Residential Realities November 2012
November 4, 2012: Friends and Family Help Get it Done...
The Big Chill
As New York City slowly emerges from the effects of Force Majeure, the impact on the recovering real estate market is already being experienced. With hundreds of deals scheduled to close last week, many buyers and sellers were given the bad news that banks were adjourning closings until re-inspections of the properties in the affected areas could be completed. For some transactions, we are talking about the complications that arise from unexpected delays. In other cases, deals will not be making it to the closing table. Throughout the region, mother nature has hit the real estate recovery hold button.
What to Expect…
Judging from my own anecdotal experiences, lenders will require evidence that both the building and the apartment in question were not damaged from the storm. Further, managing agents may be required to opine that capital assessments will not be imposed to pay for storm-related damage. Other underwriting conditions may be imposed as the drama plays out. If damage has occurred, particularly in Zone A buildings, timid lenders, still overly-cautious when it comes to completing residential financing, may withdraw underwriting and refuse to close certain loans. Unless the contract has anticipated the possibility of the withdrawal of underwriting by including a “funding contingency” in addition to a mortgage contingency, chaos can be expected in those deals where the buyer’s lender walks away from the damaged building or apartment.
The Work Around
Even with the above conditions as a back drop, sometimes a path must be found to complete a needed closing. For one of my clients who was forced out of his apartment by an uncooperative landlord, not closing was not an option. That being said, his all cash transaction scheduled for October 31st in Brooklyn, had to be adjourned for the obvious reasons. The seller’s attorney was stuck on Long Island and internet and telephone service was limited at his office. Traveling to Brooklyn from Manhattan on Wednesday was extremely difficult, if not impossible. Although the funds needed for closing had been wired to my trust account in advance of the closing, all of my bank’s branches were closed. Official bank checks could not be obtained nor could wire arrangements be made. Things improved on Thursday and a closing on Friday started to seem possible. My good friend and colleague, Marc Lawrence, a Managing Director at American Land, a title company in New York, volunteered to drive me to the closing. I volunteered my wife (with NYT crossword puzzles and New Yorkers in tow) to act as the coveted third passenger required for re-entry into Manhattan.
Trip to Bountiful
Although we gave ourselves plenty of time for the trip, a combination of a lack of gas, commuter exhaustion and folks finally chilling out on Friday afternoon, resulted in a very quick trip from midtown to Fort Greene. An attorney filled in for the seller’s counsel who could not make it in from Long Island. Although the title closer, John Renaldo, was dealing with his own power outage issues in Northport, he made the two-hour plus trip using the limited service finally available from Long Island Railroad. By texting to work around spotty internet and telephone service, the required title search updates were obtained and the closing was completed in relatively short order. Both buyer and seller, knowing the odds against getting the closing done, were more relieved than anything else.
A Very Quiet Week
Back in the car, the trip through the powerless neighborhoods of the lower eastside, the financial district, the village, the twenties and the thirties, made it quite evident that it will take some time for a version of personal and professional normal to present itself even after power is restored. A true test is coming as to whether the real estate recession is really behind us…