Archive for First Time Buyers

Fed housing credit?

Fed housing credit?

Local media has been commenting since last August that New Yorkers seem to be blasé about the Recovery Package offer of $8,000 toward a new home. However, it was so popular nationally that Congress has extended that, and added a $6,500 offer for current owners who move.

Well, I wouldn’t pass it up if I were in the home market right now, and put my team to work finding out what you might buy with that free cash. Some new furniture and décor are obvious choices, and almost everyone needs something for their new home.

Or you could use it for other kinds of fun. Given my favorite pastimes, I might figure out how many lovely restaurant meals I could savor, including cuisine hot spots my wife and I usually reserve for special occasions.

But you have many other options. For about $600 to $1,600 you could score a pair of trendy Christian Louboutin shoes or boots at Saks, which offers 96 choices at your fingertips. Or there’s the current Prada event with hot items coming up, now available for pre-orders. While at Sak’s you could also pick up a steal on men’s watches, such as Breil Milano’s stainless steel chronograph strap watch at $1,250.

Or how about a Hermes bag? For classic Hermes, you can’t go wrong with the Birkin bag, starting at $6,000. Here’s a entire blog dedicated to the Birkin.

Here’s a tidbit from a local fashion blog: “Katie Holmes & Suri: Spotted on Madison Avenue of New York, little Suri had her own pint-sized version of Mom’s orange Hermes shopping bag. Later on, Katie was seen with a rare burgundy Garden Party Handbag that looked more like a boarding bag. The Hermes handbag offset her black pencil skirt and red heels. With all the goodies that could be stuffed into that spacious bag, Holmes was ready for anything.” The Evelyne, starting a bit under $2,500, is très chic now.

You can toast your new home with a rare champagne.  Dom Perignon Oenotheque 1993 is just $399.00 per 750 ml. bottle, limited to one per customer at Astor Wines.  Salon Blanc de Blanc, Le Mesnil – 1997 is more expensive at $459.99, but in greater supply.  You can buy a case of 6 for $2621.94.

Does your new co-op or condo allow pooches?  How about using your savings for today’s most expensive, pure bred, a Samoyed, starting at $3,000 or an English Bulldog at around $2,500.  On the other hand, if you adopt a nice homeless puppy from a shelter approved by the Humane Society, you’ll have lots of money to buy dog food and a really fancy collar, $18 and up from wwww.muttropolis.com.

And let’s not forget the sports fans.  How about season tickets to the Yankees next year?  Despite the World Series victory, top prices will actually decline, with field level seats at $250 per game for season ticket holders, down from $325 this year.

How much more stimulated could you get?  Check out my November 2 post  for housing stimulus dates and details. Go, Feds!

Buyers who can pay in full in cash for their co-op or condo apartments are in the driver’s seat.  Right now, being able to offer a seller a sure thing – with no surprises on the way to closing – will go a long way to assuring you of negotiating the best possible deal.

Pair some flexibility with cash, and you’ve got the magic ingredients of what I call FLASH.  Being flexible means being open to the seller’s needs in terms of setting the closing date – being ready to close immediately or allowing ample time for the seller to find a new home rather than demanding a quick move – offering to take care of needed repairs or accommodate the start of a school year.   With FLASH, you’ll find that the door to your new home is open, ready and waiting.

If you’re like most people – who can’t afford a full-cash sale – you can still find yourself in the “most attractive buyer” finals.  If you have great credit and can put down at least 20% on a jumbo conforming mortgage (up to $729,750 in New York), or at least 30% for higher mortgages, you’ll still set setting hearts aflutter.  Pre-qualifying for an adequate mortgage is a fabulous move to round out your VIP buyer profile

1 -The Numbers

  • Manhattan residential real estate has performed better than the broader U.S. real estate market.
  • Compared with losses of more than 40% for Los Angeles and San Francisco over the past few years, Miller Samuel reports in the third quarter 2009 Manhattan Residential Market Overview that the average price per square foot in Manhattan was $996 vs. $1289 as reported in the first quarter of 2008 , a price reduction of 23% from the peak.
  • Third-quarter 2009 data show prices declined at a lower rate while transaction volume surged 46%, a sign that the Manhattan market is starting to find its bottom.
  • As Donald Trump once said “It’s a water thing”. Manhattan is a landlocked island. While developers in most cities keep expanding outward, developers in Manhattan do not have this alternative.
  • Wall Street firms are expected to pay a record $140 billion in bonuses this year according to The Wall Street Journal. Regardless of whether these bankers deserve their lavish bonuses, their payday will boost Manhattan real estate prices.

2 -Capital of the World

  • Manhattan is a global must-see destination. Emerging markets like Brazil and China are creating wealth at a very high rate and churning out millionaires.
  • New York is often the first international destination new millionaires from emerging countries want to visit. It’s also one of the first places where they want to buy investment property or a pied-a-terre.

3- Diversity of Industry

  • Besides finance, New York has media, hospitality, advertising and professional services like law and accounting firms. These industries will be serving emerging-market economies and will benefit the local New York economy in terms of job creation and housing demand.
  • If not for the diversity of the current New York City economy, the unemployment rate would be even higher than 10.3% that was reported in August.
  • Sectors like education, health, leisure and hospitality have gained jobs, which partly offset the negative impact of the financial job losses.

4 -Quality of Life

  • New York City is one of the safest cities in the US.
  • The legal system is established and there is a better work-life balance compared with countries like China.
  • Transportation in Manhattan via the Subway system is efficient and reduces commuting time for those living in Manhattan.
  • The air in Manhattan is pristine compared to air in other global metropolises like Hong Kong.

Portions excerpted from NuWireInvestor reporting on a story written by Wei Min Tan of TheStreet.com

In addition to last week’s passage of a bill to extend through 2010 Freddie Mac, Fannie Mae and FHA loan limits  to $729,750, the extension and expansion of the home buyer tax credit is the pending business in the Has passed the Senate.

After a long week of negotiation on the credit, an agreement on the scope of both expansion and extension has been reached. The agreement on the extension and expansion of the credit is as follows:

  • Credit available for purchases before May 1, 2010. Prospective purchasers with binding contracts in place as of April 30, 2010 will be allowed an additional 60 days to complete the transaction.
  • Credit remains at $8000 for first-time purchasers. No change to definition of first-time purchaser.
  • New $6500 tax credit for repeat buyers who purchase between December 1, 2009 and May 1, 2010. Repeat buyers must have lived in their homes consecutively for 5 of the previous 8 years.
  • Income limits are expanded to $125,000 on a single return and $225,000 on a joint return. Current law $20,000 phase-out retained.
  • New anti-fraud limitations are imposed.

The White House has indicated that President Obama will sign the has signed the legislation into law.

Here are the details directly fro the IRS.

Is this really a 2 bedroom apartment?

Is this really a 2 bedroom apartment?

I realized when I did the post of some of the most annoying words in real estate (and real life)   that some of the terms used to describe New York City apartments were inaccurate or misleading.

The most common errors can be found in the room count where alcoves are called rooms (a 3.5 room apartment called a 4 see floor plan left), balconies are called terraces, and the number of bedrooms is just plain wrong/inaccurate and should be called half rooms.

Perhaps more than any other U.S. city, Manhattan has its own distinctive types of housing and there are some standard terms used to describe them.  Knowing the differences can help you choose the best apartment and neighborhood for your needs and your lifestyle.  Let’s define the terms:

Alcove/Alcove Studio

An alcove is an area that’s usually less than 70 square feet adjoining the living room. May be called a half room, often used as a dining room, bedroom or home office. May have a wall added to create a separate room. To be a “legal” bedroom it must be at least 80 to 100 square feet, have a window and a closet.

An Alcove Studio is an apartment with an alcove, often in an L shape.

Balcony

Outdoor space of an apartment projecting out from the building’s façade

Brownstone

Built as luxury homes in the 1800s through the 1930s, brownstones usually have four to six floors and are row houses, sharing side walls with adjacent homes. They may be single family town homes or they may have been converted to co-ops or condos. Likely to have features especially desirable to lovers of old homes – spacious rooms, high ceilings, lots of wood floors and ornamental trim, fireplaces, and yards or gardens. The term comes from the brown sandstone used on the building exteriors. Brownstones don’t lend themselves to doormen, and rarely have them.

Classic

Larger apartments, usually pre-war. Indicates the apartment has a formal dining room. Usually used with the number of rooms, like a “Classic Six”, typically a living room, dining room, kitchen, two bedrooms and a maid’s room.

Condo

Condo, short for condominium, is an alternative choice for apartment ownership. When you buy a condo, you own your apartment outright just like you would own a single family house.  You don’t have to go through the board approval process.  You have more control over your home and  usually, you can rent it or sell it to anyone you choose. More

Co-op

Co-op means cooperative ownership. Rather than owning your apartment, you become a member of the corporation which owns the entire building and you own shares in that corporation. Your ability to buy, sell or rent the property is subject to board approval.  More

Condop

A condop is a co-op with less restrictive condo-type rules. With condops you  own shares in the co-op but the rules are often more relaxed than the standard co-op.  Condops, like most condos,  may allow you to finance a higher portion of the price, rent out the apartment and sell it to anyone you choose with no board approval. More

Convertible, Junior or Flex (also see Alcove)

An apartment with an alcove off the living room. May be listed as a Junior 4, which would mean a traditional living room, bedroom and kitchen plus a living room alcove that may be converted into a separate room or bedroom. To be a “legal” bedroom it must be at least 80 to 100 square feet, have a window and a closet.

Duplex

In New York, an apartment on two floors.

Elevator Building

Generally don’t have doormen; most provide intercom and security systems as well as elevators.

Flip Tax

A flip “tax” is something of a misnomer. Rather than a tax levied by the government, it is an income generating fee used by some co-op’s and, much less frequently, by condos. As determined by the co-op board or condo association, the fee can be on the profit of the sale, a fixed amount, a percentage of the gross or net sale or a fee per share. The co-op or condo by-laws determine if the buyer or seller has to hand over the check.  In reality however who pays the flip tax is determined by market conditions and contract negotiations.

Floor-through

Apartment that occupies an entire floor or half floor of a building. Usually found in low-rise walk-up buildings.

Full Service Building

Built from the 1980s to present modern (but could be pre war as well),, more likely to have facilities such as fitness centers, and both doormen and concierges. Many offer garages.

Half Room (see also Convertible, Junior or Flex)

Usually an alcove, sometimes a large foyer that might be used as a room.

Loft

Usually conversions of former commercial or factory buildings, though some are new construction. Feature very open floor plans, may have period details such as supporting columns. Ceilings are high, up to 20 feet and large windows are common. Utility pipes are often exposed. Doormen unlikely.

Loft Area

In buildings with very high ceilings, similar to a partial second floor accessed by stairs or a ladder. Often used as a bedroom or storage area.

Maisonette

This apartment is usually found in mid and high rise buildings. Has its own entrance to the street like a town house and usually is two stories. Could have access through the lobby of the building as well. A building may have several maisonettes.

Number of Rooms

Other than kitchens, to be counted as a room a space must have at least 100 square feet and a window. Any kitchen except a Pullman is usually considered a room. Baths are not counted as rooms. A three-room apartment is usually a living room, kitchen and bedroom. A four-room would usually have two bedrooms, or one bedroom and a separate dining room.

Penthouse

Apartment on the top floor of a building usually includes an outdoor area (see terrace) on the roof.

Pied-a-terre

Apartment the owner doesn’t use full-time. Typical example would be someone who lives in the apartment when visiting from his/her primary residence.

Post-War

Built in the late 1940s through 1980s, with more modern amenities such as larger closets, laundry facilities, and larger spaces in smaller apartments – studios as well as one and two bedrooms. Fewer architectural details, fireplaces, etc., both inside and out. Most have doormen and live-in superintendents.  May be co-ops or condos.

Pre-War

Built before the mid-1940s, or World War II, virtually always co-ops. Tend to have high ceilings, large rooms, and features like wood floors, decorative trim and fireplaces. Usually 10 to 20 stories. May have doormen.

Pullman or Petite Kitchen

The kitchen is a strip along the living room wall, rather than a separate room. Most common in hotels converted to apartments.

Studio Apartment

The living and sleeping areas are combined. One rooms have Pullman kitchens, two rooms have separate kitchens.

Terrace

Typically larger than a balcony and is open to the sky. Can be part of the building’s roof as in a penthouse or could occupy a building’s setback.

Town Houses

Self-contained homes. In Manhattan, these are likely to be brownstones, typically row houses sharing side walls. Can be single or multi family home and/or could have been converted to a co-op or a condo.

Triplex

In New York, an apartment on three floors.

Walk-Ups

Usually four to five stories with no elevator, built as pre-war apartments. Overall the least expensive kind of apartments in Manhattan. Unlikely to have doormen.

Visiting open houses, scanning the Internet sites and dreaming of where you’ll place your sofa is all well and good, but when it’s time to get serious about buying a new home, there are some basic steps that will position you to find the right place and get the best deal.

Once you’ve decided you want to buy and that your financial basics look sound, the smartest thing you can do is put together your own dedicated search team – a buyer’s broker, a real estate attorney and a bank/mortgage broker.  Choose carefully and make sure they are well-versed in real estate in New York City.  Ask them about their experience.

Buy Into a Buyer’s Broker

A buyer’s broker will help you at every step of your purchase, from helping you figuring out what kind of apartment you want at the price you can afford, to the subtleties of the co-op interview.

Make sure you like your broker – you’re likely going to be spending a lot of time together.  Be sure that he or she listens to you and really hears what you’re saying.  Otherwise, you’ll spend a lot of time seeing spaces you’re not interested in.  Want a big kitchen?  Lots of light?  Outdoor space?  An older, pre-war building with lots of charm or a brand new, sleek and modern place, a view of the Empire State Building?  If he or she can’t get into your head, the search process won’t be as pleasant as it should be.

Be aware that most agents in New York are seller’s brokers.  If you meet an agent at an open house, for example, you need to keep in mind that you’re speaking with the seller’s representative.  Any hints you give about how much you’re prepared to spend will be reported back to the seller – in which case, you’re likely to spend top dollar.

Why?   Because you’re chatting with a seller’s agent, whose top priority is to show the property in its most favorable light and negotiate the highest price and best terms for the seller. New York law is crystal clear on the duty of listing and selling agents – they must provide “undivided loyalty” to the seller.  So if they can figure out how much you’re prepared to spend, their job is to make sure you spend every cent.

The seller’s agent may offer to have another agent at their firm to act as your representative in making an offer and negotiating for the purchase.  That’s perfectly legal, but being asked to step in and assist the buyer at the last minute may not be the ideal scenario.  First and foremost, it doesn’t give the buyer the advantage of having a dedicated advocate for his or her needs nor can he or she negotiate as effectively as a buyer’s broker who has been working with you all through the process.

Be Prepared

The other representatives you’ll need when you want to buy a property are a banker/mortgage broker and a real estate attorney.

Finding a good banker and pre-qualifying for a mortgage will not only make you an attractive buyer to all those folks hoping to sell their homes, but it will also ensure that you’re looking in the right price range.  A loan officer should request your credit score to do a pre-approval letter, stating that you qualify for a mortgage up to a stated amount (you’ll need to pay for a credit check, usually $20 or less), and be able to explain what kind of rates and mortgages her or his company could offer you today along with what information they will need if you apply for a mortgage with the company.  You’ll know exactly what you can – and can’t afford.   You won’t fall in love with something you can’t have – and when you do find that perfect place, you’ll be in a strong position to negotiate for it.

Locating a real estate savvy attorney will also smooth the way. An attorney in addition to being expert in  New York City real estate, should be well-versed in reviewing co-op and condo financial statements (your accountant could help here), should plan to read its board meeting minutes to look for items like upcoming expenses, lawsuits pending etc. and be familiar with the latest inclusions/exclusions in NYC real estate contracts.

So, first things first.

When you decide to start looking, take time to find the right folks to ensure your search is a success– your buyer’s broker, real estate attorney, and loan officer.  You can call around, ask friends – and even ask prospective members of the team to recommend others they’ve worked with in the past.

With your team lined up, you’re ready to look, and to buy.  Now, about that sofa …

If you’re thinking about buying an apartment in Manhattan, this may be a great time to grab the gold ring.  Prices are much lower than the last few years – brokers are looking back to 2004-2005 for comparative prices (comps).  And mortgage rates are amazing – fixed-rate mortgages have been hovering in the 5% to 6% range, the lowest in the past 20 years except for a stray month here or there.  The experts don’t expect them to go lower and aren’t ready to predict when they’ll start going up again.

If you look at listings online, asking prices might still seem high. Sellers hate to let go of the peak value their apartments reached on paper in 2006 and 2007.  Be sure your buyers’ broker knows pre-bubble values and is an all-out negotiator for you.  Along with purchase price, negotiations can also include terms, asking the seller to pay some of the points, for example, or maintenance rebates or contributions to other closing costs . Think about finding a dedicated buyer’s broker.  He or she will negotiate harder for you and shouldn’t cost a dime, as broker’s fees should be built into the seller’s cost.

Start the process by making sure you can qualify to buy a coop or condo apartment:

  • Can you come up with at least 20% of the purchase price for a down payment?
  • Will your total housing costs (Mortgage + Maintenance–for a co-op — or Common Chargers + Taxes–for a condo) be at or under about 28 % of your income?  This ratio can be somewhat higher for a condo purchase.
  • Do you have an excellent credit score?  The best rates in NYC currently require a credit score of 760 or more. If you’re not there, note that a good mortgage broker can find fairly competitive rates with FICO scores of at least 720. If your score is below that, it’s a great idea to raise your score as much as you can before you start to shop.
  • Will you have the cash for closing costs and, what many co-op boards and/or lenders require, post closing cash reserves up to one or two years to cover mortgage, taxes, maintenance etc?

Why now?  The best answer can be found by asking recent buyers.  One new owner bought her one-bedroom co-op (with patio) in Soho in March. She had stopped looking late last fall because the prices were just out of reach.  But by early ’09 she could buy a lot more apartment than she’d expected, in a lot more locations. She ended up paying $490,000 a 15% reduction from the $569,000 asking price.  As the Time Out New York article points out in this case as well as two other examples, there are closing costs, some perhaps unexpected, beyond the simple purchase of the apartment.

Up-front costs

$98,000

Down payment on Soho apartment (20 percent of $490,000 contract price)

400

Appraisal

3,317

Bank, mortgage broker and closing costs (including credit report, loan origination, commitment and processing fees, flood certification and a document delivery fee)

2,125

Buyer’s attorney fee

1,500

Floor refinishing

1,349

Co-op fees (including building lawyer fee, first month’s maintenance and a not-yet-refunded $250 move-in deposit)

1,654

Interim interest charges (interest on the mortgage paid at closing)

1,250

Title fees (including bank lawyer fees, lien search and UCC filing)

500

Inspection (the seller tagged the sale “as is” before accepting the low offer, but still, “I wanted to know what I was getting into,” D’Agata says)

$110,095

Total
(We deleted $2,500 she’d put on another apartment where she didn’t get board approval.)

Monthly costs

$2,226

Mortgage payment (interest rate: 5.5 percent)

$29

Co-op insurance

$931

Maintenance charges and taxes

$3,185

Total

If you’re ready to make the move,  plan to live in your new place for at least three to five years and  have a comfortable cushion of post closing reserves, then it can make good financial sense to buy now.  Take a look around.  You may be pleasantly surprised at what you can afford.

Manhattan Rental Market Overview 3Q 2009

Miller Samuel, an independent appraisal firm,  and Prudential Douglas Elliman real estate today released the Manhattan Rental Market Overview.

The report tracks the 2549  apartment rentals in the third quarter of 2009 and compares the data to second quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.

Continued declines in rents may remove potential buyers who feel they are safer renting for a year or two while they wait for the bottom to occur in the residential sales market.

Highlights of the report include:

  • The average rental per square foot was $47.84, down 9.4% from $52.80 in the prior year quarter, but an increase of 8.3% from the prior quarter result of $44.16. This suggests some easing in the rate of decline since the same metric in the prior quarter fell 17.5% year over year.
  • There were 6,527 listings available at the end of the third quarter, 5.4% above the 6,191 listings in the same period last year, but 10.5 below the prior quarter total of 7,290 listings.
  • Downtown had the highest rental price per square foot of the four regions and saw a modest increase over the summer, averaging $45.87 per square foot, up 2.9% from the prior quarter.
  • One-bedroom apartments showed the largest gains over the summer, rising 6.3% to $46.62 per square foot from the prior quarter. Other than 2-bedroom apartments, which saw a 1% increase over the same period, all other types posted declines.

More and more people are talking about the importance of an excellent credit score,  so if  your credit score is low or just downright bad, there are proactive steps to take that will not only improve your credit score , but increase it enough to turn it into a good credit score.

  1. Check for accuracy. Remember that your credit report is based on information from the three credit reporting companies: Equifax, TransUnion and Experian and you can download a free report from each of them by accessing AnnualCreditReports.com (this is the site with the really annoying TV commercials).   On each of the reports, make sure all credit accounts listed under your name belong to you and make sure that all balances and payment histories are correct. Immediately contact-in writing – the reporting company and the information provider if you see inaccurate or incomplete information.
  2. Lower your debt ratio. When using credit cards or other credit lines, keep your balances low rather than maxing the line out. If your credit card balances are high, pay them down or pay them off to bring the outstanding debt ratio down. Use some of your savings, apply extra payments each month, or get a second job to lower your debt ratio. As you lower your debt ratio, you’ll see your credit score gradually improve.
  3. Make your payments on time. Always make sure that your payments reach your creditors on or before the due date. Making your payments on time is the number one way to increase or improve your credit score. As you continuously do this you’ll gradually see your credit score increase.
  4. Keep accounts open. Many New Yorkers think if they close credit accounts they’re not using their credit scores will automatically improve.  The opposite is true. One of the factors used to calculate your credit score is the longevity of your relationship with your creditors. If you have a credit card or home equity line of credit that you’re not using, the longer you have the relationship established with the creditor, the more of a boost it can give to your credit score. Closing long-term accounts can cause a decrease in your score so only close credit accounts if absolutely necessary.

If you have a low credit score (a score of 760 or higher is considered high by co-op and condo mortgage lenders) or bad credit, use one or all three of these steps to transform your bad credit into good credit. It’ll increase your chance of getting loan approval—helping you to achieve your goal of being a New York City condo or co-op owner.

Graph: myFICO.com

Graph: myFICO.com

Your credit score plays the starring role in whether or not you qualify for almost any loan, mortgage or consumer credit you apply for. Other factors are taken into consideration when you’re applying but your credit score is one of the most important factors—especially in current hard economic times when lending requirements are stricter than ever.

Did you know, for example, that when you apply for a mortgage to finance a NYC co-op or condo, to get the best rate, lenders today are requiring your score is at least 760? This means that if your credit score isn’t this high, it may hold you back from your dream of being the owner of a Manhattan condo or co-op. Low credit scores can also mean higher interest rates or less favorable lending terms than applicants with high credit scores.

What affects your credit score

There are several factors that go into the calculation of your credit score . While each factor is weighted differently, payment history, the amount of debt you have, the length of credit history, the variety of credit, as well as how much new credit you’ve established are all used to calculate your score. Since higher interest rates on an approved loan or getting turned down for the loan completely are outcomes directly related to low credit scores, it is important to check your credit report and score for accuracy and to keep your credit score as high as possible.

Resources for monitoring your score

Since your credit score is so important to almost any lending decision, you need to monitor it and be aware of anything on your credit report that may bring it down. You should pull your credit report and credit score at least twice a year. There are a number of resources available to pull your credit score and/or full credit report.

Check out  Credit Karma to receive your free credit score. To supplement that, get your free full credit reports from FreeCreditReport.com. This site accesses the three credit reporting agencies TransUnion , Experian and Equifax Almost as annoying as the AnnualCreditReport.com commercials, is the fact that you will have to pay each of them to receive your score!

If you are planning to buy or thinking about buying an apartment in New York City, it’s smart to get expert help from the beginning. Touring apartments is just the beginning; buying one is more complicated.

If you tour open houses, you’ll meet real estate agents, virtually always the seller’s agents.  There are several different kinds of agents and it’s important to know the how they work.

Listing Agents

Listing (or seller’s) agents are the ones with whom the seller has listed his or her property. A seller’s agent promises to take reasonable care, provide undivided loyalty, confidentiality, full disclosure, obedience and duty to the seller. That means their top priority is to show the property in its most favorable light and negotiate the highest price and terms for the seller. In other words, the listing agent owes complete fiduciary responsibility to the seller.

Buyer’s Agent

Conversely, the buyer’s agent is engaged by the buyer to represent his or her interests.  The buyer’s agent is completely motivated to make sure that you get the best possible deal.  He or she negotiates the purchase of the home you want at a price and on terms most favorable to you.  A buyer’s agent promises to take reasonable care, provide undivided loyalty, confidentiality, full disclosure, obedience and duty to the buyer.  In other words, he owes complete fiduciary responsibility to the buyer.

Dual Agent

A real estate broker may represent both the buyer and seller if both buyer and seller give their informed consent in writing.  For example, if you visit an open house, you might meet the seller’s agent as you tour the home.  Should you decide to buy – or make an offer on – the property, you might ask that agent to represent you.  In that case, the agent will not be able to provide the full range of fiduciary duties to both buyer and seller.  The agent must explain the possible effects of dual representation, including that by consenting to the dual agency relationship the buyer and seller are both giving up their right to undivided loyalty.  A buyer should carefully consider the possible consequences of a dual agency relationship before agreeing.

Dual Agent with Designated Sales Agents

If the buyer and seller provide informed consent in writing, the real estate brokerage firm may designate a sales agent to represent the buyer and another sales agent to represent the seller to negotiate the purchase and sale of the property.  A designated sales agent cannot provide the full range of fiduciary duties to the buyer or seller.  The designated agent must explain that like the dual agent under whose supervision they function, they cannot provide undivided loyalty.

So if you are a buyer, a listing or seller’s agent can not advocate for the best deal you can get.  If the seller has an agent totally dedicated to their interest, buyers should strongly consider working with agents who are totally dedicated to ensuring that they get the best possible deal.

New York State law is crystal clear and requires disclosure regarding real estate agency relationships and the rights and obligations it creates.

As always, if you need legal, tax or other advice you should always consult with a professional in that field.

First Time Buyer $8000 Federal Housing Tax CreditIf you’re a first time homebuyer in New York City and you can close on an apartment by December 1st 2009,  you may be wondering how you can leverage the $8,000 tax credit to buy your first condo or co-op. The question then comes to mind, “How much can I afford or want to spend on my new home?”

The first thing you need to know is that a couple (or two individuals jointly) buying their first home who want to use the Federal Housing Tax Credit can only have an annual combined income of $150,000 or $12,500 per month.

When you apply for a mortgage, the first thing the mortgage broker or lender is will calculate is your debt-to-income ratio. This ratio takes into account your monthly debt including the monthly mortgage payment, maintenance (for co-ops) or common charges and taxes (for condos), student loans, car payments credit card payments etc. They like to see that your total monthly debt expenses do not exceed 40% of your monthly income. If your gross monthly income is $12,500, then your total monthly debt cannot exceed $5,000 (12,500 x 40%).

The calculation above may be adequate to receive financing for a condo purchase, but many coops only will allow your maximum monthly housing expenses (principal and interest payment on the mortgage and maintenance), to be typically 28%  of your monthly income (could be 25% or lower for some co-ops, which is the limit set by the co-op board, not the lender).

Using a limit of 28% for housing expenses, a buyer with an income of $12,500 per month would have approximately $3,500 per month to spend on housing expenses.

So depending on the amount you have for a down payment (assume at least 20%), the mortgage rate and other debt, you may be able to spend between $3500 and $5000 per month to for your Manhattan co-op or condo.

You can use this link to StreetEasy.com to adjust the variables and see what’s available for you based on your personal circumstances.

See a video here and read the FAQ here

The combination of a tumbling stock market, where 401k holders watched the value crumble, and the decline of home prices has made it an attractive time to take the leap into buying a first home. Rather than watch their stocks, bonds, mutual funds and other investments continue to lose value, many first time buyers have cashed out all or some of their 401k and used it toward the down payment or for covering other costs.

Like any major financial decision, using a 401k to buy your first home has some good, some bad and some ugly things you need to be aware of.

The Good
• Great deals on purchases. The good news is that real estate prices have fallen to the point where you can find better deals and there’s a wider selection than in the recent past. It may even mean that you can buy a co-op or condo that you were never able to afford before the decrease in value.
• Upside appreciation. This also means that when real estate values return to normal that you’ll probably profit when you sell (assuming you sell for more than you paid and what you owe on the mortgage).

The Bad
• Loss of income. When you decrease the value of your 401k account, the lower principal balance means you have less money from which to earn interest, dividends and appreciation.
• Depletion of nest egg. Since the purpose of a 401k is to provide income for your retirement years, when you spend this money now, it’s not going to be available for tomorrow.

The Ugly
• Tax penalties. The ugliest part of early withdrawal from a 401k is that good old Uncle Sam hits you with tax penalties can really hurt—and it diminishes the amount you wind up with when you make a withdrawal.
• Fees. The investment firm that manages your 401k may also charge you a penalty or fee for liquidating the investments early, which may leave you with even less money than you anticipated.

Mortgage rates include co-ops

New York State has just announced a new Federal tax credit for first-time home buyers.  The program will take effect in September.

  • Mortgage Credit Certificates (“MCC”) issued by SONYMA enables first-time homebuyers to convert 20% of their annual mortgage interest into a direct income tax credit on their Federal Tax Return for each year of the life of their loan;
  • MCCs can be used with any fixed-rate mortgage product offered by your lender;
  • Borrowers with MCCs can also take advantage of the $8,000 Federal first-time homebuyer credit (if closed by November 30, 2009)

There are limitaitions  on income ( $92,160 for 1 & 2 person households, $102, 520 for 3+person hosueholds) as well as purchase price limits ( $637,640for co-ops and condos ). Here are the details.

Manhattan Residential Rental Report 2nd Quarter 2009Miller Samuel, an independent appraisal firm,  and Prudential Douglas Elliman real estate today released the Manhattan Rental Market Overview. The report tracks the 2346  apartment rentals that occured in the second quarter of 2009 and compares the data to first quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.

The market report shows that rental inventory year-over year was up 28.8% , there was a 17.5% year over year decline in rental price per square foot and a 58.3% decline in the number of new rentals. Interestingly, the average rental price in Q2 09 vs. Q2 08 shows a decrease of only .9%,

At the end of a very interesting article written by Jonathan Miller for the Huffington Post,  he confirms what I’ve seen is that there are a large number of first time buyers out there, and contracts are being written (and signed).

“One of the key culprits for the rental price and activity drop was the record low mortgage rates in the spring, which pulled many first time buyers out of the rental market (if they could qualify under the banks newly-found underwriting conservatism). Combine that shift with rising unemployment and there is less activity and downward pressure on rental prices.

One could therefore argue that the rental market is a leading indicator for the purchase market, at least in Manhattan. When the economy improves and the pace of unemployment begins to ease, the number of rentals should begin to rise, eventually followed by sales activity.”