Archive for Condop

Nov
08

Congress Restores FHA Loan Limits to previous levels

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As we reported in May,  the Federal Government backed new mortgage lending limits program expired in September, 2011.  This week, the U.S. House and Senate voted to restore the FHA loan limits to the previous maximum $729,750.  According to the National Association of Realtors, this will help provide stability to communities as credit restrictions continue to prevent some qualified buyers from becoming home owners.

The restoration of the limits only apples to FHA mortgages, not Fannie Mae and Freddie Mac, which also expired at the end of September.  The conforming loan limit for these two secondary mortgage market companies will remain at a maximum of $625,500.

While this may be good news for many markets, in Manhattan, where over 70% of the apartments for sale are Co-ops, it probably won’t make much difference.  Most co-op boards require 20-50% down payments and higher income to debt rations (25-30% maximum debt to income).   Lenders for most condos are asking for at least 20% down payment to qualify for a loan.

Excerpts from Daily Real Estate News, November 18, 2011

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According to a new J.D. Power and Associates study the average time required to approve and close a home loan has increased to nearly 47 days, compared with approximately 30 days in 2008. The reason? Increased scrutiny of loan applications and higher origination volumes driven by increases in refinancing. Not surprisingly, the longer wait times are fueling a decline in overall customer satisfaction with primary mortgage lenders.
The study also finds that credit scores are now higher among mortgage customers and the percentage of loan applicants who have been faced with requests for additional documentation has increased considerably—to 45 percent in 2009 from 33 percent in 2008.

“While the more cautious approach to underwriting mortgages is justified, the longer turn times and more numerous requests for information tend to have a negative impact on satisfaction,” said David Lo, director of financial services at J.D. Power and Associates. “Good underwriting and delivering a satisfying customer experience are not mutually exclusive, and some of the negative effects of a tightened lending environment can be mitigated by simply improving communication between lenders and customers.”

The 2009 Primary Mortgage Origination Satisfaction Study measures customer satisfaction in four key factors of the mortgage origination experience:

  • application/approval process
  • loan officer/mortgage broker
  • closing
  • contact

According to responses from more than 3,400 consumers who originated new mortgages within the previous 12 months here’s the top mortgage lenders BB&T (Branch Banking and Trust) 783 out of 1,000,  Wachovia 781, National City Mortgage  769, SunTrust Mortgage 769, Wells Fargo 754, Flagstar Bank 744, GMAC Mortgage  744,  Bank of America, 741

Plan

Plan

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Oct
21

Manhattan Homes, Apartments and Amenities – A Glossary

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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.

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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 …

Flags of the worldThere is a common misconception that it is more difficult for foreign nationals than for American citizens to get a mortgage in NYC.  In fact, there are some restrictions, but it is perfectly possible for foreigners to get mortgages for New York City home purchases.

Foreign nationals obtain a mortgage like anyone else

Foreign nationals can approach local NYC banks, national lenders, credit unions and mortgage brokers to apply for a mortgage. Not all lenders offer foreign national programs, but they are readily available.

As a foreign national, one must be prepared to put a down payment as high as 40% of the purchase price—required by the lender because it typically will only loan 60-80% of the purchase price. Interest rates are reasonably priced and there are no forbidden property types so you can finance a condo and a co-op just as easily as a single-family home. Some lenders will require you to prove your Visa status or type of Visa you possess that gives you permission to be in the United States, be it for a business or a pleasure trip or to come to the U.S. to work, study, conduct business or immigrate.

Foreign nationals who hope to purchase co-ops will need to go before the co-op board, just as citizens do.  The co-op board may impose its own requirements such as requiring a green card, U.S. tax returns and other conditions. Co-op restrictions may make it more convenient for foreign nationals to purchase condos because the bylaws and rules of condo associations are typically less restrictive than those of co-ops.

If the purchase is strictly for investment purposes I would recommend the purchase of a condo. That said, in New York City, there are “condops” (a cross between a coop and a condo) which may allow you the flexibility as an investor but at a lower cost.

The bottom line is that a foreign national can obtain mortgage financing just like a The bottom line is that a foreign national can obtain mortgage financing just like a U.S. citizen would in order to establish a NYC mortgage. Find a lender that offers foreign national loans and apply for the mortgage. Then sit back and wait for information to be processed—just like a U.S. citizen would have to do.

Aug
20

Condops: Co-ops for the Free Spirit

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Co-op, Condo or Condop?

Co-op, Condo or Condop?

If you yearn for the freedom of condo living but your pocketbook won’t stretch beyond the co-op price range, a condop may be perfect apartment for you. To understand the differences and what they mean to your budget, here’s a quick rundown on the basics of modern living in Manhattan:  co-ops, condos and condops.

Co-ops are by far the most common form of apartment ownership in Manhattan – over 70 % of available apartments for sale are in co-op buildings. 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. Monthly maintenance fees cover building expenses including heat, hot water, insurance and staff salaries. In addition, your maintenance charge also  includes real estate taxes and  your apartment’s share of the underlying mortgage on the building. A portion of these maintenance fees (taxes and interest on the building’s mortgage) are tax-deductible.

Co-op boards play a huge role when you want to purchase or sell your home. You will be required to submit detailed financial information, tax returns, and personal and business reference letters and appear for a personal interview in order to gain the approval of the board before you can purchase your home. In addition, some boards may not allow you to sublet your apartment and may even have a say over the selling price, since a below-market sale could affect everyone else’s investment.

A condop is a co-op with less restrictive condo-type rules.

A Condo, short for condominium, is an alternative choice for apartment ownership. The number of available condos has grown in recent years, especially in new construction. 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.  And once you’ve bought, you have more control over your home.  Usually, you can rent it out to anyone you choose and when you are ready to sell it, you don’t need to deal with board approval for your buyer as you do in a co-op.

Monthly maintenance fees -called common charges- are usually lower than co-op maintenance charges, but don’t provide any tax deductions because there is no underlying mortgage on a condo and you pay property taxes on your apartment directly to the city.

So what’s a condop? Simply put, a condop is a co-op with less restrictive condo-type rules. With condops you still need to play well with others and 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 by requiring lower  down payments,  and usually there will be  no high-stakes personal interview with the board.

In a condop, like a co-op, some of the monthly maintenance fees are tax-deductible   but like a condo you’re usually relatively free to rent your apartment, use it as a pied-a-terre, may be able to have live/work space and may be able to sell your property more easily. Prices for condops are usually lower than comparable apartments in condos.

Not all condop buildings have these flexible rules, so you need to study individual listings carefully when looking for condops, and be sure your buyer’s broker and attorney are familiar with their structure.

Categories : Co-op, Condo, Condop, Properties
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