Archive for February, 2010

Last week the Federal Reserve took center stage by raising its discount rate: the rate at which banks can borrow money directly from the Federal Reserve. While this move has very little immediate impact, the increase was widely viewed as a symbolic first step in beginning to remove the emergency measures put into place during this deep recession. The Fed’s meeting minutes also provided some more insight into future Fed moves. In addition to letting certain programs expire as planned, the Fed will create some new tools that will enable it to “mop up” excess cash in the market. These new tools, in conjunction with its primary method of adjusting the Fed Funds rate, will be targeted at keeping inflationary pressure under control.

This week, and coming weeks, could begin to see mortgage rates become more volatile as the market digests everything coming out of the Fed. We’ll also get new and existing home sales data this week. With housing and employment as the weakest link, any positive news could push rates upward.

Graph Courtesy from NY Times in an article by Bob Tedeschi February 17, 2010. Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

In this buyers’ market when negotiating for a Manhattan co-op, condo or townhouse, having flexibility with regard to the date of closing  (some sellers may want to close later rather than sooner depending on their circumstances)  AND having cash (something I call FLASH) you will surely get you the best deal.

With regard to financing, many buyers and sellers believe that the purchase of a coop, condo or townhouse in Manhattan will either have or not have financing contingency.  But there are actually three options when it comes to the loan financing provision.

The latest version, the co-op contract spells out these options and allows the attorneys to choose one of them. Although the standard condo and townhouse contract forms do not contain a similar provision, an experienced attorney could add it into a rider.

The options are as follows:

#1 Contract contingent upon purchaser obtaining a loan/financing commitment

#2-Contract NOT contingent upon purchaser obtaining a loan/financing commitment, but purchaser may use loan financing to complete the transaction

#3 purchaser may NOT use loan/financing (i.e. must all cash and can’t have a loan)

The existence of #3 is particularly important not only in today’s lending environment, but to leverage maximum negotiability.  When placing an all cash offer the seller will want to know that it is, in fact, ALL CASH and that the purchaser will not even apply for financing.

This post was taken from a tip written by Alex Suslensky, Esq. and published in PDE Title’s Spring Newsletter. PDE Title is a Prudential Douglas Elliman Real Estate company.

Foreign purchasers of Manhattan real estate often take title to the property through a legal entity rather than in their capacity as individuals. Some of the reasons they opt for this can be privacy issues, income tax deferral issues, gift/estate tax concerns, the need or desire to shield the foreign investor’s own assets from liabilities arising from the ownership of U.S. real estate, and whether it is expected that additional investors will acquire equity interests in the property.

It is imperative that prior to signing the contract of sale the foreign purchaser receives competent legal and international tax advice as to the proper structure to use in order to accommodate the investment.

Foreign purchasers should be cognizant of the fact that certain types of entities in which they want to take title may not be available to persons that are NOT citizens or permanent residents of the United States, such as an “S Corporation”. In using this particular entity the investor would soon discover for one, that it may not be available to them and that the income generated by the U.S. real estate would likely be subject to double taxation.

This post was taken from a tip written by Filippo Cinotti, Esq.and published in PDE Title’s Spring Newsletter. PDE Title is a sister company of Prudential Douglas Elliman Real Estate.

Categories : Foreign, Investors
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As the snow falls heavily in Manhattan, I received an update from the Central Park Conservancy. Reminding me of Valentines Day (note to self: Send flowers to Les),  I did wonder which was the most romantic spot in Central Park.

The answer? Bow Bridge. Check this and