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?

Last week, Mayor Bloomberg introduced a bill that would require owners of Class A multiple unit residential buildings to disclose where smoking is permitted or prohibited inside the units, outside areas within 15 feet of entrances and doorways as well as the common areas, balconies, courtyards and rooftops.

Current trends to regulate smoking in public spaces, such as in parks and restaurants, have sparked interest in pursuing non-smoking policies for residential buildings. Additionally, New York City’s Smoke Free Air Act already requires that individuals cannot smoke in public places, including the common areas of a multiple dwelling such as hallways, elevators and stairs.

The proposed legislation put forward by the Mayor’s office would require buildings to create a smoking policy if they do not already have one.  There are several concerns with the legislation.

• In the current draft of the bill, buildings would have to comply within 90 days.   This is an unrealistic turnaround time for condo and coop boards. They would need at least 6 months to confer with their attorneys and have any smoking policy approved by the board members.
• Under the legislation, the proposed notification requirement is the responsibility of many parties including owners, managers and leasing agents.  In actuality, given the various ownership and management structures in New York City real estate, each lease and sale transactions can be structured differently and can make it difficult to clearly delineate responsibility.  It may be straightforward to designate responsibility in an owner managed and leased rental building, but it may be less clear if a condo owner is subletting his/her own apartment.
• Additionally, the City is seeking to impose hefty violations if this notification is not in place. We question the need for a complicated fine schedule.

REBNY will be working with the Mayor’s office and City Council to ensure that any bill that is passed is practicable for building owners and managers.

Related to the smoking issue, the Best Practices Subcommittee of REBNY’s Residential Management Council created a guide that serves as a starting point to help managing agents best inform their buildings and boards if they are considering implementing a no-smoking policy. This Subcommittee, which finalized the guide at the beginning of April, laid the groundwork to open communication and provided insight into addressing this issue.

Under existing city, state, and federal law, owners of rental apartment buildings are free to adopt a non-smoking policy with regard to the individual residential units that are free market. Currently, there are no laws in New York prohibiting smoking within an apartment in residential buildings, but implementing a smoking ban could lower maintenance costs and insurance rates.

Here are some highlights from REBNY’s guide for implementing a smoking ban in residential buildings:

Rentals

A landlord or owner can ban smoking in the building for each new non-rent-regulated tenant.  However, the landlord would have to add a rider to that effect to the lease.

In the event that an existing tenant has smoke emanating from his or her apartment and other tenants have registered complaints, the landlord may be able to use that as a basis to attempt to terminate the smoker’s lease.

Coops

An outright ban on smoking would most likely require an amendment to the proprietary lease, which would require the affirmative vote of the owners of a supermajority (typically two-thirds or 75 percent) of the shares.

The Board of Directors may consider whether the smoker’s conduct rises to the level of objectionable conduct sufficient to terminate the shareholder’s proprietary lease.  The Board of Directors could also use the prohibition against “objectionable odors” emanating from an apartment found in most proprietary leases to attempt to terminate the smoker’s proprietary lease.

Condos

Condominium’s By-Laws can generally be amended by the affirmative vote of the owners.  The Board of Managers has the ability to reject any purchaser who permits smoking in the unit.  The Board of Managers can also indicate a specific date in the future at which point no resident may smoke in the building including within the unit.

If the Board of Managers has the authority under the By-Laws to fine a unit owner who smokes in a unit and the smoke enters another unit, it may impose such a fine.  Absent such a provision, the Board or offended unit owner could sue the owner who smokes for monetary damages and an order enjoining the owner from smoking.

The Guide titled, Issues to Consider-Smoking and Second Hand Smoking in Multi-Unit Residential Buildings, is easily accessed on the member’s only side of REBNY.com.  Go to ‘Just for Managers’ and click on ‘RMC Subcommittees” for the full document.

From REBNY memo April 25, 2012.

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.

 The reverse mortgage allows homeowners 62 and older to borrow against the equity of their home and continue to live in them without having to make payments, as long as the home remains their primary residence.  Interest is added to the loan balance which must be repaid after the borrower moves out or dies.  The borrower must keep current with property taxes and insurance.

 In a report released last month by Met Life Mature Market Institute and the National Council on Aging showed that:

• Homeowners aged 62 to 64 are far more likely to take out a reverse mortgage than they were in 1999, even though they are borrowing less.
• The average age of borrowers who took the federally required reverse mortgage counseling was 71.5, down from 76 in 2000 and nearly 77 in 1990.
• Two-thirds of homeowners seeking reverse mortgages to lower debt levels.

 The majority of reverse mortgages come through the Department of Housing and Urban Development and are guaranteed by the Federal Housing Administration through a program called Home Equity Conversion Mortgages.

 Some experts caution retirees against reverse mortgages especially early in their retirement because they run the risk of depleting their equity in their most important asset.  Homeowners at or near retirement should work with a financial planner or estate lawyer to make sure their plan is clear for the next 20 years of living expenses.

This article is for information purposes only.  It is not intended to be legal, financial or tax advice by the Real Estate Geezer.  Always seek the advice of a competent legal, financial and/or tax professional.

Based on New York 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. 

Tenants are feeling resentful; already staggering from a year or more of rent increases.  Many feel trapped, because it is too costly to move or stay.  This could cause renters to shift their focus from renting to buying, but that may not be an option for some due to lack of down payment or credit issues.

According to Jonathan J Miller, president of the appraisal firm Miller Samuel, “When you see rents rising, it is usually reflective of a strong economy, but that is not the case now”.  Prices are being driven up by a tight credit market that forces people to stay in the rental market and limits new construction.

Some renters will opt pay more for less – a smaller apartment for less or the same rent they’re paying now.  Even so, moving expenses, broker fees and deposits can take even that option off the table.  Others are making the decision to share, even putting up temporary walls where allowed and sacrificing a living room.

Even the outer boroughs like Queens and Brooklyn are seeing spikes in the rental prices. 

Rental averages are up in every category, with one-bedrooms rising the most, by 6.5 percent over the past year, to $2,747, according to the Citi Habitats report. Studios rose 3.6 percent, to $1,953; two-bedrooms climbed by 6.1 percent, to $3,865; and three-bedrooms rose 4 percent, to $5,107.

There are some exclusions to the average rental price.  Since the majority of New York’s rental apartments in Manhattan are rent-regulated in some fashion, they are not included in the average.  Also, smaller landlords that do not use brokers   would not be included.  Renters could find that smaller landlords are more willing to negotiate because they would rather keep a happy tenant with a good payment track record, than to have a vacancy for an extended period of time.

There seem to be few options for renters until developers start to bring more new units to the market, or until another market crash to contain the out of control rents: 

• Stay put and try to negotiate or suck it up
• Get a roommate or two
• Move to another rental, neighborhood or town
• Buy

Based on New York Times article.

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

Well, you could send a letter to the occupant with a check offering to pay for repairs and new curtains, and risk offending the occupant, or you could walk across the courtyard and visit in person.  Ask them if they noticed the view from outside their apartment.  Maybe they ordered new curtains already, or maybe they’re broke and cannot afford the repairs.  Maybe you could offer to help with the repairs if it is within your comfort zone and budget so that you can improve your view.  Stay friendly, even if they tell you to mind your own business. 

Or, you could just ignore it…

Based on New York Times Article.

4/16/12  The world’s most expensive one-bedroom condo?:  And you think New York Apartments are expensive?   A one-bedroom penthouse condo was listed recently in Tokyo for 1.8 Billion yen roughly $22 Million.  The apartment is 4,400 square feet and loaded with amenities.  Read the full article at Yahoo! Real Estate

 4/19/12:  Prudential Douglas Elliman Releases Brooklyn Sales Market Report for 1QTR 2012:  The Brooklyn market continued to enjoy stabilizing prices and a steady level of new development activity. Mortgage rates dropped to record lows, which helped lower priced co-op sales retain greater market share. Listing inventory fell below the five-year average, in turn tightening the listing discount negotiated between buyers and sellers. Despite the economic challenges facing the region, Brooklyn continued to be one of the better performing housing markets in New York City.  Get the report from Prudential Douglas Elliman here.   

4/19/12:  Prudential Douglas Elliman Releases Queens Sales Market Report for 1QTR 2012:  Record low mortgage rates helped create a surge in lower priced co-op sales in the fourth quarter that continued into the new year. This trend combined with the decline in listing inventory has brought some stability to the market. Although prices softened somewhat over the past year due to tight credit and a weak economy, we are encouraged with the progress of the Queens housing market so far this year.  Get the report from Prudential Douglas Elliman here.

4/19/12  Rental website Rentenna.com seeking “hottest doorman” in the city:  Rentenna.com, a website for locating New York City rental apartments, is sponsoring an unconventional beauty contest, the Wall Street Journal reported — for New York City’s doormen. The start-up began accepting nominations for the city’s most attractive doormen last week, the Journal said, and more than three dozen have been put forward by their tenants so far.  Get all the details at The Real Deal

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