Archive for October, 2012


Sorry says the Board: The Price isn’t Right

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Manhattan buyers and sellers have known for years that the real estate market has its share of challenges.  Co-op boards, who can reject applications for many reasons, are now rejecting sales if they think the price is too low in order to protect the property values in the building.

Buyers undergo intense scrutiny during the co-op application process, including providing volumes of financial and personal history, even references for their pets.  Co-op boards can reject an application for almost any reason, and they are not required to state the reason.

Some boards are determined to maintain the value of the building even if it means rejecting serious buyers.  Sellers want to sell their apartments, and buyers are determined to get a good deal or not overpay for the apartment.   Lawyers are fielding phone calls from boards and purchasers seeking legal advice.

For those outside the New York City area, this is astonishing since co-ops are rare.  But in New York City, where co-ops make up about 75% of the housing stock in Manhattan, this is a way of life.  Brokers are becoming accustomed to brokering deals where the contract price would be acceptable to a board, but the seller gives concessions like splitting the flip tax or paying for renovations as part of the contract.

Sometimes the board will reach out to the broker or individuals involved and let them know what the sticking point before flat out rejecting the application.  However, when a board is unwilling to approve based on low price, they run the risk of being considered a difficult board causing people to shy away from the building; or miss the clues that a seller might be in distress and default on the maintenance charges if unable to sell, putting the building in a tough financial situation.

A good broker will be able to negotiate the ins and outs of a board package, explain the pitfalls and advantages, and advise you on what position you should take.  Manhattan real estate is unlike real estate any other place in the world.  Having a broker by your side who knows their market is an asset to your team.


Inspired by New York Times article

This week, we released our Third Quarter report for the Hamptons & North Fork Sales Market.  Hamptons & North Fork Sales Overview Q3 2012 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“The East End market saw its highest number of third quarter sales in six years”


  • Number of sales increased 4.3% from the prior year quarter to 561, the metric’s highest third quarter total since 2006.
  • Listing inventory fell 14% from the prior year quarter to 1,924. Over the same period, the monthly absorption rate, or number of months to sell all listing inventory at the current pace of sales, was down from 12.5 to 10.3 months, the second fastest rate in over four years.
  • Median sales price fell 9.3% from $700,000 in the same quarter last year to $635,000, largely due to an increased number of lower-priced sales. Sales below $1M increased to 69.9% market share, up from 67.1% in the prior year quarter and above the five-year average of 66.5%.
  • Days on market, or number of days from the last price change to contract date, was 192 days, up from 170 in the prior year quarter.
  • Listing discount, the percentage difference between the list price at time of contract and the sales price, fell from 11.3% in the prior year quarter to 8.6%.


In the News – October 21, 2012

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10/3/12  Power Strips:  What’s your strategy for Power Strips?  Do you hide them?  How about showing them off?  Read about Rich Thrush’s strategy and see some interesting designs in this New York Times article.

10/10/12  Exclusive 3rd Quarter 2012 Elliman Report for Westchester & Putnam Sales Markets:  After one of the busiest spring markets we’ve seen in 5 years, the Westchester housing market remained active through the summer.  In fact, third quarter sales in Westchester were up sharply compared to the same time last year. Record-low mortgage rates, despite unusually tight lending conditions, drove demand and helped bring first time buyers into the market. While housing prices generally remained stable, the amount of inventory available for sale continued to decline. We anticipate the same market conditions through the end of the year.   See the full report at 

10/18/12  Exclusive 3rd Quarter 2012 Elliman Report for the Queens Market:  The third quarter Queens housing market was characterized by stable pricing and falling inventory. Properties sold faster as buyers and sellers moved closer together in determining fair prices. Despite mortgage rates dropping to record lows, the market remained a challenge for buyers, with limited inventory to choose from and tight bank lending conditions. The Queens market has come a long way over the past several years, and we look forward to an active market over the next several quarters.   See the full report at

10/18/12  Exclusive 3rd Quarter 2012 Elliman Report for the Brooklyn sales Market:  The Brooklyn housing market was defined by falling inventory this quarter. Consumers had fewer choices, which continued to hold back the number of sales. Despite mortgage rates falling to record lows, housing prices remained stable, largely due to the tough lending standards still in place by banks.  Despite this challenge, the market stabilized, and we anticipate continued improvement over the upcoming quarters as the economy grows stronger.  See the full report at


Legal Question: What is a 1031 Exchange?

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Q:  What exactly is a 1031 Exchange?   Is it true that you do not have to pay capital gains taxes when you use a 1031 Exchange?

A:  A “1031 Exchange” refers to Section 1031 of the Internal Revenue Code.  A 1031 Exchange enables a seller of an investment property to defer paying capital gains taxes on their sale by taking the proceeds from the sale of the investment property and purchasing a replacement (“like kind”) property.

The seller does not avoid paying capital gains taxes.  Rather, the seller defers paying capital gains taxes, which enables the seller of an investment property to use the entire proceeds from their sale to purchase another property.  

Important Tip:  Please note that the seller must comply with very specific rules in order to utilize a 1031 Exchange and an accountant or attorney should be consulted beforehand.

Information provided by Neil B. Garfinkel, REBNY Residential Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP

This post is provided as informational proposes only and should not be construed as legal, accounting or tax advice by the RealEstateGeezer. You should seek advice from a qualified professional

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How’s the Market? September 2012

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While Quarterly Sales Reports show closed activity for the previous quarter, monthly Contract Signed reports are the ‘crystal ball’ of closed sales to come.  Granted all contracts signed for any given month may not close in the next month, and some may not close at all but most (over 95%) will become closed sales which will become part of the next Quarterly Sales Report.

In the following charts and graphs you can see how the market stacks up against last month and this month last year.





The following charts and graphs show the quarterly comparisons for last quarter, the previous quarter and last year.








This week, we released our Second Quarter report for the Manhattan Residential Rental Market.  Manhattan Residential Rentals Market Overview Q3 2012 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Brisk market pace continues as rental prices continue to rise and marketing time remains near a 20-year low”

  • Median rental price was $3,195, up 10.2% from $2,900 in the same period last year.
  • Net effective median rental price (after concessions) was up 8% over the same period.
  • Landlord concessions accounted for 2% of all rentals with an average of 1 month free rent.  This compared to 8.6% of all rents in the same period last year

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The Differences are narrowing between Condos and Co-ops

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If you’re looking to buy an apartment in New York City, you probably already know there are basic trade-offs between buying a co-op or a condo.  Co-ops usually are stricter in approval and building rules, but they make up a higher percentage of housing and are generally less expensive than condos.  But there’s more to it than that. 

Some neighborhoods have more condos for sale than co-ops.  However, the sometimes stringent application process and financial requirements for co-ops usually mean the buildings are more financially secure.

 Here are some factors to consider:


  • There are more co-ops (75%) than condos (25%) in New York City, but the gap is shrinking.
  • Certain neighborhoods with new developments have a higher numbers of condos because most new buildings are sold as condos.
  • Consider your style.  If your heart is set on a pre-war building, likely you’ll have to buy a co-op.

 Price Difference

  • According to Miller Samuel, the overall market statistics seem to show that on average condos cost as much as 40% more than co-ops.
  • A comparison of co-ops and condos with similar amenities and size conducted in 2006, showed the difference to be only about 9% more.  Condos are sometimes larger and they involve different closing costs due to the type of ownership.

 Approval Process

  • Historically only co-ops require very detailed applications with financial statements and tax returns, however, some condos are starting to require similar applications.
  • Condo boards cannot reject potential buyers, but they can pre-empt the sale by offering to buy the apartment on the same terms.  This rarely happens because few condo boards have the finances to make these purchases.
  • Co-ops generally require larger down payments, some as low as 20% of the purchase but many require 25-50% down payments and some don’t allow financing at all.
  • Financial requirements can make buying a co-op difficult for the self-employed and foreign investors.


  • Some co-ops have very strict rules, imposing restrictions on subletting or use as pied-a-terre.  But even some condos have rules for pets or noise restrictions, the same as co-ops.
  • Renting a co-op usually means getting board approval, if the building allows it at all, and usually only for limited rentals of 1-2 years at the most.  Most condos allow rentals or sub-lets.


Inspired by New York Times article.

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In the News – October 7, 2012

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9/27/12 City Awards Contract for Controversial E 91st Street Trash Station:  Swedish construction giant Skanska has won a $181 million contract to build the controversial East 91st Street marine transfer station.   The city’s Department of Design and Construction selected Skanska and a company called Trevcon to work jointly on building the new 10-story garbage facility, the city confirmed.  Read the full story at 

10/02/12 Second Avenue Subway Newsletter:  72nd Street Station plans.  See the full newsletter at 

10/02/12:  Forget Restaurants!  Locals are eating in:  The 2013 New York City Zagat restaurant guide reveals that for the first time in more than three decades, New Yorkers are cooking more dinners and lunches at home than dining out or ordering take-out.  See the full article at Crain’s New York Business 

10/2/12:  Manhattan Apartment supply hits 7-year low:  Despite tight inventory of apartments and co-ops in Manhattan, there is little sign of any pickup in prices.  The time it takes to sell an apartment drops to a five-year low.  See full article at Crain’s New York Business




Legal Question: Gift Taxes and the Lifetime Exemption

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It’s very common in real estate deals for the buyer to get financial help from family members. But what about the gift taxes? Buyers inevitably ask this question, and often have incorrect assumptions about how it works.

Who Pays?: Gifts are not income, and almost all cases it is the donor or the giver of the gift that must deal with the tax implications, not the receiver of the gift. Gifts to one’s spouse, however, are not subject to taxation. But be careful, if there is an agreement to repay, it’s not a gift, it’s a loan, and this has obvious implications for the lender on the deal. Also gifts from an employer to an employee are always considered income, and cannot be treated as a gift even if all the other elements of a gift are present. Be sure the buyer understands that a gift cannot come with an expectation to return.

Annual Exclusion: Each year any individual can give any other individual up to $13,000 (married couples can give $26,000) without it being subject to taxation. And that exclusion can be used for any number of individuals. So a married couple can give their married child a total of $52,000 ($13,000 from each parent to each of the child and the child’s spouse, so the total is 4 X $13,000) in December, and then do it again in January, without any reporting obligation.

Lifetime Exemption: Gifts in excess of the annual exclusion trigger an obligation to file a gift tax return on IRS Form 709, even if no tax is currently due. Under federal law, the estate basic exclusion is $5,120,000 as of 2012. So the first $5,120,000 of a person’s estate is exempt from federal tax, and that exemption applies to non-excluded gifts made during a taxpayer’s lifetime. So even though a federal return is required to be filed, individuals do not pay the gift tax until their cumulative lifetime gift giving (less annual exclusions to individuals) exceeds the exemption amount. But the exemption of $5.2 million, however, is temporary and expiring at the end of 2012. Congress has yet to act on an extension.


Information provided by Jerry M Feeney, Esq. Residential Real Estate Law.

This post is provided as informational proposes only and should not be construed as legal, accounting or tax advice by the RealEstateGeezer. You should seek advice from a qualified professional.

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This week, we released our Third Quarter report for the Manhattan Residential Sales  Market.  Manhattan Residential Rentals Market Overview Q3 2012 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Manhattan price and sales levels showed seasonal stability, despite listing inventory falling to a seven-and-a-half-year low.”

  • All price indicators posted modest year-over-year declines as 1-bedroom apartments jumped 5% in market share over the past year, reaching 37.8% of all sales. The median sales price was $890,000, down 2.3% from $911,333 in the prior year quarter. Year-to-date median sales price was unchanged from the same period a year ago at $850,000.
  • There were 2,952 sales in the quarter, the second highest total since the credit crunch began four years ago, second only to the prior year quarter total of 3,106 sales. While there was a 5% decline in third quarter sales from the same period a year ago, signed contracts increased 4.9% over the same period.
  • Listing inventory continued to decline, dropping 24.3% to 5,847 at the end of the third quarter, its lowest level since the first quarter of 2005. Despite the drop in supply, only 8.5% of all sales sold for more than their list price at the time of contract, down from 10.1% in the prior year quarter.
  • Days on market—the number of days from the last price change if any to the contract date—jumped from 119 days in the prior year quarter to 190, reflecting the increased sales of much older inventory.
  • Listing discount—the percent difference between the list price at time of sale to the sales price—increased from 4.4% in the prior year quarter to 7.2%.

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