within 24 hours, lo and behold, the closing of their sale got moved up to the same day as the closing of their purchase.
• 5:00
  SPEAKER_00: And it'll take place hours before the closing.
• 5:04
  SPEAKER_00: So at first, when we're hearing that this calendar is so full, magically one email got it done.
• 5:12
  SPEAKER_00: Now, we're not looking for a pat on the back here, but I think all of us collectively have to think a little bit differently when it comes to how we deal with management companies, and we can no longer accept the status quo.
• 5:27
  SPEAKER_00: We can't let words like impossible or our calendar is full to stop us from getting our clients what they need.
• 5:37
  SPEAKER_00: So internally, we think about what we can do to motivate a management company.
• 5:43
  SPEAKER_00: So never forget that management companies can be replaced.
• 5:48
  SPEAKER_00: It's a very competitive business and management companies work for the buildings that they serve.
• 5:56
  SPEAKER_00: They may not jump at a request made by us as the lender or the attorney or you as a real estate agent, but they definitely will when they are pushed by a board of a building.
• 6:10
  SPEAKER_00: Number two, don't assume the management company is right.
• 6:14
  SPEAKER_00: So every transaction for a co-op or a condo needs a questionnaire, which is a four to five page document that contains important detailed information about the building.
• 6:25
  SPEAKER_00: How many units are in the building?
• 6:26
  SPEAKER_00: Are any of them delinquent on their maintenance?
• 6:29
  SPEAKER_00: Is there litigation in the building?
• 6:32
  SPEAKER_00: Is there commercial space, etc.?
• 6:34
  SPEAKER_00: Things like that.
• 6:35
  SPEAKER_00: And every so often something will appear on a questionnaire or a question will be answered in a way that can spook a client or prevent a lender from lending on that building.
• 6:48
  SPEAKER_00: And the vast majority of people take that information at face value.
• 6:52
  SPEAKER_00: Well, if the management company is saying this, it must be true.
• 6:55
  SPEAKER_00: We have to take a different approach here.
• 6:58
  SPEAKER_00: And I wish this wasn't the case.
• 7:00
  SPEAKER_00: I wish that we didn't always have to do the job of other people in the transaction.
• 7:07
  SPEAKER_00: But this is what it requires in this day and age.
• 7:10
  SPEAKER_00: So if there's an answer on a questionnaire that is spooking a client or is preventing a lender from lending in that building, we have to push back.
• 7:20
  SPEAKER_00: We have to ask that question again and ensure that they answered that question accurately.
• 7:27
  SPEAKER_00: We had one a couple weeks ago where a questionnaire that we received stated that the sponsor held 30% of the units in that building.
• 7:37
  SPEAKER_00: And if that were the case, that would be an issue for traditional financing in that building.
• 7:44
  SPEAKER_00: And in all of our correspondences leading up to getting into contract with the attorney and the real estate agent, we never heard anything about excessive sponsor ownership.
• 7:53
  SPEAKER_00: But when we got that questionnaire, that's exactly what it stated.
• 7:56
  SPEAKER_00: So after bringing this to the attention to the attorney and then notifying the management company to get further clarification on this sponsor ownership question, it turns out they answered it incorrectly.
• 8:09
  SPEAKER_00: And they sent an email, acknowledged that they made an error, updated it, and it showed that they had 5%.
• 8:15
  SPEAKER_00: Sponsor owned 5% of the units in that building, which allowed us to proceed with the traditional financing that we were offering.
• 8:23
  SPEAKER_00: So trust but verify.
• 8:24
  SPEAKER_00: Number three, it takes a village.
• 8:27
  SPEAKER_00: A buyer's agent and a seller's agent are not competitors.
• 8:31
  SPEAKER_00: Competitors would imply that one party wins and the other party loses.
• 8:36
  SPEAKER_00: In real estate, when the transaction closes, everyone wins.
• 8:40
  SPEAKER_00: I say all of that to say this.
• 8:42
  SPEAKER_00: Both agents will serve their clients much better if they work together to get what's needed from the management company.
• 8:51
  SPEAKER_00: It's best to copy each other on all correspondences so everyone has visibility into what's happening.
• 8:59
  SPEAKER_00: That communication will go such a long way.
• 9:02
  SPEAKER_00: And look, it's okay to fight a request where a lender or a bank is asking for something and you as an agent are thinking to yourself, why are they asking for this?
• 9:12
  SPEAKER_00: Why do you actually need that?
• 9:14
  SPEAKER_00: It's okay to question that kind of stuff.
• 9:16
  SPEAKER_00: But we do find that sometimes there are agents or attorneys who are questioning things just for the sake of it.
• 9:23
  SPEAKER_00: I'll give you an example.
• 9:24
  SPEAKER_00: We were working on financing for a buyer who was purchasing in an eight-unit co-op.
• 9:30
  SPEAKER_00: And we were requesting certain documentation from the management company, which the listing agent was on a lot of those correspondences, and there were a few items that the listing agent was questioning why we're asking for this.
• 9:45
  SPEAKER_00: And they were putting this in the email with the management company on there.
• 9:50
  SPEAKER_00: So you are getting involved in this and you're interfering with what's needed.
• 9:57
  SPEAKER_00: And one thing that the agent said, I've been doing this for 20 years and I've never seen someone, and I and by the way, this agent lived in that building.
• 10:06
  SPEAKER_00: And she said, no one has ever asked for this before.
• 10:09
  SPEAKER_00: Which we hear sometimes, where they'll be, you know, maybe they say, I've never heard of anyone ask for this on a co-op before or a condo, or maybe they live in this case, live in that building, and they'll say, no one's ever asked for this before.
• 10:20
  SPEAKER_00: Well, in this particular case, it's 2026.
• 10:23
  SPEAKER_00: We looked up the building and we saw the last mortgage that was taken out in that building was in 2014.
• 10:31
  SPEAKER_00: It's been 12 years since anyone has gotten financing in that building.
• 10:35
  SPEAKER_00: So for someone to come to us and say no one's ever asked for this before, it's like going to a doctor that you haven't seen in over a decade and saying, Why are you doing these tests?
• 10:46
  SPEAKER_00: We didn't have to do this last time.
• 10:47
  SPEAKER_00: Maybe your health profile changed.
• 10:49
  SPEAKER_00: Guidelines change all the time.
• 10:52
  SPEAKER_00: So things need to be updated.
• 10:54
  SPEAKER_00: And sometimes requests are going to be made that previously didn't have to be made.
• 10:58
  SPEAKER_00: So it's important to make so again, it's okay to ask, it's okay to push back, but it's also important to let the process play out.
• 11:05
  SPEAKER_00: Maybe hop on a call with a lender and say, I've never seen this before.
• 11:08
  SPEAKER_00: Can you explain to me why this is being asked?
• 11:12
  SPEAKER_00: Why do you need it?
• 11:13
  SPEAKER_00: And then let me see what I could do on my end to get it from management.
• 11:17
  SPEAKER_00: But having that extra context will help me help you.
• 11:20
  SPEAKER_00: That's a more constructive way about going about the process.
• 11:23
  SPEAKER_00: When attorneys, agents, and lenders can all work together, the process will move a lot smoother.
• 11:30
  SPEAKER_00: Because a lot of it does come down to us against the management company.
• 11:34
  SPEAKER_00: We're fighting with them.
• 11:35
  SPEAKER_00: We need information from them to get from point A to point B.
• 11:38
  SPEAKER_00: We all need to get to point B.
• 11:40
  SPEAKER_00: So how can we work together to ensure that we get there?
• 11:43
  SPEAKER_00: It's working together, communicating on this.
• 11:45
  SPEAKER_00: Are there any other tips or tricks that you use and that's part of your process that you can share with us and that we can share with other agents?
• 11:55
  SPEAKER_00: Please put them into the comments.
• 11:56
  SPEAKER_00: I also want to hear about horror stories.
• 11:58
  SPEAKER_00: What are some horror stories that you've dealt with when it comes to management companies?
• 12:02
  SPEAKER_00: Please feel free to put them into the comments.
• 12:05
  SPEAKER_00: And with that, thank you so much for watching and we'll see you on the next episode.
• 12:09
  SPEAKER_00: Take care, everyone.
• 12:10
  SPEAKER_00: Bye.