Closing Costs Guide-Created by Jerry Feeny

Real estate closing costs can be confusing. These PDFs created by Jerry Feeny,  a well known and respected New York Metro real estate attorney, cover closing costs (coops, condos, townhouses-and other real property)  for buyers and sellers in New York City , The Hamptons and Westchester & Rockland Counties. 

We hope you find this guide helpful in ‘demystifying’ the age-old question of buyers, ‘what are my closing costs?’ And from sellers, ‘what costs do I have to pay at closing and what is left over from the sale price?

According to the survey by the National Association of Realtors, the reported cancellation rate doesn’t mean that one of every three transactions are falling through, rather more than triple the number of agents are facing  deal-jeopardizing problems in 2011.

 Some of the issues reported:

• Appraisals below contract price.   Appraisers hired by the mortgage company may have a different opinion of the value of the property, sometimes significantly below the price agreed in the contract.  Foreclosures being used as ‘comparables’ to value non-distressed properties are part of the problem here.  Inexperienced appraisers who are unfamiliar with local trends also contribute to this trend.
• Stringent underwriting and documentation requirements.  Restrictive underwriting rules at the Federal Housing Administration, Fannie Mae and Freddie Mac can derail signed contracts or delay them for months.
• Poor service by lender staff.  Agents report “lack of customer service” and “generally bad attitudes” as contributing factors to delays and some contract failures.  However, agents also need to be on the lookout when loan processing deadlines start to lag or communication breaks down, and facilitate the progress of getting it moving again.

The key to closing on a home is to make sure you choose the right agent, lender and other team members who will help you understand the rules and requirements before hand, and stay on top of the professionals involved in your transaction.

Based on Los Angeles Times article.

 Board interviews are near the top of the strangest and most stressful things New York City residents go through while trying to put a roof over their head.  Having enough money to buy the apartment is just not enough; you must pass the interview as well.  Interviews run from basic and routine to a microscopic examination of your life and very grueling.

 While real estate brokers are typically involved in preparing clients for interviews, sometimes lawyers have the perspective to see the mistakes that sink their contract at the last minute in the interview process.  Here are a few tips from one lawyer who has lived through board rejections:

1. Don’t Lie.  Tempting as it may seem to lie to avoid conflict, it is likely the truth is less damaging than the lie.  Trying to cover up the youthful indiscretion that landed you in jail for the night won’t win you any brownie points with the Board.  Chances are if they’re asking you about your arrest record, they already know the answer and want to see if you’ll fess up.  Explain that you’re not proud of that time and it’s something that you’ve never repeated.
2. Explain Renovation Plans in the Right Context:  If the apartment is in desperate need of renovation, the board members interviewing   you are aware of the situation and are looking forward to someone bringing that unit up to date to increase market value, and create good comps for the other units.  Present the plans in the correct light:  “You want to update the apartment and have carefully reviewed the alteration policies of the board and plan to follow them to the letter”. 
3. Be Candid About Your Plans for Using the Apartment:  Some boards are not fond of absentee owners, because they typically tend to have lots of guests and generally don’t spend as much money on upkeep on the apartment as those who make the apartment their primary residence.  If you plan to use the apartment as a secondary residence, be honest about it and address their concerns.
4. Remember the Pets:  If you have a pet, be honest about it, and stress that yours are obedient and not a trouble-maker.  Explain you have read the rules and understand when and where pets are allowed on elevators and in the lobby.  Reassure them that the animal will not be a danger to anyone in the building.  You may even be asked to bring your pet in for an interview. 

Lastly, be yourself and at ease.  Rely on your Broker to prepare you for the process.   If for some reason the board rejects you, remember the immortal words of Groucho Marks “I don’t care to belong to a club that accepts   people like me!”

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

4/26/12  Useful  Vocabulary for Building Watchers:  Here are a few  architectural definitions that anyone who wants fluency in New York architecture will find useful.  Read the full story in the New York Times  

4/26/12  Prudential Douglas Elliman releases “The Elliman Report:  Long Island Sales 1Q 2012”:  Mild winter weather brought consumers into the market earlier than usual, causing the number of signed contracts in the Long Island housing market to jump from year ago levels. Housing prices were mixed, as buyers of lower priced properties took advantage of record low mortgage rates. Although properties took slightly longer to sell, listing inventory fell to its lowest first quarter total in six years. Despite the slow improvement in the national economy, we are encouraged by the state of the market in 2012.  See the full report 

4/26/12:  Prudential Douglas Elliman releases “The Elliman Report:  Hamptons & North Fork Sales 1Q 2012”:  The Hamptons and North Fork housing markets showed stability in both price and sales activity. Just as we have seen in prior quarters, the high end of the market continued to show strength. While it took somewhat longer to sell a typical property this quarter, listing inventory continued to decline. Considering the slow pace of our national economic recovery and tight credit, the East End housing market has continued to hold its own.  See the full report 

4/27/12:   Space Shuttle Enterprise’s Historic Flyover Wow’s New Yorkers: Did you see it?  Hundreds of space shuttle shuttle fans braved the chilly temperatures and biting wind Friday Morning along the Hudson River here to catch a glimpse of NASA’s prototype orbiter as it flew past the Intrepid Sea, Air and Space Museum it will soon call home.  See the full article on Yahoo! News 

4/27/12:  Threats, stormy Exits and…:  The setting for the closing on an apartment in the East 50s was a lawyer’s office. Things seemed to be going well between the sellers until the wife found out the price her husband had received for the apartment.  This is New York City, where real estate transactions can literally take on the trappings of a blood sport. Unlike most other parts of the country, it is a place where lawyers are invariably involved in the transaction; at the very least, this increases the number of people around the table.  Read the full article in the New York Times 

4/27/12  Brokers See Bright Future for 2012’s Residential Real Estate Market: The Real Estate Board of New York (REBNY) has released the results of its Residential Brokers Survey for the first quarter of 2012.  With the unseasonably warm weather and favorable market conditions, brokers saw an uptick in activity this quarter and are optimistic about next quarter.  Of the brokers surveyed, 69 percent reported that they thought the first quarter of 2012 was better than the previous quarter.  Additionally, 76 percent of brokers reported that they expect the second quarter of 2012 to be better than the first, a 16 percent increase from last quarter. 

 Their optimism was based on the improving activity in the market.  The survey found that 70 percent of brokers reported completing executed contracts of sale this quarter, a nine percent increase from last quarter.  Another highlight from the first quarter of 2012 was that 74 percent of brokers reported closing rental transactions at or above asking prices, which is a 13 percent increase from this time last year.  In addition, 26 percent of the brokers reported closing sales at or above asking price, a nine percent increase from the fourth quarter of 2011 and a 4 percent increase from the first quarter 2011.

 “Brokers feel changes in the market first and we count on them to help us gauge where the market is headed,” said REBNY President Steven Spinola.  “Based on the survey results, it’s clear that broker’s optimism is coming from an improving market and that their view that 2012 will be a strong year for New York City real estate is justified.” 

 The survey also found a near perfect record of 99 percent of brokers reporting that they received a coop board approval in less than 90 days from the time a completed coop board application was submitted.

 Similar to last quarter’s findings the top features/amenities this quarter were: 1) doorman building, 2) laundry in unit, 3) private storage space, and 4) on-site fitness center.
 The survey was sent to REBNY’s Residential Broker Members.  404 brokers took the survey this quarter.  See the REBNY Q1 2012 Residential Broker’s Survey Results

Buying a home is the single biggest purchase most of us will ever make. For many, it is a transaction full of fear, worry, and stress. Here are a few secrets to help the stress melt away.

1. Education. Since most of us fear what we don’t understand, educate yourself. Ask questions, and own up to not understanding something. The only ‘stupid’ question is the one that is not asked. Keep asking until you understand the answer.
2. Surround yourself with experts. Finding the right people to help you through the transaction can make all the difference. They will help you manage expectations. Board approvals and financial statements are fraught with pitfalls that your Real Estate Agent and accountant can help you navigate.
3. Be Prepared. Like a Swiss watch, real estate transactions have a lot of moving parts. Any one delay could send the whole timeline into a tizzy. Make sure you plan for delays like attorney reviews and board approval, and add in some breathing room to reduce the stress. 
4. Expect the unexpected. Even when you think you’ve covered all the bases, there can be challenges that will try your patience. The board application can be long and tedious, seemingly prying into every aspect of your life. Requests for clarification give you a chance to fill in the blanks that could mean the difference between approval and denial. 
5. Control what you can. Focus your energy on the parts of the transaction you can control; working on your credit, saving, and finding trusted professionals who will guide you through the process. Having a clear vision of your daily life and personal finances in your new home will help you see past the obstacles to the goal. “An obstacle is what we see when we take our eyes off the goal.” Focus on the goal, and let your trusted professionals guide you through the obstacle course.
6. Let go of the rest. There’s a big difference between knowing what can happen and planning for the possibility, or dwelling on every possible disaster. If fate throws up a roadblock, take a deep breath, consult your experts, and make the best decision you can.

Inspired by Trulia article by Tara-Nicholle Nelson

Basics of the home mortgage interest deduction

• Taxpayers who itemize deductions on Schedule A can include interest paid on mortgages with certain limitations:
• Only interest paid on a loan secured by a principal residence and second home is deductible
• Only deduct interest on loans for which they are legally liable, so paying someone else’s mortgage doesn’t count.

Once the above conditions are met, the following applies:

• Only interest on the first $1,000,000 of debt for first and second residences combined can be deducted, for Single or Married filing Jointly and married filing separately, the limit is reduced to $500,000 each.
• Only the interest on the first $100,000 of home equity loan debt.
• In this example, an unmarried taxpayer with a mortgage and home equity line of credit could deduct the interest on $1,100,000 in total.

Recently the IRS ruled that, for an unmarried couple who jointly owns the home together the $1,100,000 limit applies to the residence, not the taxpayer.

• One or two homes which are the principal and second homes cannot provide more than a home mortgage interest credit on $1.1 million of debt total regardless of how many people own the homes.
• Once the $1.1 million of interest deduction is used from the first and second home, no further interest deduction can be claimed.
• In this example John and Jane own two homes jointly but are not married.  Home one has a mortgage debt of $1.5 million and home two has a mortgage debt of $1 million, with no home equity line of credit on either property.  According to the ruling, John and Jane cannot together claim interest on more than $1 million of total mortgage debt.  However if John owned home one and Jane owned property two, then each taxpayer could claim the full limit providing they were otherwise eligible.

 Tax planning becomes very important in this situation.  Seeking the advice of a qualified tax professional can be extremely helpful prior to purchasing a home to be sure the structure permits maximum deductions.

Based on blog article by Jerry M Feeney, Residential Real Estate Attorney.  Information in this article is to be used for informational purposes only, and not to be considered legal, tax or financial advice by the Real Estate Geezer.

If you:

• Need quick access to funds
• Want to avoid traditional mortgage fees
• Are finding it challenging to obtain a traditional mortgage for new construction or investment property
• Are required to verify you have sufficient liquid assets to support the purchase
• Want to use a bridge loan as a short term strategy
• Are purchasing a second home and wanted to use equity in primary residence as down payment value of primary home has decreased significantly

Securities Based Lending using the Portfolio Loan Account may be for you.

• Allows borrowers to use eligible securities in their brokerage account as collateral.
• No  origination, maintenance or facility fees
• Access to available credit without having to reapply for each new loan
• Quick application process, with access to credit in approximately five business days.

This post is based on a document provided by Amit Michael Kapil at Morgan Stanley Smith Barney and is to be used for informational purposes only, not to be considered legal, tax or financial advice by The Real Estate Geezer

So what do they look at? 

• Debt-to-income ratio    
• Mortgage lenders generally want no more than 28% of a buyer’s gross monthly income to the mortgage payment (Principal, Interest, Taxes and Insurance), or a maximum of 36% for PITI and recurring debt (loans, credit card payments, child support, etc)
• Co-op Boards usually want to see something closer to 25-30% debt-to-income
• Income – liquid income
• Generally the last 3 years of tax returns are reviewed for gross income and adjusted gross income
• Earning Potential – if your earnings are less than board guidelines, or assets are too weak, but you can show potential for increased income, the board may approve with conditions such as a year’s maintenance held in escrow.
• Debts
• Boards also consider other debts, student loans, car loans, other mortgages.
• Other Factors
• Location – locations such as Brooklyn or Queens may be less likely to look for large assets and permit more financing than a building on Park Avenue in Manhattan
• Building size – larger buildings could be easier to buy into than smaller buildings because one or two arrears owners have less impact in a 200 unit building than a 20 unit building.

Boards want to protect their co-op, choosing people who are the right fit.  They also need to stay within the boundaries of discrimination laws.  Reviewing the financials allows the board to decide whether to move forward or not without violating the discrimination laws.

Excerpted from Habitat article

A few tips to make it through the process:

• The board can be discriminating  (picky if you will) but not discriminate for reasons of race, color, religion, national origin, sex, age, family make up, disability, sexual orientation or citizenship status.
• Appropriate information for basing a decision
• Can you afford to pay maintenance charges
• How many people will live in the unit
• Income, credit, residential history and employment history
• Some boards request a preliminary application which is reviewed by a board screening committee to determine if a purchaser is eligible.  If so they move forward with the full application package.
• Application package
• Residential History
• Bank history
• Employment History
• Hobbies and Interests
• Interest in board or committee service
• Anyone who will live in the apartment
• Full financial disclosures.  See our post: What Co-op Boards look for in your Financials.
• Community Values
• Assess compatibility with the co-op and its character.
• Some boards allow opportunity for you to ask your own questions
• Have pets?  Some boards want to ‘interview’ them as well (Read about it in our article: Co-op Board Interview for Pets!)
• Each board has their own guidelines
• After the Interview
• After review, the committee will give recommendation to the board, who votes on the purchase.
• Letter sent to seller with decision, with copy to purchaser and co-op’s attorney
• Co-op’s attorney will communicate with all attorneys involved to arrange closing.

Excerpted from Habitat article

 Are you enticed by the mortgage interest lowest rates in decades? If so you’re not alone, but they are often out of borrowers’ reach. Lenders base their rates on perceived risk. Only if you can show you’re low-risk would you qualify for a rate that matches those seen in headlines.

If you’re looking for the lowest available rates consider these basic factors:

• Credit Score: The ideal FICO score is around 740 or higher. This will put you in the best place for pricing.
• Points: 1% of the loan amount is a point, and by paying points you can reduce your mortgage rate. Be sure to ask for a zero point quote as well to compare the two rates.
• Property Types: Such property types as duplexes, condominiums in newer buildings or with lower down payments, commercial properties or non-owner occupied properties come with higher rates.
• Down Payment: Experts say putting down at least 25% could lead to more attractive pricing. Lenders offer different breaks on rates if equity is higher.
• Loan Length: ARM and 15-year loans are often lower than those on the 30-year loan. Consider how long you plan to live in the property and weigh your options.
• Other considerations:
• Lock-in: You may receive a lower rate for a shorter lock period 30-45 days rather than the usual 60 days
• Additional ownership costs, taxes, insurance and maintenance.

 Inspired by New York Times Article by Vickie Elmer published January 12, 201