Page 6 - New England Condominium July 2021

6 NEW ENGLAND CONDOMINIUM
-JULY 2021
NEWENGLANDCONDO.COM
There’s also the minutia, like cleaning sup-
plies. But boards should remember, you gen-
erally get what you pay for—especially with a vendor than expected; we do further inves-
professional services—so don’t try to save a tigation. It has a forensic aspect; perhaps you of audit that’s normally performed by an ac-
few dollars on an attorney or an accountant were misbilled. Or was there maybe an extra countant,” says Richard Brooks, a partner
and expect top shelf service.”
Eric Fudeman, a partner with Needham, verify, correct, and confirm, but I can’t tell you in Braintree, Massachusetts. “In addition, the
Massachusetts-based accounting firm Bloom if you overpaid until our assessment is com-
Cohen Hayes, agrees. “As accountants, we plete. In the end, the numbers never lie.”
don’t judge what is unnecessary and what is
necessary. A board sets a budget for a year, says that as a manager, he will provide the accountants. Lastly, and it may be most obvi-
and upon regular review, if some expense board raw information, vouching for bills, ous, the board conducting an audit on its own
seems really high to the industry norm, I and examining any written for over a certain records would be in a position of conflict, as
might question it. But we don’t refer to it as set amount. He will also compile a financial they are looking at the records that they them-
‘leakage,’ though. Our view is that the board statement as a budget and comparative tool. selves keep—so it would not be an indepen-
simply didn’t budget properly. If there are “It must be accurate, thoughtful, and realistic,” dent review.”
leaky toilets or water running someplace, you he says.
might have excessive water bills. Or if you
have high common area electric bills it might approach to controlling financial leakage is or condominium community. That vigilance
be because there is too much heat. To get the vigilance. Management and boards should be requires a team and a plan. That team in-
best price for services, boards should also re-
bid, rather than just renewing contracts. For quarterly basis and coordinating with their specialists, and board members. Reliable pro-
example, perhaps your board isn’t rebidding accounting professionals when any unexpect-
snow removal and paying a higher price than ed expenses occur. Zanjirian suggests that a of those projections against real expenditures
they should be.”
“When we do work within apartments tors should look at different items every year. In the long run, vigilance is more effective
that owners should pay for and it’s not billed Some years energy costs or metered services than wishful thinking. In business—and
back correctly, we have substantial and costly should be scrutinized. Other years it might be that’s what your community is—unexpected
leakage,” says Dan Wollman, CEO of Gumley supplies or annualized repairs.
Haft, a Manhattan based co-op and condo
management firm. “There are also utilities checks against his own projections. “If I did economic horizon.
such as water and sewer, electric and gas, as a good job, it’s close,” he says. “If something is
well as other issues with recording those bill-
ings; are you being charged correctly? In one tion to accountants, “there are also profession-
case,” he says, “we had an excessive water bill als who can renegotiate your water bills and
in one building we manage. It wasn’t clear if other services with the city to get you a reduc-
it was a leak or there was a problem with the tion. They are familiar with city programs you
meter. We had the meter recalibrated, and might not be familiar with.” Wollman points
then found a leak in the condensate tank. It out that this can help—but it does cost money.
turns out that was the source of the actual “You have to pay for these services.”
physical water leak that led to the financial
leakage.”
Scott Wolf is the CEO of Brigs, a manage-
ment firm located in Boston, and says he sees compare them to budgeted projections, ev-
this problem less frequently—particularly in ery board member should be reviewing these
suburban-style condo associations and HOAs numbers themselves, even if they don’t have
where owners are typically responsible for the a professional background in finance or ac-
vast majority of operating costs and common counting. “With new board members,” he
areas are minimal. He notes that in more ur-
ban multifamily buildings, the incidence of through the monthly statements and how to
financial leakage does increase somewhat. view them. More than one pair of eyes is al-
“Typically, we do not see frivolous spending,” ways better.”
he says. “Generally, it’s the opposite; associa-
tions are not spending enough to maintain
their properties. Sadly, the only thing we have extensive professional experience in real es-
seen is investing in personal agenda items tate, finance, and accounting, a board should
at the expense of other needed repairs—like not undertake a full audit of their expenses
boards believing they need to plant flowers on their own, says Zanjirian. When it comes
at the entrance of a property, when paint is to association finances, it’s best to hire a spe-
peeling off the building exteriors—that kind cialist. “Accountants do [audits] and studies.
of thing.”
Audits
The best way to determine if your prop-
erty is suffering from financial leakage is to them. Much stems from how good the man-
complete a thorough audit of your financial agement company is. The best run buildings
records. “We look at it from two perspectives,” have good, involved board members and
says Zanjirian. “The first is at what the pro-
jected or expected amount of an item was—or fessional advice.”
what it should have been—and if it’s out of
line with projections. If it is, we go to deter-
mine why. Let’s say a project should have cost quire that an audit be done annually—and
‘X’ dollars, but it cost 10 percent more—or conducted by a certified accounting firm.
alternatively, say there are more payments to
visit to the property for some reason? We will with Marcus Errico Emmer & Brooks, located
When working with auditors, Wollman to be done by independent certified public
The pros agree that the best long-term maintaining the financial health of your co-op
reviewing expenses on at least a monthly or cludes accountants, auditors, managers, cost
‘Round Robin’ approach may be best. Audi-
After an accounting audit, Wollman poor monitoring, not one-time blips on the
out of whack, we turn to a specialist.” In addi-
Zanjirian also says that while it’s primar-
ily the responsibility of the association or
corporation treasurer to review expenses and
says, “they can call me and I will walk them
Don’t DIY
Unless there are board members who have
There are also consultants who do expense
studies specific to your spending. Appropri-
ately qualified managing agents can also do
great managers, but you should still seek pro-
Wollman also warns against homespun
audits, and points out that most bylaws re-
“Condominium boards do not usually
have the skills necessary to perform the kind
Condominium Act in Massachusetts specifi-
cally calls for any required audits or reviews
In the final analysis, vigilance is the key to
jections of expenses and regular monitoring
are crucial to catching any financial leakage.
bumps in expenses are usually the result of
n
A J Sidransky is a staff writer/reporter for
New England Condominium, and a published
novelist.
WHERE DOES IT GO
continued from page 1
they’re breaking records. According to the
Greater Boston Association of Realtors, this
April, which saw a 60.3% increase in condo
sales over last April, had a record-setting
1,220 units go into contract. Douglas Elliman
Downtown Boston’s recent market report
notes that Q1 2021 had the highest number
of condominium sales in a first quarter since
2006.
“The statistics are mind-boggling,” says
Gene Hashkes, a realtor/broker at William
Raveis in Newton, Massachusetts, “and I’ve
been doing this for 25 years. With more peo-
ple vaccinated, with us returning to work and
back to life, you’re seeing a resurgence in the
condo market.”
Additionally, thanks to historically low in-
terest rates many first-time homebuyers may
find that they’re now able to afford a city con-
do, while the numbers might not have worked
a year or two ago. “This is an excellent oppor-
tunity to buy a condominium,” says Hashkes.
“So, where you’ve seen [single-family] home
prices appreciate over the last 12 months, con-
dos have just been going up since the begin-
ning of the year.”
Gail Spreen, Senior Vice President of Sales
for Jameson Sotheby’s in Chicago, foresees a
HOW HAS COVID...
continued from page 1
recovery in the market there, too—not just
as an end to the pandemic and its economic
fallout, but as a shift from the uncertainty and
tumult felt over the last year-plus in general.
“I think it’s actually a great time to be a buyer,”
says Spreen, “because we’ve got great inter-
est rates, our prices are down right now, and
there’s a real positive energy.”
Much of this can be attributed to the ease
with which buyers, sellers, and agents have
taken up—and mastered, in many cases—the
technology available to them, including virtu-
al open houses and property tours. Technol-
ogy has changed the experience of apartment
hunting—and by most accounts, the changes
are for the better. Buyers, says Spreen, can nar-
row down their searches at their realtor’s office
or at home, saving in-person visits for prop-
erties in which they are truly interested. Ad-
vance scheduling and limited walk-throughs
make things easier on realtors—and on build-
ings and associations, too. What began as an
adaptation to dire circumstances definitely
seems to be a trend with staying power.
The Leaps
Where Northern cities like Boston, New
York, and Chicago saw a distinct outward mi-
gration of residents during the early days of
the pandemic, Southern cities like Miami and
Tampa, with more access to open space and
favorable weather, experienced an influx—
and in some cases, a veritable boom.
While this is good news for sellers, buy-
ers—particularly
first-time
homebuyers
looking to finance their purchase—are facing
some unforeseen obstacles. “First-time buyers
in particular are having trouble securing that
first home for a multitude of reasons, includ-
ing not enough affordable properties, compe-
tition with cash buyers, and properties leaving
the market at such a rapid pace,” says Law-
rence Yun, chief economist for the National
Association of Realtors (NAR).
Joel Kan, associate vice president of eco-
nomic and industry forecasting at the Mort-
gage Bankers Association (MBA), says that
data suggest that “In the short-term, inven-
tory shortages will persist.” The ever-rising
costs of labor and materials, plus a current la-
bor shortage, are putting a proverbial wrench
in new construction nationwide.
And while interest rates have reached his-
toric lows in recent months, many real estate
and financial professionals predict a change in
this environment. Freddie Mac chief econo-
mist Sam Khater sees it happening sooner
rather than later. “Consumer inflation recent-
ly has accelerated at its fastest pace in more
than 12 years and may lead to higher mort-
gage rates in the summer,” he says.
That said, wealthy homeseekers are not
hesitating to invest in luxury co-ops and con-
dos. In other urban areas that were reportedly
bleeding wealthy homeowners at the corona-
virus’s onset, a reinfusion of sorts appears to
be taking place at this stage of the pandemic.
New York real estate expert Donna Olshan,
president of Olshan Realty Inc. and Olshan
Group LLC, says that the luxury sector is see-
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