March 1, 2006

No Finance Contingency Explained

Posted by Noah Rosenblatt on March 1, 2006 at 9.19 AM

nyc real estate

A: A 'NO FINANCE CONTINGENCY' refers to when the Finance Contingency is OMMITTED from the contract of sale by the seller of an apartment to protect themselves in the event that the buyer can NOT secure a loan prior to closing. Should this occur, the buyer will have to come up with cash to buy the apartment at closing or risk losing their 10% deposit. Read The Comments For Detailed Answer By Real Estate Attorney Peter Graubard.

Its amazing that when I google 'No Finance Contingency' I see a past UrbanDigs post as #1 on the search results and then pretty much garbage thereafter to describe what this really is for homebuyers. Lets try to clear it up right here:

Definition of Contingency: An event that may occur but that is not likely or intended; a possibility. A possibility that must be prepared for; a future emergency.

When the New York City housing market was going crazy a year ago (mainly because of no inventory, tons of demand, and lower mortgage rates), it was clearly a sellers market with packed open houses and multiple bids on properties. I recall an office meeting when our sales manager told us that 7/10 deals were going OVER ASK! That is an incredible statistic. In this type of crazed sellers market, many buyers had to deal with a No-Finance Contingency clause being added to the contract of sale. There was not much you could do about it. If you didn't accept the clause and sign the contract, the seller would just move on to the next bid. Not the case in today's market.

Sellers omit the Finance Contingency from the contract of sale to protect themselves from a deal going sour. Once you have a fully executed contract of sale there is not much that a buyer can do to get out of the deal; except not be able to secure a loan! So, the No-Finance Contingency clause protects against this emergency and states that even if the buyer cannot secure a loan prior to closing, they must either come up with all cash or surrender their 10% deposit. In contracts of sale that do NOT have this clause and a buyer cannot secure a loan, the seller is usually out of luck with the buyer getting out of the deal and their deposit back since the deal was contingent on securing financing!

You can see the appeal of doing this by the seller. But in today's market where the dynamic or power has shifted closer to buyers, seller's should find it very difficult to get a contract signed with this clause in it. Talk to your real estate attorney about this and be sure to find out if your contract of sale has this clause in it before you sign; especially if you have bad credit, are self-employed, or have reported declining income on your tax returns from successive years. These are all items that a bank will look at before committing to your loan!

REMEMBER: After the contract is fully executed the bank will send an appraiser over to appraise the value of the property. Assuming the #'s come in where they need to be, the bank will then process the appraisal and work on getting the buyer a loan committment. This loan committment letter is needed to submit to the condo or co-op board (with the rest of the board package) for final approval. Once you have board approval a closing date could be set up. So, just because you have a signed contract doesn't mean the deal is done; you still have the loan and the board approval to take care of!

~ The Finance Contingency
~ Is Your Earnest Money Protected By The Finance Contingency

What Will The Co-op Board Ask For?

Posted by Noah Rosenblatt on March 1, 2006 at 3.34 PM

nyc real estate

A: A lot. If you are a first time buyer of a Co-op, then read this post so that you know exactly what YOU are getting into, and what the potential buyer when YOU SELL will have to provide to get a board approval.

A Co-op board will most likely look deepest into your financial history, current salary, and references when evaluating your board package. So for sake of ease I will break down by category what you will be required to provide for most Co-op boards.

Financial History
Last 2 Years Tax Returns w/ W2's
Financial Net Worth Form (All Assets & Liabilities)
Bank Account Hard Copies (Last Month)
Hard Copies backing up Assets

Current Salary
Last 2 Pay Checks or Deposit Transfers

References
Up to 5 Personal References
Up to 3 Business References
Letter from Employer stating position, salary, & length at firm
Letter from Bank confirming accounts and balances
Letter from present Landlord

In addition to all of this you will need to gather these loan documents from your lending institution (usually takes the longest to receive):

Copies of Aztec Recognition Agreement (3)
Copy of Loan Commitment Letter

Things The Board Looks For:
1. No more than 1/3 monthly salary to be used for housing costs
2. At least 1 Years worth of Mortgage + maintenance in liquid assets AFTER closing costs
3. Increase in salary from previous year

Other items the board may ask for can be copies of personal ID's, certificate of foreign status, hard copies of individual item's net worth, or the contract of sale if you are selling a property.

NOTE: The seller broker has a responsibility to their client to pre-qualify you (the buyer) for purchase of the property. The seller broker should be well aware of what the board will look for in terms of financial and situational (such as no parents buying for kids) and should NOT allow their client to accept the offer of an UNQUALIFIED buyer.

If you plan to buy a Co-op be prepared to present original copies of everything noted above, and possibly even more, for the board to review. Also keep in mind that you will be in a position later on when you sell where you will have to pre-qualify the potential buyer; no one wants a board turndown!

Originally Published 01/07/2006

March 2, 2006

What is a 421a Tax Abatement

Posted by Noah Rosenblatt on March 2, 2006 at 10.12 AM

nyc real estate

A: The 421a Tax Abatement Certificate is a key financial resource used by developers and offered by the city to spur development and keep housing costs reasonable by offering 'temporary relief' in property taxes owed by individual condominium owners or coop shareholders. Although, most new developments in New York City today are either Condo's or Condop's, not Coops (see my post on What is A Condop?). By the way, isn't that the perfect image for this post!

According to the NYC.gov website:

The Cooperative and Condominium Abatement Program provides partial tax relief for condo owners and co-op tenant-shareholders to reduce the disparity in property tax paid between residential Class 2 properties (i.e., condominiums and cooperatives) and Class 1 properties (i.e., one-, two-, and three-family homes), which are assessed at a lower percentage of market value.

There are also eligibility requirements:

Ownership -- Condominium owners and cooperative tenant-shareholders who, as of the applicable taxable status date, may own no more than three dwelling units in any one property. Units held by sponsors or their successors in interest are not eligible.
Other Exemptions -- Properties that already receive a state or local tax exemption or abatement, such as J-51, 421a, or 421b, may not be eligible.

Its important to note that tax abatements are applied for by the developer and granted by the city to offer incentives to developers for building and marketing a new property. Usually, a 10-Year Tax Abatement is granted meaning that the actual property taxes that were assessed to the building and its individual units will get relief for the first 10 years of occupancy. The tax relief is the greatest right when the building is ready for occupancy and then increases every 2 years (20% every 2 years) until the 10 years is up, and at which time the property taxes will have hit their maturity.

Lets take a look at a real-life building for an example of the 421a Tax Abatement and the listings for sale in pre-construction:

205 East 59th New Development

nyc real estate

Apt. 9B

#Beds - 2
#Baths - 2
Total Size - 1,368 Sq. Ft.
Maint/CC - $1,626
*RE Taxes - $261
Asking: $2,211,000

Apt. 22A

#Beds - 1
#Baths - 1.5
Total Size - 1,122 Sq. Ft.
Maint/CC - $1,344
*RE Taxes - $216
Asking: $1,799,500

In this New Condo Development on 59th Street the 421a Tax Abatement brought the tax payments down to a very low $200+ for these 2 units. If I do the math and add 20% to this starting figure every 2 years for 10 years, I will reach a mature property tax value of about $650 for Apt. 9B and slightly less for Apt. 22A. So in this new development the 421a Tax Abatement is saving unit owners about $400/month or $5,000 a year for their first 2 years of living at 205 East 59th street.

I know its a bit confusing and that it could also be argued that with the temporary lower monthly expenses the developer is boosting the asking price, but in the end its still a luxury new condo with more amenities than most buildings offer; including:

- 24HR Doorman & Concierge
- Private 5th Floor Landscaped Gardent Terrace
- Fitness Center
- Service Pantry for Catered Events
- Outdoor Stretching Studio on Mahogany Deck For Yoga
- A Whimsical Puppy Park

UrbanDigs Says: For investors who bought early in pre-construction at a good price point, it might be wise to sell your unit halfway into the tax abatement. The logic here is that you are selling the property while there is still tax relief in effect and the monthly expenses are lower than they will be in 5 more years; this should help you get a higher asking price assuming the market hasn't experienced any turbulence. Always remember that as monthly expenses rise, the asking price must be reduced to compensate for affordability.

March 3, 2006

Inflation Watch: Oil Still Rising

Posted by Noah Rosenblatt on March 3, 2006 at 9.35 AM

A: The price of Light Sweet Crude surpassed the $63/Barrel mark as oil prices rose for the fourth straight day on nagging geopolitical supply concerns. Fears of more violent attacks in Nigeria and Int'l tensions over Iran's nuclear plan are two forces contributing to oil's most recent bull run.

I just feel a need to report on these things because the rising price of energy is an inflation leading indicator that new fed chief Bernanke must keep an eye on and combat by tightening monetary policy. In lay terms, this means interest rates would be raised to combat future inflation.

When scrutinizing the Iran nuclear situation more closely, the article points out:

The International Atomic Energy Agency's (IAEA) 35-nation board of governors will convene Monday to study a report saying essentially that Iran has ignored a Feb. 4 call to re-suspend enrichment work. Referring the issue to the U.N. Security Council moves Iran a step closer to possible sanctions, which oil traders fear could prompt the world's fourth largest oil exporter to cut supplies.

Should this occur, the supply of oil will be disrupted once again (for how long or by how much is still unclear), leading to more supply issues and higher oil prices. Not a good sign if you were hoping that interest rates were close to their highs with no more rate hikes in the works.

UrbanDigs Interest Rate Opinion: You know how I love to predict things; just don't plan your whole life around these opinions! I am probably about 85 - 15 in favor of a 1/4 point rate hike at the next fed meeting, and about 50 - 50 for a second 1/4 point rate hike at the meeting after that. If both meetings yield a 1/4 hike (so 1/2 in total or 50 basis points), expect mortgage rates to rise to the mid-upper 6's for 30 YR fixed and possibly higher. Housing markets should remain flat to down in this scenario with more speculative markets possibly getting hit harder and faster. I will report more on this as news develops.

~ Supply Threats Push Oil Nearer To $64

Real Estate Lingo Explained

Posted by Noah Rosenblatt on March 3, 2006 at 10.15 AM

A: Check out this great post I saw on Matrix today that explains to the general public all the real estate babble that us brokers use to describe apartments in New York City. Be sure to watch the short video clip when the reporter goes out into the streets of NYC to test out what New Yorkers really know about real estate lingo!

In A Nutshell

Some basics

1. frplc, fplc, FP = fireplace
2. gar = garage
3. HDW, HWF, Hdwd = hardwood floors
4. hi ceils = high ceilings
5. MLS = Multiple Listing Service
6. vw, vu, vws, vus = view(s)
7. FDR = formal dining room
8. HVAC = Heating, Ventilation, and Air Conditioning

Is it really worth abbreviating?

1. expansion pot'l = expansion potential
2. grmet kit = gourmet kitchen
3. assum. fin. = assumable financing
4. nr bst schls = near the best schools
5. fab pentrm = fabulous pentroom
6. q pos= quick possession

OMG

1. Wow! = better check this one out.
2. lo dues = low dues
3. FROG = finished room over garage
4. OWC = owner will compromise

Warning!

1. close to or convenient to = a lot closer than you would want
2. compact = tiny
3. mature garden = needs an industrial weeder
4. intimate = claustrophobics
5. TLC = wreck
6. interesting or unique = shag carpeting and a floor plan designed by Dr. Seuss

I can't believe the dog didnt know that WBFP means 'Wood Burning Fireplace'. I mean, if it was my chocolate lab Stella (who never barks!) she would say that this is the thing she sleeps in front of when we go to Uncle Lex's house in Vermont!

~ Real Estate Lingo, Jargon, & Acronyms Are A PITA

March 6, 2006

A Rent-Hike Induced Housing Surge?

Posted by Noah Rosenblatt on March 6, 2006 at 7.59 AM

A: Why not? A Cooling Housing Market + Rising Rents & Lower Vacancy Rates could put buying back in favor again down the road (not just yet because interest rates still have some room to rise)! Something to think about when crunching the numbers. While I still believe we have some softness in the housing sector ahead of us, I can't help but notice that if rents keep rising like they have been than the disparity between the cost of renting vs. buying will narrow!

The rental market in Manhattan is certainly favoring landlords rather than tennants right now as the vacancy rate continues to drop and rents continue to rise. Add in a 9-Month Old Housing Slowdown and all of a sudden the difference between the cost of owning (w/ tax benefits) vs. the cost of renting becomes much closer. If this trend continues could this lead to a Rent-Hike induced housing boom in New York City?

Its something that can be argued for Manhattan only, as almost all other markets do not have that rare combination of limited supply of housing plus high demand for housing at the same time. It could also be argued that there are many buyers out there who have been 'priced out' of the New York City housing market for the past 2 years, and are now facing rent hikes as they look to renew. The question now presents itself: Do Renters consider buying now that:

1. They Have Saved For A Few Years & Are In Better Financial Shape

2. Are Faced With Higher Renting Costs & Less Rentals To Choose From

3. Have Experienced A Slowing Housing Market & Gained More Control of the Bidding Process

In a recent NY Mag article the focus is on rent hikes at Peter Cooper Village & Stuyvesant Town. According to Jay Heydt of Citi-Habitats:

Driven by all the bursting-bubble talk, buyers are waiting and renting, says Jay M. Heydt, managing director of Citi Habitats' Union Square office. So "as of January 2006, there's a less than one percent vacancy rate for rentals," he says, adding that there's no tighter market than downtown; putting Peter Cooper Village at the improbable center of a boom. If Eric L. wants to stay put, he'll have to pay 25 percent more: $2,800 a month, non-negotiable. Nor is he alone. The tenants-association Website teems with postings from sticker-shocked renters. "At first [I] thought it must be a mistake!" writes one. "Bon voyage, PCV!" huffs another.

Its just such an interesting topic that I do not understand why it is not covered more in the mass media. I guess there is no personal angle on the idea; no angle, no story. Anyway, thats why we blog!

UrbanDigs Says: If NYC housing continues to soften (which I think it will, without crashing) and NYC rentals continue to get more expensive (which I'm not sure what will stop it), it's hard to ignore a situation where it just makes much more sense to BUY rather than RENT! If you have been priced out of the NYC market for the past year, KEEP YOUR EYES OPEN and continue to save your money and get your credit score as close to perfect as possible and put yourself in good financial shape so that you can take advantage of a deal when it presents itself. Trust me, it will!

~ Out with the Old, In with the Newer

Who's Behind The Mask?

Posted by Noah Rosenblatt on March 6, 2006 at 9.06 AM

A: Its Jon Brownstoner, of the Brooklyn real estate blog Brownstoner. This is a GREAT blog all about Brooklyn Brownstones and written anonymously.

definitely a good read for anyone interested in Brooklyn real estate. Besides the main site the blog has a API from Property Rover so that you can search listings on the brownstoner site, a forum for group discussion, a renovation blog component, and a my brownstone webpage where you are invited to create your own brownstone homepage and to browse the homepages others have created.

If you use a aggregate reader to display new posts from all your favorite blogs, add Brownstoner to the list! Other Real Estate blogs that MUST be on your list include: Curbed.com , Matrix , & Property Grunt.

~ Brownstoner
~ For Real Estate Blogs, It's Still All About Location

Upper West Side Value

Posted by Noah Rosenblatt on March 6, 2006 at 10.02 AM

A: If you are looking for a 1BR in a prime location of the Upper West Side near Central Park and with the luxury of a 24HR Doorman and planted roofdeck, check out this 6-day old listing at 200 West 79th Street.

The Gloucester building is located on 79th street between Broadway & Amsterdam Avenue and is a full-time doorman building with a live-in super and porter available 24 hours. The lobby and hallways were just renovated meaning future assesments for this type of work shouldn't be a concern for you.

It's always best to ignore renovations and focus on the 4 things that can NOT be changed about a property: LOCATION, SIZE, VIEWS, & LIGHT. With regard to this property the location is great, the size is fine, the views I'm not sure about, and the light seems great. Not a bad start.

*Note: Your real estate attorney will review all building financials, offering plan, board minutes, and contract of sale before advising you to sign the contract. You should be notified if any major renovations are planned which might lead to future maintenance assesments!

200 West 79th Street; Apt 9B

Size: Aprox 650 Sq. Ft.
# Beds: 1
# Baths: 1
maintenance: $859 (a bit high for apartment size)
Asking: $495K
Price Per Sq. Ft.: $762
Marketed By: Doron Zwickel of Douglas Elliman

March 7, 2006

Coco Selling Studio's in Upper East?

Posted by Noah Rosenblatt on March 7, 2006 at 8.40 AM

A: Check out this $210K studio apartment that Citi-Habitats own Coco Mindreau is selling at 531 East 87th Street.

Only 1 flight up and getting southern light, this seems like a nice deal for anyone looking for a cheap home in the Upper East Side. When calculating the monthly expenses for a buyer who puts down 20% with a mortgage rate of 6.25%, the total comes out to $1,477/Month BEFORE TAX DEDUCTIONS!

If you are renting a studio apartment right now paying close to $1,300 a month, and you have the means to buy, I would strongly consider viewing this 7-day old listing. It will go fast!

531 East 87th Street; Apt. 2B

# Beds: 0
# Baths: 1
maintenance: $443
Financing Allowed: 80%
Asking: $210K
Marketed By: Coco Mindreau of Citi-Habitats

Interest Rates Could Go Higher

Posted by Noah Rosenblatt on March 7, 2006 at 10.49 AM

A: I'm now starting to get the feeling that interest rates will be headed higher than previously thought and the idea of a feds funds rate of 5.5% was recently predicted by Lehman Brothers.

It pains me to say this but it looks like we are going to be facing a few more interest rate hikes as the fed looks to bring monetary policy to a "neutral stance"; neither hindering nor helping economic growth.

According to today's CNN Money article titled "Poole Sees Rising Interest Rates"...:

The economy has a "great deal of momentum" and the Federal Reserve may have to raise interest rates further, especially if growth exceeds expectations, one of its top policy makers said Monday. "Should we get data in the coming months that are consistently strong, particularly if there are substantial upside surprises, then that says we're going to have to step a little harder on the brake," St. Louis Federal Reserve President William Poole told Reuters.

My last report on interest rate policy had me at 85 - 15 in favor of a rate hike at the next meeting, and 50 - 50 for another rate hike at the following meeting. It's time to revise these numbers upward and bring my current thinking to 95 - 5 in favoir of a rate hike at the next meeting, and 65 - 35 in favor of another rate hike at the following meeting.

As I browse Matrix today, I see Jonathan Miller is thinking the same way I am as he reports on this issue:

As a sign of more difficult times ahead, specifically in the real estate economy, analysts are beginning to raise their estimates as to how high the Fed will go until they feel inflation is in check. Consensus has been to either 4.75% or 5%. Lehman Brothers has just increased their federal-funds rate peak to 5.5% in August or September. They have not penciled in a policy reversal at any time in the next year and a half [Barrons]. Their reasons for the change:

1. Although the housing market is cooling off, the process is slow and Fed Chairman Bernanke has reiterated the idea that the Fed will respond slowly to the cooling.

2. The economy is showing more underlying strength than we had expected. Therefore, it will probably take longer for the diminishing housing-wealth effect to overcome an even stronger underlying trend in growth.

Boy oh boy oh boy. What a ride this 'new' fed is taking us on here as everyone keeps upping their estimates on how high the fed will actually go with rates. Six months ago most of us thought we would be done by now; man were we off the mark! But that's the way it is and at least we have a good idea now of where we are headed.

Worst Case Scenario: If Lehman Brothers is correct and the fed really does raise the feds funds rate to 5.5% (we are at 4.5% now), expect 30YR mortgage rates to easily exceed the 7% mark and possibly go closer to 7.5% when all is set and done. As money gets more expensive to borrow, buyers will be even more hesitant to pay top dollar for any property across the country.

~ Poole sees rising interest rates
~ The Housing Boom is Over & The Economy Feels A Little Too Fine

Sex Really Does Sell in NYC

Posted by Noah Rosenblatt on March 7, 2006 at 2.54 PM

A: Thanks for the tip, whoever you are! Did you catch this ad in the NY Times this Sunday? We all know that SEX SELLS in this city, but I didn't think it would become part of a marketing package for an apartment. I bet it worked and probably got the broker more calls than usual.

Man, this place really is X-SEXY! For anyone out there with too much money in their bank accounts than they know what to do with, I highly recommend buying this pad!

252 Seventh Avenue

# Beds: 2
# Baths: 3
Monthly's: $2,011
Financing Allowed: 90%
Asking: I don't know. $3.2M or $2.995M?
Marketed By: Deborah Rieders & Susan Storan of Corcoran

March 8, 2006

PropertyShark.com: Tools For Real Estate

Posted by Noah Rosenblatt on March 8, 2006 at 9.58 AM

A: PropertyShark.com is by no means new (most real estate blogs link to them) but I can't help but notice that many of my clients still ask me about this type of information when all they need to do is go to this website! Just type in a building address and you will retrieve consolidated NYC property records that includes owner info, title history, taxes, violations, permits, demographics, foreclosures, sales comparables, toxic hazards, air rights, and more. A truly great resource for any buyer or seller.

PropertyShark.com lets you do a search in a number of ways:

1. Which have recently sold and what they sold for
2. By neighborhood, size, and type
3. Which are in foreclosure or pre-foreclosure
4. By owner's name
5. Which are actively for sale

The site is also not restricted to NYC, as they now cover over 20 million properties in 15 major markets. Combining public data with proprietary data and technology, the PropertyShark.com team strives to level the playing field to allow all people to access data that was previously only available to a select few.

definitely worth the time to visit and bookmark for future use!

Prosper.com: A New Lending Model?

Posted by Noah Rosenblatt on March 8, 2006 at 10.55 AM

A: I saw this one on Inman Blog the other day and just thought it was a very interesting idea created by the former E-Loan founder. Think of a 'Citibank-Meets-Ebay' business model and you get to Prosper.com.

Prosper.com is a online marketplace for people-to-people lending and was launched to make consumer lending more financially and socially rewarding for everyone. According to the website:

The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper's online auction platform.

People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers.

Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as people who lend bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.

Visually, the online lending platform works like this:

UrbanDigs Says: It's just such a new idea (lending from people online through a bidding model rather than from a bank) that personally I would feel a little nervous about it. That's not to say its a bad idea or that you won't find a great rate through a service such as this, its just that its so new and I'm not sure exactly how it works or the background of who you are lending from or to. I would love to hear some feedback from anyone that has used this new site so that I can hear concrete evidence of its quality of service.

~ E-Loan cofounder starts new Internet lending site

March 9, 2006

DinaBean.com: Great Gift Ideas For Brokers

Posted by Noah Rosenblatt on March 9, 2006 at 11.58 AM

A: Thanks for the tip from Dina who started her own gift shop online DinaBean.com. Part of a real estate broker's job, besides satisfying the needs of their client, should always be to present a gift once the transaction closes (either renting or selling). It just makes for good business in a service industry that is largely based on personal refferals. Dinabean.com offers gift ideas that are 'outside the box' and perfect for brokers to offer to their clients.

I usually base the gift I give on the commission I receive from a deal. Here is the breakdown that I go by:

$0 - $5,000 Commission ---> $150-$200 Gift
$5,000 - $7,500 Commission ---> $250-$350 Gift
$7,500 - $10,000 Commission ---> $350-$500 Gift
$10,000+ Commission ---> $500+ Gift

Now this is NOT set in stone and giving a gift that is valued lower than this guide is fine; as it's the thought not the value that really counts. But this is what I usually stick to because I love to see the surprised look on my client's face when they see what I got them after the deal is done.

Note: The gift is a tax write-off for brokers because it is a business expense! Be sure to keep the receipt and give it to your accountant when he/she does your filing.

Giving a nice gift to your client really tells them that you enjoyed working for them more than the dollars that you got from doing the deal. If I'm willing to spend a portion of my paycheck on my client, they know that they have a broker that truly cares about them and not just about the deal! It's a great model to abide by for any agent looking to grow their business into a 'refferal based' business as they enter the prime of their real estate career!

~ DinaBean.com Gift Ideas

March 10, 2006

3 Reasons To Buy Now

Posted by Noah Rosenblatt on March 10, 2006 at 9.48 AM

A: With all the bubble talk I feel it would be a good idea to take the other side of the coin and discuss a few reasons why it would be a good idea to buy now, rather than wait out a cooling housing market.

Reason # 1: Interest Rates Are Rising - The argument could be made that in a rising interest rate environment the housing market will cool off because money is getting more expensive to borrow. But even if you get a property for a bit less in 6 months because of cooling, you will lose that 'savings' due to the higher interest rate that you lock in down the road. If current consensus is now for at least 2 more rate hikes (for a total of 50 basis points), with possibly more, I believe that buyers now have a bit of pressure on them if they happen to find a great deal out there. FACT: Interest rates are going up and no one really knows how far! Recent reports suggest they are going higher than anyone originally thought and Lehman Brothers recently predicted 4 more 1/4 point rate hikes ahead of us. The Skinny: Expect Mortgage Rates To Rise Considerably Over The Next 6-10 Months As The Fed Combats Inflation & A Booming US Economy

Reason # 2: NYC Rents Are Rising: With vacancy rates under 1.0 and housing prices still high, landlords know they can jack up their rents as units turnover. These days, rent hikes of 25% more for non-rent stabilized buildings are not uncommon! The recent article in NY Mag and my post here on UrbanDigs discusses how the landscape has changed for renters in New York City over the past year or so. For any renter who is facing a lease expiration soon and currently has a stable/high-paying job with significant liquid assets saved up, should consider looking at the sales market as they will most likely face much higher renting costs as they renew or sign a diferrent lease. The days of cheaper rent and no fee rentals that we got used to after September 11th are no longer. The Skinny: The Cost of Living in NYC Without Building Equity is Rising! Taking into account tax benefits, equity building, and future appreciation over the long term, it might make sense to buy rather than rent if you are forced into higher renting costs!

Reason # 3: Buyers Have Control & Can Submit A Low-Ball Offer - Sellers are frustrated. Open House activity is not what it used to be and sellers are faced with patient buyers and a longer time on the market before a deal presents itself. In todays market, sellers should expect at least 3-6 months to sell their property. But what about those sellers that have to sell now? The other day I reported on a $210K studio on the Upper East Side. Well thats gone now only 2 days after I reported on it. Not to say my post brought in the buyer, rather that this was a deal where the seller had to sell now. So the broker underpriced and the unit sold very quickly. Somebody got a good deal and for all I know the seller accepted a 180K offer? Who knows? The point is that there are good values out there if you look. And even if you think a property is still overpriced (but you love it), submit a low ball offer! You would be amazed at the response in today's market at an offer that a year ago would have insulted the seller and garnered 'no response'. If a property was asking 700K, was reduced to 650K, and you think its worth 575K, then submit it! Don't wait around for another price reduction. Be proactive and submit your highest bid and leave it in their hands. The Skinny: Buyers Have Power & Sellers Are Frustrated. You never know the level of urgency that a seller is under. Buyers must understand that they have more control in today's market than they had in the past 2-3 years! Take advantage! Submit your low-ball offer and see what happens; after all, you might get an apartment for a price you never thought possible.

These 3 reasons describe the current environment we are in when analyzing NYC real estate. What do we know? We know borrowing costs are rising. We know rental costs are rising. We know we are 9 months into a housing slowdown and deals do pop up here and there. We know that buyers have way more control and negotiating power than they had in the past 2-3 years. We know sellers are frustrated. This is what we know. Put it all together and I can easily make an argument why its a good time to buy. I'm not broker babbling here. I'm simply offering a breath of fresh air while all the other blogs talk about the impending housing crash. But what if it doesn't? No one knows how to perfectly time the real estate market and the decision to buy vs. rent should be made after analyzing your own personal situation. Ask yourself:

1. Do I have enough assets to afford a down payment, closing costs, and still have enough left over to be comfortable both for my own well being and to pass a coop board (should you buy a coop).

2. Is my job stable? Do I expect my salary + bonus to rise over the years?

3. What will my rent be when my lease expires? Is it going to be much higher than it was?

4. Do I plan to live in NYC for at least the next 3 years?

If you answer 'YES' to these 4 questions than you should strongly consider buying rather than renewing your more expensive lease to rent. If you have the means, then Buy! Don't be fooled by all the bubble talk and don't try to time the market perfectly. Buying a home in New York City is still to me a fantastic investment as long as you buy within your financial limits. Good Luck!

March 12, 2006

Mortgage Report: Week of March 13th - 17th

Posted on March 12, 2006 at 2.30 PM

Bond prices fell last Monday and caused home loan rates to rise about .125%. Because the European Central Bank decided to raise their interest rates, the concern is that foreign investors will now start moving their money out of the US market. For this coming week, inflation watchers will be on the edge of their seats waiting to see if consumer prices are indeed on the rise. If the news of the week looks economically "hot", with inflation on the rise, look for bond pricing to suffer and home loan rates to rise another .125%.

March 13, 2006

Rate Your Co-op Board

Posted by Noah Rosenblatt on March 13, 2006 at 9.03 AM

A: Although I registered the domain www.passthecoopboard.com months ago it looks like I was beaten to the punch by this well thought out website called Wallfly.com. Wallfly is a site dedicated to building a database of rating Co-op boards; a problem that I was dying to solve. A difficult (data and user reviews will take time) yet rewarding model that lets residents lookup and rate their own building's board policy on toughness, restrictions, what its like to live there, what it takes to get in, and who deson't stand a chance!

NOTE FROM SITE: To review you must register. A member may only write one review per building. If you wish add to a posted review, however, you may edit your review at anytime.

Moving on, the main page has a RAVE REVIEWS section that points out the best reviews for buildings that were left by residents.

In addition the site has added some fun stuff such as a TOP 10 list of most infamous board turndowns; with Madonna & Howard Stern being the current leaders. Add in Recent Reviews, a Watchlist, Co-op Buzz section, Glossary of terms, and Real Estate Links (no UrbanDigs though..whats up with that?) and this site is on the right path to building what will eventually be a very useful resource!

If you are looking to buy a Co-op then you should know that the board approval process can be tedious, frustrating, and painful at times. A site like Wallfly.com will be very handy once their database gets filled with user reviews. Currently the site is lacking in content but that should be expected from a 7 month old startup! Good Luck Wallfly guys! Now lets try to help them out by submitting a review of your Co-op!

~ WallFly.com - Rate & Review Co-op Boards

Out with Co-ops -- In With Condo's?

Posted by Noah Rosenblatt on March 13, 2006 at 10.35 AM

A: As I browse Curbed.com today I notice a frustrated reader bring up the question of 'Why Are Co-ops Here'? It's a great question as future first time homeowners don't really know the headaches and restrictions that many Co-ops place on their shareholders. From the tedious board approval process to subletting and living policies, you would think Co-ops are a dying breed. But I'm not so sure they are.

To Curbed Reader: As much as I would like to agree that a city of condo's would be so much simpler than a city ruled by Co-ops, I don't see much change down the road. Yes it is true than almost ALL new developments are either Condo or Condop, I do not see how the more liberal condo legal structure will ever surpass the restrictive and dictatorship model of Co-op legal structure in New York City.

Rather, I do see a future environment where existing Co-op boards get more liberal as the members of the board change over time and reflect the new ownership of the building itself. In my opinion, a Co-op board with less stringent policies makes for a more valuable stock certificate at resale.

A Co-op with more liberal purchasing, subletting, living, and reselling policies can be marketed to a larger pool of potential buyers making it more valuable. A Co-op property with very stringent board policies must lower their asking price as they are marketing to a much smaller buyer pool.

I'm sure many filthy rich people out there will disagree with me as they prefer the stringent policies of their Co-op boards so as to maintain the quality of resident that ultimately makes it as a shareholder of their private corporation. But there are more less wealthy people out there than filthy rich people. So, I tend to side with the masses.

New York City used to be about 80% Co-op or so (estimate only) and has since started swaying a bit towards the Condo side with all the development due to the past 3-4 years of the housing boom. Now I would say NYC is about 75% Co-op. This # will never go below 50% so a world not ruled by Co-ops in New York City is just an unrealistic dream. Instead, look for a LIBERALIZATION of Co-op boards that will be an attempt to level the playing field when it comes to board approval, subletting, pied-e-terres, parents buying for kids, and reselling; all features of a Condo that make it more valuable.

But in the end, you still own stock in a corporation. Never forget that! Closing costs will always be lower and Co-op owners will never own a title to their property!

~ Ask Curbed: Will the Revolution Be Condo-ized?

What is a Sponsor Unit?

Posted by Christine Toes on March 13, 2006 at 3.17 PM

Sponsor units have NO BOARD APPROVAL! When an individual or company converts a rental building to a co-op or condo, the first transfer of an apartment, or "sponsor unit" does not require board approval.

According to Wallfly.com's Glossary: Sponsor Unit: Apartments that are held as an investment by the sponsor - the original develeper who built the building or converted the the building to a co-op. Sponsor apartments are usually exempt from board approval.

But there are some other important things to note!

Sponsor units command a premium because people who might not pass a board can buy them. For example, a sponsor unit would be a good choice for parents who want to buy an apartment for a child who is a student. A sponsor unit may be the best apartment for someone who is not working, or only has a short job history. Basically, if you aren't a candidate for a co-op building and can't quite afford a condo, keep an eye out for a sponsor unit!

Buyers of a sponsor unit should take note that they will need to pay NY State and NY City transfer taxes, and often the seller's attorney fees. You still have to submit a board package (Homeland Security! The management company needs to know who is moving into their building) and you almost always have to abide by the building's house rules as far as sublet requirements and pets. Although it varies from sponsor to sponsor, you may be able to put down less than the minimum financing normally required by the building.

Check out these sponsor units under $550K:

$539K - One Bedroom - Central Park West and 101st St

$499K - Convertible two bedroom - 25th St. and 2nd Avenue

$289K - Studio - 311 East 25th Street

March 14, 2006

Wellington Tower Condo Pricelist

Posted by Noah Rosenblatt on March 14, 2006 at 8.48 AM

A: I just received the updated price list for The Wellington Towers Condo on 350 East 82nd Street in the Upper East Side.

The Wellington Towers Condo Conversion is slated to be a sophisticated limestone, granite, and brick tower of studio to 5-bedroom luxury condominium residences with expected occupancy sometime during the Summer of 2006.

Amenities Include:

- Year-Round Swimming Pool
- Spa Facilities; Sauna, Steam, & Relaxing Treatment Rooms
- Fitness Center
- Children's Playroom
- Private Lounge w/ Wi-Fi Access; Check out my Hotspot Locator Website
- Community Room w/ Catering Facilities
- 24HR Doorman & Concierge
- Valet Parking & On-Site Garage
- On-Site Dry Cleaning & Maid Service
- Pet Friendly
- Gas Fireplaces in Apt's on 14th Floor & Higher

Updated Pricing & Availability List:

One thing to note is that monthly's are a bit high with a tax abatement already 4-5 years old. Still, if you have the means definitely look into it as the location is great and amenities are plentiful in this slick new building.

~ Wellington Tower Condos

Co-op Board Reference Letters

Posted by Noah Rosenblatt on March 14, 2006 at 10.45 AM

A: When preparing a package for a Co-op board you want to be as professional as possible and present yourself in the best possible light. The most important aspects of the board package include your financial history, current job and liquid assets, and personal & professional letters of reference. For this post I will go over how your letters of reference should look before submitting the package to the board.

Below are 2 reference letters (1 personal & 1 professional) that were used in a past deal that the Co-op board ultimately accepted. To protect the privacy of the buyer, all names, numbers, and author of the letters are blacked out.

PERSONAL LETTER OF REFERENCE EXAMPLE

PROFESSIONAL LETTER OF REFERENCE EXAMPLE

Although I had to black out the names and numbers listed in the letter you should still be able to get a good idea of how the reference letter should be made. Keep it 3-4 paragraphs in length and have it typed up on a corporate letterhead with the author's signature at the bottom along with contact info. Good Luck!

New Credit Score System Revealed

Posted by Noah Rosenblatt on March 14, 2006 at 11.04 AM

A: The 3 major credit agencies today revealed a new system called "VantageScore" for computing one's credit rating after a need for a systemwide overhaul has been hotly debated for years. The goal: Simplifying the loan process for both lenders and borrowers. Story.

According to the article:

The announcement by Equifax, Experian and TransUnion said the new "VantageScore" was "a direct result of market demand for a more consistent and objective approach to credit scoring." "Under the new scoring system, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation," the agencies said in a joint statement.

This is so important because a person's credit score is directly related to how much a lender will ultimately lend and the rate they are willing to provide. The better the credit score, the more you can borrow at a lower interest rate.

The new scoring system will range from 501 - 990.

According to Experian, the rating categories will be as follows:

A -- 901-990

B -- 801-900

C -- 701-800

D -- 601-700

F -- 501-600

The new scores will be available immediately!

~ Major Credit Agencies Adopt Uniform Score

March 15, 2006

The Yield Curve Explained

Posted by Noah Rosenblatt on March 15, 2006 at 8.55 AM

A: I saw this YIELD CURVE EXPLANATION on the sidebar of a recent CNN Money article last night and I immediately knew it would be perfect if I transffered the meat of the article into a post on UrbanDigs. For sake of ease, here is an explanation of the yield curve, and what surrounds all the recent talk of an inverted yield curve!

Lets get right into it. The yield curve is what economists use to capture the overall movement of interest rates (which are known as "yields" in Wall Street parlance).

NORMAL YIELD CURVE

Normally the longer you lend somebody money, the more money you want back in return. After all, more time means more risk. So longer-term bonds typically command higher rates of interest than short-term notes and bills. The resulting yield curve -- a graphical representation of the rates of return for short-term to long-term Treasuries -- rises from left to right.

TYPICAL MOVE

When the Fed starts raising or lowering its target for an overnight bank lending rate -- essentially moving the "short" end of the yield curve -- the entire curve typically moves as well.

FLATTENING YIELD CURVE

Recently the Fed has been raising short-term rates. But long-term Treasury rates have been falling. This has led to a "flattening" of the yield curve, where the difference between short-term rates and long-term rates becomes less and less.

INVERTED YIELD CURVE

If short-term rates continue to rise and long-term rates refuse to do so or head even lower, the yield curve will "invert" -- an unusual state when short-term rates are higher than long-term rates. This is often taken as a sign of impending recession. But debate has grown in recent months over whether this is in fact a reliable indicator. The last time the yield curve inverted was in 2000, and a recession followed. The same thing happened in 1989. But an inversion in 1998 proved to be a false alarm.

This yield curve theory is important to understand because there are always things that can be learned from CAUSE & EFFECT. For example, when the yield curve inverts a recession is looming ---> if a recession is looming the fed will cut rates ---> as rates fall the housing market will runup.....and so on and so forth. After all, having a general understanding of where monetary policy is headed can be very advantageous when formulating a future investment strategy!

It's NOT an exact science but it does tell a story that has resulted in some kind of scenario that could be educational for future analysis. It is true that every recession had an inverted yield curve years before to predict it. However, not every inverted yield curve predicted a recession. Confusing right. Well like I said, its not an exact science. The reason it was big hoopla when the yield curve inverted months back was because if a recession did actually occur than the fed will not raise rates by that much and will actually need to start cutting rates once the data proves a recession is at hand. If rates go down, housing becomes more attractive an investment as CD's, Money Markets, and other fixed investment vehicles become less rewarding.

SmartMoney.com Article: Inverted yield curves are rare. Never ignore them. They are always followed by economic slowdown - or outright recession - as well as lower interest rates across the board.

I hope the graphs above make sense so that now you know what the experts are talking about when they discuss the yield curve, bond rates, and what it could all mean down the road. Lets see how accurate this past inverted yield curve actually turns out to be.

~ Big Rally in the Bond Market
~ The Living Yield Curve

March 16, 2006

Priced To Sell: 200 East 36th Street

Posted by Noah Rosenblatt on March 16, 2006 at 9.12 AM

A: I found this listing today that was originally priced at $525K back in December and reduced twice to $450K today. With 2 reductions in 3 months on the market you know this seller is ready to go! Whoever is in the market for a 1BR in Murray Hill with at least 725 Sq. Ft., 24HR Doorman, Renovated Common Areas, Gym, Courtyard Garden, Storage Room, and low monthly's which includes basic cable should definitely check this one out.

A clip from the central listing system:

Drastic Price Improvement!!! Will not last!!! This beautiful large one bedroom apartment has a great layout and high ceilings. The apartment is very sunny with western exposure & Empire State building view. Apt has parquet floors and five closets and is quiet. This full service building boasts a 24 hour doorman, brand new lobby and hallways, courtyard garden, roofdeck, live-in suoper, laundry room, private storage room, bike room and luggage room. Brand new gym just opened! The low maintenance includes basic cable. Pets Welcome! Great building in fabulous neighborhood that offers it all-- restaurants, entertainment, transportation.

Unfortunately this Co-op board discourages parents buying for children or the use of guarantors.

200 East 36th Street; Apt 2C

Size: 725 Sq. Ft.
# Beds: 1
# Baths: 1
maintenance: $720 (Below $1/Sq. Ft.!)
Asking: $450K
Price Per Sq. Ft.: $621
Originally Priced: $525K on 12/9/2005
Marketed By: Caitlin Hughes of Corcoran

OPEN HOUSE SUNDAY FROM 4:00 - 5:30PM

Good Luck!

Outdoor Space Landscaping

Posted by Noah Rosenblatt on March 16, 2006 at 1.14 PM

A: For those individual property owners with private gardens, patios, or terraces and for those Co-op buildings with roofdecks take a look at this Riccardi Landscape Design that focuses on outdoor space redesign in New York City.

Although it is hard to find outdoor space in Manhattan, for those of you that do have it and for buildings that have common roofdecks or courtyards, this seems a great idea to increase the quality of your living and investment! I already wrote a blog titled, "Outdoor Space: Find It!", that points out the big advantage of both owning and re-selling properties that have outdoor space in NYC.

Take a look at this before and after example I found on the site:

BEFORE

AFTER

No wonder some of the customer testimonials mention:

"Barbara Delivered our Beautiful New Garden on Time and On Budget - We now spend more time here than our Living room!"

For those of you who like to do it yourself, like me, you can:

MY OUTDOOR SPACE

UrbanDigs Says: Do what I did with my outdoor space. Go to Home Depot and get a bunch of bags of marble landscape chips, evergreen plants, bags of dirt, and lattice wood. Order rectangle planters from a site such as this one that can easily be assembled and then put it together, stained, poly'd a few times, and interior coated with roof sealant before planting. Do your best to cover your walls with the lattice wood and put climbing roses or hydrangea's so that it will crawl up the lattice. Add some clear christmas lights to the lattice wood and bam, you got a great outdoor space. Or you can pay Barbara from the site above to do all this for you.

March 17, 2006

2BR Condo's For Under $1M

Posted by Noah Rosenblatt on March 17, 2006 at 8.28 AM

A: Finding a true 2BR/2BTH Doorman Condo in Manhattan is hard enough on your own. Here is some help. Check out these 4 sub $1M apartments that may be good for your growing family! Priced from lowest to highest.

275 West 96th St; Apt 4F

Size: 1,100 Sq. Ft.
# Beds: 2
# Baths: 2
maintenance: $912 (Below $1/Sq. Ft.!)
Asking: $899K
Price Per Sq. Ft.: $817
Originally Priced: $899K on 3/9/2006
Marketed By: Alan Nickman & Stephen O'Neil of Bellmarc

135 East 54th St; Apt 4E

Size: 1,200 Sq. Ft.
# Beds: 2
# Baths: 2
maintenance: $1,288
Asking: $965K
Price Per Sq. Ft.: $804
Originally Priced: $995K on 10/17/2005
Marketed By: Jeanie Davis of Corcoran

333 East 34th St; Apt 5L

Size: 1,185 Sq. Ft.
# Beds: 2
# Baths: 2
maintenance: $1,304
Asking: $975K
Price Per Sq. Ft.: $823
Originally Priced: $975K on 2/13/2006
Marketed By: Daniela Kunen of Douglas Elliman

236 East 47th St; Apt 26E

Size: 1,127 Sq. Ft.
# Beds: 2
# Baths: 2
maintenance: $2,073 (High Monthly's Affecting Price)
Asking: $990K
Price Per Sq. Ft.: $878
Originally Priced: $990K on 11/15/2005
Marketed By: Inge Tuncay of Halstead

As always, feel free to talk with me every MON - FRI from 10:00AM - 12:00PM right here on UrbanDigs to discuss whether these 2BR's listed might or might not meet your needs!

March 20, 2006

Real Estate Jobs in Jeopardy?

Posted by Noah Rosenblatt on March 20, 2006 at 9.47 AM

A: Over the past few years as the housing market surged, thousands of either unemployed or unhappy workers decided to become a real estate agent. Unfortunately, the housing surge was only temporary and as every seasoned real estate professional knows, refferals and creative marketing are what drives your business. So I ask you, what will thousands of relatively new real estate agents do now that the housing market is cooling and they are in the hardest part of their careers; Building Their Business & Refferal Base. Fact is, it can take years to build one's real estate business where personal and professional refferals are the main driver of your annual income. Its just unfortunate for those who will never make it!

When I was at a recent Citi-Habitats office meeting, it was announced that the average length of a real estate agent's career is 1.1 years. It was also announced that the average career of a top producer is about 4.5 years. While these numbers are probably not exact figures and one could argue that numbers could be presented in any possible light, its hard to ignore the disparity between these two concepts; average length of career and average career length of top producers.

So what happens to the rest of the agents? Well quite simply they die out. According to today's CNN Money article:

Over the past four years, the housing market has been a big driver of job growth as almost four out of every 10 jobs created in the United States were housing related. "At best people should prepare for no pay increase and no bonus, something they have been getting a lot of," Mark Zandi, an economist at Moody's Economy.com told the paper. "At worst they should be thinking they may need to change occupations."

Its a tough world out there when you try to chase a surging market. I've lived through it when I was an equities trader during the dotcom boom, and I'm living through it now as a real estate agent in a cooling housing market. Who will survive with so many agents fighting for a share of a decreasing # of sales housing market in New York City? Will sales agents start doing rentals? Will they retire? Will they move on to other jobs? Well, they have one thing going for them. The national economy is booming and job creation is strong. But when will the denial of a still-booming real estate business actually be overcome?

I'm hearing from colleagues that the older generation brokers are for the most part, beginning to move on. While I have no stats to back this up, it does make sense. Younger brokers have come in droves over the past few years and have brought with them more energy and determination to work harder for their clients. The days of putting a listing in the system, showing 3-4 OH's on Sunday, and getting a direct deal and bringing a 6% commission to the house are over!

Perhaps its just the old American Way of chasing the big money, wherever it happens to show up. I recall when I was at the Real Estate Institute studying for my license that the teacher said to a class of 50 or so, "...forget being a buyer broker. They just take your commission and will never last". Boy was he wrong. It even sounded as if he was frustrated by the fact that buyer brokers are entering the market and taking away 3% of his commission; since he didn't bring in the buyer and get a direct deal. In my humble opinion, buyer brokers are a key aspect of the real estate industry. In fact, I believe there is a stat out there that aprox. 85% of deals in NYC are co-brokes; meaning that 2 brokerage firms worked together to get the deal done and share the commission. Think about this:

What is the value of the seller broker right now besides acting as the gateway to the rest of the brokerage community? Shouldn't the buyer broker who brings the actual deal to the table be rewarded most?

And what about the online real estate landscape that is changing so drastically? We are still waiting to see how this plays out and who the winners are. How will it affect sellers and seller brokers? Its going to be very interesting to see which brokerages are the survivors, which online sites are the survivors, and more importantly which real estate agents are the survivors. Maybe it will be the real estate bloggers that come out on top? Maybe not!

In the end it comes down to one hugely important aspect when discussing the future of real estate jobs: WHO HAS THE BEST & MOST CREATIVE MARKETING STRATEGY AND THE LARGEST REFFERAL BASE! Trust me Jacky Tiplitzky will be just fine. Michael Shvo will be better than fine. Dolly Lenz ain't going anywhere! So how could we learn from them!

~ Real Estate Jobs in a Sad State

Price Per Square Foot Rises

Posted by Noah Rosenblatt on March 20, 2006 at 10.09 AM

nyc real estate

A: My daily browsing of Matrix led me to this interesting chart regarding the Price-Per-Square-Foot (PPSF) of closed Co-op & Condo deals for the entire island of Manhattan. For those newbies, PPSF is a number derived simply by dividing the asking price by the total size of a property. It's a valuation metric used to asses a property's actual resale value.

According to the post:

The average price per square foot of a Manhattan apartment has risen continuously over the past decade, up a total of 234.7%. The average square footage of all units sold peaked with the dot-com boom, at 1,362 square feet, later trending down 6.8% to 1,269 square feet in 2005.

NOTE: As with all housing stats this chart is dating back to last year (lagging) when the market was very different. I'm certain the next chart, or perhaps the following one, will more accurately show the recent housing slowdown in NYC with a small drop in price-per-square-foot per transaction closed.

~ Crains New York Business Economic Spotlight Chart - March 2006

March 21, 2006

4BR Value in Gramercy

Posted by Noah Rosenblatt on March 21, 2006 at 10.36 AM

nyc real estate

A: Check out this 6-Day old listing marketed by Richard Healy of Halstead which to me represents a fantastic value for a 4BR Condop in Gramercy. For those in the market for a 4BR family home in these neck of the woods, be sure to check this one out ASAP! While the high end is a bit sluggish right now, props to this broker for pricing it correctly.

Its hard enough to find a 4BR family home in Gramercy for under 3M, let alone one that is 3,600 Sq. Ft. in size. While this pre-war building doesn't have a doorman, it does have a wrought iron gated entrance w/ stone floor, a computerized key entry security system, a keyed passenger elevator, and investor friendly board policies. Priced at only $815 a square foot, somebody will get a lot of bang for their buck with this one in a great location with 4 exposures! Some more details:

118 East 25th Street; 3rd Floor

Size: 3,600 Sq. Ft.
# Beds: 4
# Baths: 3
maintenance: $2,464 (LOW - includes taxes as well!)
Asking: $2,975,000
Price Per Sq. Ft.: $815 (See the value!)
Marketed By: Richard Healy of Halstead

4BR Floorplan

nyc real estate

Mortgage Report: Week of March 20th - 24th

Posted on March 21, 2006 at 6.21 PM

Retail sales for February were weak and appeared to be spread across most types of retail outlets. Weak economic news tends to benefit Bond pricing and that's why home loan rates improved slightly last week. This week there are a few ecomomic reports that may influence housing rates and will reveal inflation on the producer level. A favorable PPI report on Tuesday will likely benefit both stocks and bonds and bring more improvement in loan rates.

March 22, 2006

Finance Contingency: Not For Me?

Posted on March 22, 2006 at 8.01 AM

Let me first start by stating that I am not a real estate attorney and that you should always discuss with your attorney topics of this nature. Before considering removing the mortgage contingency in the sales contract it is best to consult your attorney to assess the amount of risk for your current situation.

With almost every sale the question of the buyers willingess to remove the mortgage contingency comes into play. From my experience, people who have purchased multiple properties generally are not concerned with removing the contingency while the first or second time buyer may be terrified by the idea. Let's take a look why.

According to Freeadvice.com: A "mortgage contingency clause" is a provision in the home purchase contract that says that if the prospective buyer can't get a mortgage within a fixed period of time, s/he can call the whole deal off. In other words, the agreement is conditional on the buyer being able to obtain a mortgage on the property.

Below are some common reasons why someone could run into problems obtaining financing:

1. Low Credit Score
2. Lack of Income
3. Lack of Assets
4. Apartment does not appraise for the contract price and the bank will not cover the gap. (was a common situation in Manhattan Condo's where the purchasers were obtaining 90% financing or more)
5. Building may have a low owner occupancy rate, pending lawsuits or another situation that the bank may consider problematic.
6. Loss of Employment

You know your financial situation better than anyone and with the help of a trustworthy mortgage broker should easily be able to anticipate any problems with the bank. However, it has been my experience that in the last few years banks would pretty much loan to anyone with a pulse.

Number 4 listed above (Apartment Does Not Appraise For Contract Price) is particularly interesting because in the past coulple of years low appraisals were very common. The recently sold comparable sales that appraisers and brokers use to evaluate a property's price could not keep up with the fast paced market. Many apartments were flipped for absurd profits within months of closings even after the original appraisals had come in under the sale price. Bottom line: If you are a seller who is considering removing the finance contingency you better be sure the apartment is selling at or under market value or make sure the buyer is putting at least 20% down. Ask your broker what has recently sold in the apartment as well as the neighborhood.

Number 5 listed above (Building Has Low Owner/Occupancy Rate) should not be a concern if you trust your attoney to be thorough with their due dilligence and your lending bank has approved the loan on the building. Upon reviewing the building's financial statements, the offering plan, and the board minutes your attorney should be able to anticipate any potential problems.

I have seen someone lose a $100,000 downpayment because they lost their job prior to closing. Banks will double check your employment status within 3 days of the closing date. In this particular situation the purchaser was laid off 2 weeks prior to closing. When the bank contacted the employer and learned that the purchaser was laid off, they refused to commit to the loan and allow the deal to close. The developer saw an opportunity to make a quick buck and took it.

Long story short; If you are a buyer and have financial stability, good credit and a team of professionals that you can trust to protect you, you can rest much easier removing the financing contingency and using that as a negotiation tactic. Be very cautions and best of luck.

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March 2006 Archives

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March 15, 2006

NORMAL YIELD CURVE

TYPICAL MOVE

FLATTENING YIELD CURVE

INVERTED YIELD CURVE

March 16, 2006

March 17, 2006

March 20, 2006

March 21, 2006

March 22, 2006