How to sell an apartment that has been in a serious fire
In October 2016, residents in 24 of the 36 apartments at 130 Jane St. were forced out by damage from by a three-alarm fire. Two years later, many have still not been able to move back. Chris Palminteri and his family are among them.
The co-op building—the luxury Harbor House—is home to celebrities, and apartments there don’t come cheap. A two bedroom there, #1/2A, just recently went into contract for $2.1 million. Notably, apartment #1 has been gutted, and as the listing notes, the construction costs to combine the apartments will be absorbed by the building's insurance company.
If you're wondering how to sell an apartment after a serious fire, and what you as a seller are obligated to disclose to potential buyers, consider Palminteri's experience. He's also a broker at the Simple Real Estate Co., and represents the seller of #1/2A and has also helped others in the building sell their apartments.
No one was injured by the 130 Jane St. fire, which was caused by faulty electrical wiring between the fifth and sixth floors. But fires displace hundreds of New Yorkers per year, and when they happen in condos or co-ops, they make resales much more complicated.
Repairing the damage is the first challenge, and the 130 Jane St. fire is illustrative. Because it spread to a top-floor unit, firefighters cut a massive hole in the roof and dumped 10 million gallons of water on the building in total, Palminteri says. Afterward, fire restoration companies came in and gutted all of the apartments that had water damage down to the studs, in order to prevent a mold outbreak.
“The biggest thing that destroys apartments is water,” Palminteri says. “That creates the potential for mold. They dry it out with fans, but if it gets into the sheet molding, there can be issues.”
Eliminate all traces of the fire
He advises sellers to make sure you eliminate all remnants of fire damage by painting multiple coats, and sanding and refinishing the floors.
Water can also damage appliances, so be sure to check all circuitry. And if your residence has central A/C, inspect the ductwork for water and residue.
What you are required to disclose
Once the apartment is clean, you are free to list it without disclosing that it has been in a fire. Laws governing accident disclosure vary from state to state, and in New York state, sellers are not required to disclose if there has been an accident in the apartment, be it a fire or something even graver, like a murder.
“New York is what we call a ‘buyer-beware’ state, or caveat emptor, where the seller is under no obligation disclose information about a particular property to a purchaser,” says Adam Stone, a partner at The Stone Law Firm. “It’s up to the purchaser to do whatever inspections they care to do as part of their due diligence.”
The state took a meager step toward shifting the burden of responsibility with the Property Condition Disclosure Act, which went into effect in 2002. But it is a fairly toothless piece of legislation, particularly for transactions in New York City. The act is limited to “residential real property,” defined as one- to four-family dwellings and excludes condominium and co-ops apartments. Moreover, the penalty for failing to fill out the disclosure form is weak: a $500 credit against the final purchase price. That’s a small price to pay for limiting risk.
What buyers need to know
That’s not to say that a prospective buyer couldn’t ask for specific language in the sales contract protecting them in the case of any fire damage. For example, it's common to ask that the seller ensure all appliances are working at the time of closing.
“That’s pretty basic, regardless of the Property Condition Disclosure statement,” Stone says. “But it doesn’t mean that after closing the seller has any responsibility. It’s still up to the buyer to go in and test things. If something isn’t working, they need to do something about it right then.”
A buyer is more likely to demand specific protections for fire damage if the fire was recent and well-known. (Bad news travels fast, after all.) Their attorney could also turn up information while doing due diligence before the sale is completed.
“If the fire is public record, it’s going to come up,” Palminteri says.
But sellers can accentuate the positive by touting any repairs and upgrades done to the apartment.
“You could say there was a fire, but as a result you repainted the apartment, refinished the floors, installed new fixtures, etc.,” Palminteri says. “For the buyer, it’s like getting a brand-new apartment based on insurance proceeds. It could be a good thing.”
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