Try & Buy - Fad or Trend?
Desperate times sometimes require creative measures. A Reuters article on rent to own programs being offered by the homebuilder Toll Brothers recently caught my eye. It mentioned that Toll was offering the program at the Northside Piers development in Brooklyn.
Just by way of history, sales began at Toll's Northside Piers in Williamsburgh in early 2007, and by March of 2008 70% of the 180 apartments had been sold in the first 29-story glass tower. It appears that as of today, only 14 units in One Northside Piers remain unsold, per the development's web site.
According to the New York Times, in the first go round Toll reportedly had to cut prices on some larger apartments and others with limited views. They altered their plans on phase II to include more studios and one-bedrooms, which appeared to be in greater demand than two and three bedroom units. According to Street Easy,59 sales have been recorded at the development to date at an average price of $734,000 and around $920 per square foot. Another 26 units are in contract. According to Street Easy's data on the units in contract, the two bedrooms sold for an average $945,379 and $833.75 per square foot with units averaging 1,134 square feet. The one bedrooms sold for an average $666,133 and an average $713 per square foot, with units averaging 934 square feet. Please note that the square footages here may include outdoor space, I don't know how Street Easy collects its data.
So I called David Van Spreckleson, Toll's VP for the New York area to ask about the rent to own program. He avered that 10 units out of 70 remaining units in the project were being offered in a pilot program. "We wanted to see how people on the fence about buying or about moving to Williamsburgh would react to it." He also offered that 2 of the units had already been rented and the tenants were both very happy, sounding like someone expecting a couple of sales to result. As far as the workings of the program, it's pretty simple, before renting the prospective tenant must first pre-qualify as a buyer with Toll's mortgage company. The typical compexion of a loan would be your classic 20% down, but Van Spreckleson said Toll could be flexible depending on the buyers qualifications.
If the renter agrees to purchase their unit within the first 6 Mos. as tenants, their entire rent will be credited towards the purchase price. Thereafter, the amount credited towards purchase will tail off month by month. The renter's original qualification with the mortgage company will endure, unless they are laid off or have some other change of life and the renter is also free to shop for the best mortgage they can find elsewhere. The program is not being run out of the Northpoint Piers sales office but rather out of an Elliman storefront office on Bedford Ave. According to Street Easy, Lior Barak and Christine Blackburn are the agents there. Interestingly, Street Easy shows 11 units for rent at Northside Piers that appear to be in the program.
I have not heard of any other try and buy programs around town, but let us know if you have. I expect there will be more, just as we have seen a resurgence of the old "layaway" programs now being seen at retail. It's a sign of the times. I couldn't discern any obvious gotchas in the Toll Bros. program from the brief description I got, but if you do look at a rent to own program with any new project make sure to read the fine print.