Residential Realities February 2013
February 3, 2013: Reasons to be Cheerful (February Edition)
Looks Like We Made It
Speaking of fiscal cliffs, the nail biting over whether the co-op and condo tax abatement would be extended is finally over. Both houses of the New York State Legislature passed a bill that would extend the tax abatement benefit based upon the assessed value of the co-op or condo. The Governor signed the legislation on Friday. One major change from the prior abatement scheme is that the benefit will only be available to taxpayers who occupy the apartment as their primary residence. A thorough analysis of what the Legislature has approved can be found in Frank Lovece’s Habitatmag reporting.
A Co-op and Condo Purchaser Blue Light Special
At first I thought it was a parody piece from The Onion, but apparently it’s real. As reported in the Wall Street Journal, 100% financing is back! With a commitment to ignore history, certain lenders are making 100% jumbo loan financing available to their high rollers (particularly to physicians), who maintain significant balances with the lending institution or investment bank. From the “nudge, nudge, wink wink” department, one lender doesn’t require a pledge of additional liquid assets, just “proof” that the borrower has those assets. Additional restrictions on investment accounts may be applicable. Common sense appears to be optional.
January Number Crunching
The force was strong in Manhattan last month. As deconstructed by my friend, Noah Rosenblatt, on Urbandigs, the shortage of inventory continues to drive contract volume in Manhattan and a shift in the balance of power from buyer to seller. Once again, buyers are forced to make accelerated buying decisions.
Residential Reality: Beware the All Cash Contract
As the market continues its ascent and as multiple offers proliferate, it won’t take long for sellers to seek out all cash contracts. Buyers should continue to approach the all cash offer with maximum caution. Lending metrics have not changed, and except for a select few, residential loan underwriting is difficult and time consuming. A buyer who commits to purchasing an apartment without a financing contingency takes a significant risk, as banks continue to scrutinize the finances of the co-op or condo, as closely as they review the finances of the borrower. Your finances may be “pre-approved”, but with a commitment letter chock full of conditions, you can have a long way to go before the loan is cleared to close. There are many trap doors waiting for the uninitiated co-op or condo buyer, particularly in an improving market, so make sure you are crystal clear on risks before the contract is signed…