Archive for Build Your Team

In 1971, the city launched the 421a program as an incentive for developers to build projects on underused or unused land.  Today, a record number of condos have a 421a status.  Ranging from 10 years duration below 96th Street to 15-25 years in Upper Manhattan, the exemptions do have an expiration date.  The exemptions start to decrease annually after the first two years, which usually means rising common charges.

Historically, condos will sell for a higher price if the common charges are low.  While in development, the developer will set the rate for the monthly charges until a board is in place.  Luxury buildings with high-end amenities like rooftop decks, concierges, etc. may have lower common charges while the 421a Tax Abatement is in force.

Once the tax abatement expires, condo boards are generally scrambling to find ways to reduce costs.  Some condo bards have taken the drastic action of terminating their contracts with property management and hiring an on-site manager.  This extreme step takes a dedicated hands-on board to oversee the manager, decrease costs and look for ways to raise revenue.  Board members are generally volunteers, so finding people willing to give their time for the community is sometimes difficult

Some condo boards find other ways to chip away at the expenses; cutting staff, renegotiating mortgage rates, installing high-efficiency lighting in the common areas, and other similar strategies. Some cost-cutting measures come with risk of reduced services, but the upside remains – lower common charges generally create higher selling prices.

 

Inspired by The Real Deal Article by Hayley Kaplan

Sep
02

Co-op & Condo Tax Abatement – New Rules

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In New York City, real estate taxes are an important part of the value, and it seems the rules are about the change.

According to Jerry Feeney, Residential Real Estate Attorney   the following is a summary of the changes.  As always, it is important to see qualified advice when dealing with legal and tax matters.

 

  • Primary Residence:  The apartment must be the owner’s primary residence to be eligible for the abatement, and parking spaces and storage units are excluded.  This important change is effective July 1, 2014.  Non-residents who received the abatement in 2011/2012 will see the abatement phase out in 2012/2013 and 2013/2014.  By 2014/2015 the abatement will be completely phased out for non-residents.
  • Multiple unit ownership:  Ownership of 4 or more units in the same building disqualifies the owner from any abatement, regardless of whether one of them is a primary residence.   If one owner owns 3 or fewer units, and one is the primary residence, the abatement will apply to all of the units.  If none of the three units are owner occupied, none will get the abatement.
  • Other Exemption/Abatement programs:  This change in the law will not affect other real estate tax relief programs, but recipients of certain relief programs are ineligible for the co-op/condo abatement, without regarding primary residence status.  These programs are (a) J51, (b) 420c and 421a, b, and g. (c) HFDC, (d) DAMP, (e) Mitchell-Lama, and (e) clergy.  Personal exemptions, however, will have no impact on the receipt of the co-op/condo abatement.  Examples of these programs are:  (a) STAR, (b) disabled homeowner, (c) senior citizen, and (d) veterans
  • Trusts:  In determining principal residence for a unit owned by a trust, NYC Finance requires that the unit is the principal residence of the beneficiary of the trust, trustee, or in the case of a life estate, the life estate holder.

 

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

 

Information provided by Jerry M Feeney, Residential Real Estate Law 

 

Aug
20

In the News August 18, 2013

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8/7/13 TV Star Ortiz lands at Elliman after KWNYC firing:  Luis D. Ortiz, the newest star of “Million Dollar Listing New York,” has officially signed on to work at Douglas Elliman, he told The Real Deal exclusively today.  See the full article at The Real Deal 

8/15/13  Bloomberg’s “affordable” micro-apartments don’t come with micro prices:  New York City’s micro-apartments aren’t really all that affordable, and in reality are geared toward the upper-middle class, the New York Observer reported  See the full article at The Real Deal 

Aug
15

Tax breaks on Second Homes

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Second homes or Pied-a-Terre’s often offer owners tax breaks that are similar, but not identical to, those for primary residences.  You may also be able to earn additional income that could help the bottom line tax.  The second home could be an attractive investment when you consider the potential for long-term appreciation along with the potential income and tax breaks.

You should consult with a qualified tax attorney or CPA when trying to figure out tax implications on transactions involving real estate.  The laws change frequently, and they can keep you apprised of the latest information and help you maximize your tax advantages.

In general, how it works:

  • Mortgage interest up to $1 million of “acquisition indebtedness” incurred when buying the primary and on additional interest can be deductible.  If your combined mortgages exceed $1 million, the interest paid on the first $1M could be deductible.
  • Second homes can be timeshares, yachts, motor homes, as long as it includes sleeping, cooking and bathroom facilities.
  • Gains from selling a second home are generally taxed as a short-term or long-term capital gain.  While the sale of a principal residence can be excludable, gain on the sale of a vacation/second home is not.  Recent rule changes limit the amount of prior gain on a vacation/second residence that can be sheltered if that home is converted to a primary residence.
  • Vacation Home Rentals – many owners rent vacation homes to earn income and help pay for the cost of owning the home.  These rentals are taxed under one of three sets of rules depending on how long the homeowner rents the property.
    • Income from rentals totaling not more than 14 days per year is nontaxable under current guidelines.
    • Income from rentals totaling more than 14 days per year is taxable and is generally reported on Schedule E Supplemental Income and Loss on your 1040.  Homeowners who rent their properties for more than 14 days can deduct a portion of their mortgage interest, property taxes, maintenance, utilities and other expenses to offset that income.  That deduction depends on how many days they use the residence personally versus how many days they rent it.
    • Owners who use their home personally for less than 14 days and less than 10% of the total rental days can treat the property as true rental property if certain rules are followed.

 

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

 

Excerpted from Presti & Naegele Accounting Offices newsletter

 

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Aug
08

How’s the Market – July 2013

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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.

 

AV&MED_SP_DOM_07-2013

DISC_AP_07-2013

Sales_Region_07-2013

 

Jun
14

Make Your Offer Irresistible

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You’ve found it, THE PERFECT apartment.  You want it; it’s going to be yours.  Or is it?  Here’s a few tips to increase your chances of being able to sign on the dotted line.

  • Pay cash.  Sellers love all cash offers because they are less likely to fall through at the last minute.  If you need a mortgage, a low appraisal could sink your chances, and cause you to lose your deposit.
  • Get pre-approved.  If you have to get a mortgage, make sure everything is up to snuff with your credit.  Get the letter from the lender saying you’re pre-approved.  While it doesn’t guarantee you’ll get the loan, it shows that the lender has verified your income and credit score and determined that you can afford the payments on a mortgage at a certain amount.
  • Make your best offer.  In today’s market you may only have one shot, so make it your best offer.
  • Up the ante.  Add an escalator clause, with which you agree to increase your offer is there is a higher bid from another buyer.  Remember, if you agree to pay more than the market value (appraisal), you’re on the hook for the difference, whether or not the mortgage will cover it.
  • Increase your earnest money.  This shows how serious you are.  If you back out of the contract for any reason allowed in the contract or state law, you could get your money back.
  • Pay for extras yourself.  Offer to pay some of the closing costs or other prepaid costs.
  • Make contingencies easy to handle.  Sellers usually prefer no contingencies, but buyers need the protection contingencies provide if they need to cancel the contract.  Use your pre-approval and strong earnest money deposit to take the sting out of a financing contingency.  Seek the advice of your broker to help you determine what will help.
  • Write a letter to the seller.  This will help you connect with the sellers.  Make points like “We especially love…” and “We appreciate…”
  • Work with the seller’s timetable.  Express your willingness to go to closing on the seller’s schedule.

Inspired by Chicago Tribune article

 

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Jun
10

It’s a Seller’s Market – Every Minute Counts!

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With all cash offers becoming the norm, open houses packed to the gills, bidding wars, and some listing prices actually rising, there’s little doubt in New York City that it is a seller’s market.   The rules of engagement have changed.  Serious buyers need be prepared to act quickly.  Know what you want and strike while you can.  All cash offers help a lot since sellers are choosing offers with the least amount of hassle.

Recently, fewer apartment listings – down 27.6% last month over a year ago – and low interest rates have increased competition among buyers and driven up prices.  Add to that, listings going into contract faster, and the pressure is on to decide and act on the apartment of your dreams.

Some tips to help you get the perfect place:

Automate Your Search:   Websites like Streeteasy.com and Zillow.com eliminate some of the work, and will allow you to save searches and receive emails with new listings that meet your requirements.

Don’t Wait for the Open House:  Schedule a showing during the week before the first open house if at all possible.  If you wait until the open house, there is a good chance you may not even get a chance to make an offer.

Forget About Getting a Deal:  If this is THE apartment for you, make your best and final up front.  Let the seller know you are really serious.  Consider making the offer with a 24 hour ending time.

Don’t Delay:  Being the first to make a solid offer can give you an edge.

Be Thorough:  Have your financial statement prepared and ready to go, a short personal biography and anything else your broker recommends to put you in a strong position.

Increase Your Down Payment:  The standard 20% down is very old school.  Most brokers are recommending 30% to 35% down.  Appraisals are lagging behind asking prices because they are based on past sales.  If the appraisal comes in low, the bank will not lend more than the appraised amount, so buyers need to have cash to make up the difference.  A larger down payment can give you the edge in multiple bid situations, as well as make you look stronger to a co-op board.

Beware of Mortgage Contingencies:  Fewer sellers are willing to accept contingencies, and the buyers may be desperate enough to waive the contingency and risk losing their deposit.  But beware; if you don’t have cash to cover your losses, it’s not really a good idea to give in to the pressure.  If the appraisal comes in low, or the bank finds a deficiency with the building and won’t lend you the money, you could lose your deposit without the contingency.

Negotiate the Contingency:  Get your broker to help you structure the contingency so that it is attractive to the seller, but protects your interests.

Set Your Ultimate Price:  Decide what your number is, and be prepared to walk away.  This way, hopefully you’ll be able to sleep at night.

Sign Your Contract Quickly:  Today’s sellers get impatient when buyers take too long with their due diligence and negotiations.  A contract isn’t binding until it is signed.

 

Inspired by New York Times article

May
16

When Foreign Persons Sell

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In New York real estate sales there is one sure bet; you will pay taxes.  Whether you are a US tax payer or a foreign investor, the State of New York and the US Government will get their cut.

The question is when will you have to pay up?  The rules are a bit complicated, but one of our favorite legal bloggers, Jerry Feeney explains it like this:

For New York State: people who sell real estate in New York State, whether they are individuals, trusts, estates, or LLCs, must pay the tax at closing on the estimated gain as a condition of the sale, unless they are exempt from payment at closing.  Most transactions are exempt.  However, the exemption is only about the timing of the tax payment, not the obligation to make the payment.   Make no mistake; the seller is accountable to the taxing authority to account for the gains.

If you are a New York State resident, and/or the property being sold was the principal residence of the seller for 2 of the last 5 years, the exemption from paying at closing applies.

For example:  A seller who has owned a condo in New York City that is used as a second home, and is a New Jersey resident must fill out the applicable tax foand remit the tax payment on the estimated gain from the sale or they cannot close.  This is a very good reason to have a good accountant on retainer.

For United States Taxes, people who sell real estate in the United States must also certify at closing if they are exempt from the federal withholding requirement on real estate unless the sales price is $300,000 or less and the property is acquired for a primary residence.  If not, the seller must certify that they are exempt from withholding.  Face it, most New York City real estate is over $300,000.  There are 2 ways the seller could be exempt; if they are U. S. citizens, or resident aliens.  Others are ‘foreign persons’ under the statue and must withhold 10% of the purchase price unless they have obtained a withholding certificate from the IRS approving a smaller withholding.  These certificates can take up to 90 days to obtain, sometimes more, so be sure your attorney starts the process early to ensure a smooth closing.

For Example:  A Canadian citizen who does not have any immigration status in the U.S., and who sells an investment property would be required to have 10% withheld at closing, which must be remitted to the U.S. Treasury.  This seller would then need to file a U.S. Tax return for the year that the property was sold, regardless of whether they have any other U.S. income.

It is vitally important that your team include a qualified attorney and accountant to help you navigate these treacherous and complicated waters.

Based on article by Jerry M. Feeney,  Esq., Residential Real Estate Attorney.

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.

 

May
03

Mortgage Update May 2013

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Mortgage_Chart_05-09-13

 

Unemployment Rate Falls

During a week packed full of major economic news, the big market mover was Friday’s stronger than expected Employment report, and mortgage rates ended the week higher. This week’s Fed and ECB meeting announcements produced some volatility but had little net impact.

Following a dismal March Employment report and weaker than expected first quarter GDP data, investors were concerned about another spring slowdown for the US economy. The April Employment report helped alleviate those fears, however. Against a consensus forecast of 155K, the economy added 165K jobs in April. The bigger news was that the figures for February and March were revised higher by 114K. With the revisions, the economy added an average of more than 200K jobs per month during the first quarter. The Unemployment Rate unexpectedly declined from 7.6% to 7.5%, the lowest level since December 2008. Without a doubt, the data was significantly stronger than expected, which is good news for the economy. But for mortgage rates, it was bad news for a couple of reasons. It increases future inflation expectations and it moves the Unemployment Rate closer to the 6.5% target which may cause the Fed to scale back its bond purchase program.

The Fed concluded its highly anticipated meeting on Wednesday. Prior to the release of its statement, investors, expecting to see clearer signs of support for an increase in the magnitude or the duration of the bond buying program, pushed up the price of Treasuries and mortgage-backed securities (MBS). The Fed statement was little changed from the last statement, however, causing MBS prices to lose their earlier gains. The Fed will continue asset purchases until the labor market improves “substantially”. The primary change to the statement was the addition of the language that the Fed is “prepared to increase or reduce” the pace of its asset purchases based on changes in its outlook for the labor market and inflation.chart 050313

Also Notable:

  • Pending Home Sales increased to the highest level since April 2010
  • Weekly Jobless Claims fell to the lowest level since January 2008
  • As expected, the European Central Bank (ECB) cut rates by 25 basis points
  • Eurozone unemployment rose to a record high of 12.1%

 

Graph courtesy New York Times article and newsletter by Fred Ashe from Citi Financial Group.

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Apr
21

Legal Question of the week: Lost Co-op Stock and Lease

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Q:  I am selling my co-op.  I have turned my apartment upside down and inside out, inspecting every scrap of paper and I cannot find my Stock and Proprietary Lease for the apartment.  I’ve contacted the managing agent who is requiring me to not only execute a Lost Stock and Lease Affidavit, which I understand is common, but they also are requiring me to post a bond.  Is this common practice?

A:  No, it is not common practice for a co-op to require a shareholder to post a bond if the shareholder loses their stock and lease.  While the co-op has a right to request a bond, generally, the co-op simply requires the shareholder (or the party who lost the stock and lease) to execute a Lost Stock and Lease Affidavit.   Lost Stock and Lease Affidavit generally states that the shareholder (i) is unable to locate the stock and lease, and (ii) is required to indemnify the managing agent and co-op for any loss that the co-op incurs as a result of the loss of the stock and lease.  The shareholder (or the party who lost the stock and lease) will likely incur a fee in connection with the Lost Stock and Lease Affidavit.

 Important tip:  One of the first questions your real estate broker should ask a seller of a co-op apartment who has the original stock and lease.  If the shareholder has a loan, then it is likely that the original stock and lease will be in the possession of the lender.  If the stock and lease is lost,, the managing agent for the co-op should be contacted immediately so as to determine the co-op’s procedures concerning lost stock and leases.

 

Based on REBNY article by Neil B. Garfinkel, REBY 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.

Categories : Build Your Team, Co-op
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 Q:  I am considering purchasing a condominium unit in a small building, but the condominium board does not have an accountant prepare audited financial statements.  Is there a requirement that condominium and co-op boards have accountants prepare audited financial statements?

 A:  No, there is no requirement that boards have accountants prepare audited financial statements.  However, audited financial statements prepared by an accountant provide assurance that the financial statements fairly reflect the building’s financial position.  Consequently, an audited financial statement will provide a prospective purchaser with confidence that they have an accurate picture of a building’s financial condition.  Purchasers considering a condominium or co-op that does not have audited financials should proceed with caution when conducting their due diligence.

 Important Tip:  As mentioned in a past Legal Line Question of the Week, audited financial statements for a condominium or co-op are one of the due diligence items that your real estate broker should request from the seller or managing agent as soon as possible in order to expedite the transaction.

 Based on REBNY article by Neil B. Garfinkel, REBY 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

Mar
15

Lawyer’s Tips for Preparing for Appraisal

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The appraisal is an important piece to the financing puzzle.  The price on the appraisal is the figure upon which the financial intuition bases their funding decision.  A failed appraisal could kill the deal.

  • Make sure your broker attends the appraisal.  This gives him the chance to present a neat package of all the comparables for the transaction price and show off the property.
  • Show off features of the apartment that may not be so obvious like deeded storage or a second dishwasher.  This is even more important if the appraiser is not familiar with New York City.
  • Explain negative comparables.  For example the apartment in the same line that sold for a great deal less that needed to be renovated needs to be pointed out.

 

From article by Jerry Feeney  http://jerryfeeney.com/real-estate-101/preparing-for-the-appraisal/

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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.

 

 

 

 

 

 

…But there’s no pleasing everyone all of the time, especially in real estate.  Buying real estate is mostly about personal preference, from location to décor.  Some things can be changed, true, but you can’t just move an apartment to a different location.  So we’re going to focus on tips for the things you can change.

  •  Odors:  Your apartment is all spruced up and ready to show, but buyers use all their senses when looking for a home.  Nothing sends people running faster than powerful odors.  Cigarette smoke and pet odors cause people to think the odors are permanent.  Invest in professional cleaning to address the challenge.
  • Extreme Overpricing:  If buyers and their brokers are constantly commenting on the price or worse, nobody is even looking at it or you continually get lowball offers, you may have a challenge on pricing.  Make sure your apartment represents value for the price.  Make sure you listen to your broker’s advice when it comes to pricing.  He’s the expert in your neighborhood, and can bring you comparable prices to similar apartments.
  • Dirt and mess:   Buyers get distracted by clutter and dirty dishes, piles of mail and books in plain view.  Make sure everything is neat and tidy before every showing and open house.
  • Lots of little malfunctions:  Buyers will almost compulsively open and close cabinet doors and drawers, flick light switches and hold handrails as they go up and down stairs.  Drippy faucets  and uneven tiles will sometimes send buyers running, or at the very least subconsciously start tallying up the cost of all the little fixes and drop their offer accordingly.  To sidestep this pitfall, walk through the apartment with your broker and have him show you all the little fixes that need to be handled.  Check with your building Super to see if he can fix them for your inexpensively.

 Inspired by Trulia article by Tara-Nicholle Nelson http://pro.truliablog.com/sellers/ways-to-hater-proof-your-listing

Categories : Build Your Team, Selling
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Feb
25

Legal Question: What do I need to Sell an Estate?

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Q:  What should I know about selling an estate that is different from selling my own co-op?

 A:  Make sure your broker contacts the managing agent for the co-op at the beginning of the transaction to be sure you have plenty of time and are able to gather all the necessary documentation necessary to effect the transfer of stock and lease at closing. 

 Though each building may have their own process, generally they will need the following documentation:

  • Certificate of Letters of Testamentary dated within 6 months of the closing
  • An Affidavit of Debts and Domicile executed by an executor or administrator of the estate
  • Federal Release of Lien issued by the IRS (or affidavit confirming that no such release is required)
  • New York State Release of Lien of Estate Tax issued by the New York State Department of Taxation and Finance
  • The Decedent’s death certificate
  • Last Will and Testament fo the decedent (certified as true and correct).

You should speak with your attorney to be sure that the necessary documents are available and ready to be turned over when requested prior to closing.

 

Based on REBNY article by Neil B. Garfinkel, REBY 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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