Friday, July 28, 2017

Many years ago, my husband and I moved to Riverdale from Manhattan and purchased a co-op apartment (or, more correctly, stock shares in the co-op corporation that provided us with a proprietary lease that made us tenants of the co-op corporation and permitted us to occupy the apartment). We answered an ad in The New York Times, took the express bus and walked to the building. We were entirely on our own—no real estate agents were involved but our attorney eventually examined the co-op’s financial documents and pronounced them acceptable. We paid the asking price—all cash, according to co-op rules. We were interviewed by the co-op board (the chairman of the interview committee turned out to be the head of my doctoral program so that was the main topic of discussion while everyone else sat silent!) and, after unanimous yes nods all around, we were welcomed into the co-op.

But then, what? As we subsequently learned (but at the time there was no one to instruct us), a walkthrough shortly prior to closing should have taken place. Thankfully, our sellers were decent, honest people who left the apartment in fine shape and left the contractually agreed-upon items when they vacated. The co-op did its part by carefully conducting a post-moving inspection of the apartment after our sellers moved out.

These days, things are different. Largely gone is the casual, chatty interview not even preceded by a written co-op application. Few applicants are accepted on the spot, especially when interviewed by a subcommittee of the entire board. Given today’s prices in Riverdale, also gone is the all-cash purchase requirement! Many sales are now in the hands of real estate agents who represent the sellers, not the buyers. So, as a buyer, who is protecting your walkthrough interests and what, at a minimum, should you expect? If the real estate agent conducting the walkthrough is representing the seller, should you suspect that the agent might hide or gloss over any items to which you might have a claim regarding repair and/or replacement?

First, both buyers and sellers should understand that a competent walkthrough protects all parties to the transaction. Buyers want that to which they are contractually entitled. Sellers certainly do not want to be told after closing that buyers found something amiss and demand compensation. By insisting on a thorough pre-closing inspection, sellers can claim that buyers had every opportunity to examine the apartment and to raise any issues that could be settled before or at closing.

For the buyers, the advantages of the walkthrough are obvious. If the contract (which should be brought to the walkthrough) says that all enumerated appliances are to be in working order, then buyers can test each appliance. Most commonly when there is a problem, I have found that appliances not in use for long periods of time may not function, either because—for example—the water to the dishwasher has been turned off (a problem easily solved) or the rubber in the hoses has deteriorated. Refrigerators with power turned off and the doors closed may develop unhealthy odors and mold growths and need to be replaced or compensated for in dollars. And so on. In these cases, the seller is obligated to provide working or new appliances or perhaps partial payment for a new appliance, and at closing is given a time period to make good on repairs, if necessary: Money is then held in escrow to guarantee satisfaction and is released to the buyer if the terms of the escrow agreement are not fulfilled. Alternatively, the buyer may receive a credit on the spot from the seller at closing.

Thus, in order to avoid disputes and adjustments during closing, and disputes regarding release of escrow money after closing, I urge all sellers to conduct their own walkthroughs prior to closing: Examine the apartment through the eyes of the buyers and fix what needs fixing.

I think it best to perform the walkthrough no earlier than 48 hours prior to closing; in fact, many of my walkthroughs are done only a few hours before closing. This is reassuring to the buyer because although the apartment may have been in “mint, move-in condition” one week ago, there could have been damage even in the few ensuing days before the closing—an open window during a violent rainstorm could have allowed water into the apartment, damaging the floors; a pipe in the bathroom could have burst, etc.

In addition to testing the appliances, I make certain that even items that are the co-op corporation’s responsibility (as opposed to the seller’s responsibility) are in working order. For example, we raise and lower every window; if windows don’t work properly then we put in a work order at closing.

I bring an outlet tester and we plug it into every outlet. We turn all lights on and off. We run water in the sinks and bathtubs and showers and look for leaks; we test for the presence of hot and cold water, and that the drains work as they should. We examine radiators, windows, air conditioning units, walls and ceilings for indications of leaks and water penetration through the exterior brickwork.

If the contract states that certain fixtures or items of personalty are to remain in the apartment then we make certain that they are present. Conversely, we ascertain that all items that are to be removed are no longer there.

Walkthroughs where the co-op corporation sends its own representative are immensely helpful to all parties. When the building’s superintendent appears with a punch list that enables him to examine items that are the co-op’s responsibility (such as leaky radiators, windows and central air conditioning units that don’t work properly, pipes leaking within the walls), then the buyer is reassured that the co-op is on the job and the seller breathes a sigh of relief that he or she will not be responsible for the repair or replacement of these parts or items. And the co-op rep does not take sides: He can provide, if challenged by buyers or sellers, an unbiased, clear-cut decision regarding who is responsible for what.

After the walkthrough, I report all findings to the attorneys for the sellers and the buyers. For the seller, it is to be hoped that there are no findings to report. Surely, it is in the seller’s best interests to walk away from the closing with all monies due and with no loose ends to be disputed and monies tied up in escrow post-closing. Similarly, buyers do not want to have unresolved issues post-closing, such as awaiting repairs which may or may not initially be performed to their satisfaction.

Note: Walkthroughs involving sales of houses are more complex. The prudent buyer should bring his or her inspector, engineer or architect to the walkthrough.

By Vivian J. Oleen

 

 Vivian J. Oleen is an associate broker with Sopher Realty. 

 

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