A mortgage boon for New York real estate

Consider it an early Christmas present for New York real estate buyers (and those elsewhere, too).

A newly passed law raises the so-called ‘conforming loan limit’ for borrowers seeking Federal Housing Administration (FHA) insurance for their mortgages. That means that more condo, coop and home buyers will be able to quality for conventional mortgages, which traditionally have lower interest rates than the jumbo mortgages. Specifically, the new law increases the ceiling from for FHA-insurable loans from the current $625,500 to $729,950 and keeps it at that level through 2013.

The FHA, of course, does not originate loans itself. It provides the mortgage insurance that’s essential for anyone who doesn’t have an adequate down payment to quality for a prime loan. But in the current economy, the FHA is proving to be a real lifesaver, backing fully one-third of all mortgages used to finance homes purchased last year – a dramatic increase from the five per cent it guaranteed back in 2006.

What’s even better: the new provision targets such high-ticket areas as New York City, Los Angeles and San Francisco – also the most desirable places around. Although Manhattan remains healthier than the rest of the real estate world, this new provision could introduce even more zig into a marketplace that’s been threatening to zag. 

Kudos and complaints

Predictably, the National Association of Home Builders (NAHB) were quick to praise the change. As NAHB Chairman Bob Nielsen, a home builder from Reno, NV, said, “Restoring the higher FHA loan limits will help to stabilize home values, provide constancy while private investors re-enter the market, and enable millions of creditworthy consumers to get home loans with the best mortgage rates and lowest fees and down payment requirements,”

There are naysayers, too, particularly among those who oppose government spending. But, since the bill President Obama last week was far less dramatic than the original version, the complaints aren’t terribly loud. The previous proposal would have raised loan limits for the mortgage finance companies Fannie Mae and Freddie Mac, too.

So, for those of us with a genuine passion for real estate in the world’s greatest city, with the world’s most interesting housing stock (no prejudice here, again… just facts) it’s a welcome development – and just the right thing to goose the post Black Friday holiday spirit.

For sellers: Giving thanks means getting ready

There’s another reason to be grateful this holiday weekend: Thanksgiving offers a much-needed real estate respite.

As families experience the joy of togetherness (and massive overeating), few plan to traipse through New York condos or coops - nor do they want strangers witnessing their own (messy) merrymaking.

But down time doesn’t require opting out of the game.  Smart sellers can leverage the holiday lull – and the abundance of extra bodies available – to complete chores that make a coop, condo or home even more appealing.

You can still ply the eggnog, but also be proactive about:

n  Paint:  With the dark winter months upon us, a coat of light colored paint helps brighten up a dingy area.  Consider a glossy finish to impart a sense of airiness, and go for bright neutrals to give your rooms a finished look.

n  Polish:  Most people don’t appreciate the power of sparklingly clean windows.  Arm yourself with rags and glass cleaner or, even better; invest in a window-washing service. The months ahead will literally gleam.

n  Pare down:  Taking stock is a Thanksgiving tradition, and it applies to possessions as well as life plans. Size up your living space and clear the excess.  Sparsely furnished apartments and homes look bigger and brighter to prospective buyers. Clear the walls, and eliminate bulky or unnecessary furniture. The clean-up will uncover forgotten articles of clothing, unpaired shoes and countless odds and ends that may benefit someone else – just in time for the Christmas season.

n  de-Personalize:  You’ve heard it before but it bears repeating: buyers prefer to imagine  themselves living in your space. So may the dwelling less personal by taking down as many family pictures as you can, and eliminating all those awards and trophies. Don’t worry; they can festoon every wall in your new place.

n  Prune:  If you live in a house, denuded trees and scraggly bushes can curb curb appeal, so use this brief period – well before (we hope) another snow storm – to trim bushes, move fallen leaves to plant beds, and/ or add nice holiday touches to your entryway.

n  Plumb:  Track down your leaks and/or invite your friendly neighborhood plumber to do a once-over before the truly cold weather sets in. Neglected pipes have a way of bursting at the most inconvenient times - like when an eager buyer comes calling. A check up before the dog days can keep winter’s bite at bay.

n  Prep:  Once you’ve polished, plumbed and pared down, prepare to ‘stage’ your house. The holiday season provides the perfect excuse to add tasteful touches, yummy fragrances and even soft holiday music. The operative word is ‘festive’ and the operative philosophy is ‘underdo’ rather than overdo it.

n  Pick: If you haven’t already done so, use the post-turkey-day period to select the perfect realtor.  Set your sights on someone associated with an established and reputable organization.  Manhattan buyers are well-advised to seek an agent capable of reaching out to an international audience (the source of many NYC sales). Be sure to check the broker’s collateral to determine if he or she produces high-quality brochures and professional images. Ask if he or she has enough resources and budget to arrange for things like virtual staging, if necessary.

Do all these things – and next year you’ll have something worthy of a major Thanksgiving fete.

The Second Avenue Subway Story: why is it a real estate opportunity

Some people look at Manhattan’s Second Avenue Subway construction project and see grit, grime and galling inconvenience.

Benjamin Kabak sees gold.

“In six years,” the author of the popular Secondavenuesagas.com blog predicts, “business owners will be clamoring for Second Avenue space and property values will climb precipitously.”

Just about everyone agrees. New York City’s Second Avenue Subway (SAS) will bring greater prosperity to anyone with the patience and the perseverance to wait around until 2016.  That’s when the first of four phases will bring three new stations to the transit-challenged Upper East Side.

Last week, as residents once again complained about the mayhem stretching from 63^rd to 96^th, they inadvertently demonstrated one reason why SAS – argued for and clearly needed for nearly a century – took so long to pick up speed.

Second Avenue Subway begins

The case for the ‘Line that Time Forgot’ was first made in a 1920 New York City transportation proposal. Calling for six new north-south lines and eightcross-town routes, the proposal led to the successful launch of West Side IND trains. But SAS went on to suffer more deaths and resuscitations than the hardiest cat.

Shortly after the East Side proposal was tentatively approved, fate intervened – in the form of the 1929 stock market crash. Dead before arrival, SAS never gathered sufficient speed (or cash) during the Great Depression. Stalled indefinitely in 1939, SAS quietly vanished altogether when World War II broke out.

When WWII ended with the promise of a revitalized city, lawmakers again freed up funds for the transit lifeline. The need was greater than ever, following the demolition of the Third Avenue elevated train. But the city quietly spent its largesse on repairs rather than construction, prompting the New York Times to declare, “It is highly improbable that the Second Avenue Subway will ever materialize.”A decade later, thanks to the federal Urban Mass Transit Act, it was back on track. Millions of dollars were earmarked for transit improvements. The long-delayed groundbreaking occurred in 1972, followed by excavation of three tunnel segments.

And then, once more, plans ground to a halt as the worst financial crisis in New York City history left the Big Apple near bankruptcy.

NYC’s tunnel to nowhere

In the ‘80s and ‘90s, the MTA tried to monetize the unfinished tunnel segments by offering them for rent. Ed Koch famously suggested the underground’s “dark interior” would be perfectly suited for mushroom farming. There were no takers.

And then, a funny thing happened on the way to the millennium. The city burst back to economic health amidst an internet bubble and a financial industry boom. People returned from suburbia, real estate became scarcer and more valuable, and the Upper East Side became a vibrant destination. The lone Lexington Avenue subway line, already stretched to its limits, was strained under the new growing demand. For what appears to be the final time, the SAS gained momentum and money.

In 2007, another ceremonial groundbreaking was held, immediately followed by logistical delays. SAS began – really and truly -- in 2010.

So did the trouble. The noise, debris and inconvenience that accompanied this mammoth public works created unending controversies. The process of excavating a tunnel seven stories below Manhattan has disrupted areas businesses, snarled local traffic, and caused headaches – literal and figurative – for local residents. Efforts to alter the construction schedule or win damages have been mostly unsuccessful. And the SAS – the little engine that could – remains on track, with the recent completion of the tunnel itself.  

Transit equals transformation

Meanwhile, all the commotion has created an historic buyer’s market. Prices for East Side condos and coops have dipped, despite the fact that many buildings are only marginally impacted by the daily din.

And that brings us back to Ben’s initial point: what went down will soon come back up.

Official point to the Sixth Avenue subway, which transformed block after block of shabby residences into a booming commercial haven. And Regional Plan Association President Robert Yaco believes SAS will also spawn a lively ‘hospital corridor’ linking medical institutions from downtown up. That, he adds, will spark even greater demand for luxury housing along the SAS line.

As for Ben Kabak, he knows that construction woes will “fade like a bad dream” in a few years.

And then? The adventurous buyers who got in early will leave everyone else ….well… in the dust.

7 things you need to know before buying new condo in NYC

You’ve found the perfect slice of New York City real estate; NEW condominium.

Sure, the asking price is a bit steeper than for that coop nearby. But the condo offers the complete package: pool, fitness center, movie screening room and playroom – with a few strings attached.

Never fear. The strings can be untied with the help of a savvy real estate lawyer and some good, old-fashioned education. Without proper knowledge, though, a string can easily trip you up.

The condo difference

Condos are among the fasting growing real estate offerings today. Unlike their New York City cousins -- cooperative apartments or coops -- condos are fully owned by the buyer. That is, they belong to the purchaser from the walls inward . With full ownership comes greater freedom to buy, sell and often (but not always) rent your unit, whereas coops – which give each owner a pro-rated share of the entire building – are administrated almost entirely by a group made up of the shareholders themselves.

The grounds, common areas, and the maintenance of condominium extras falls to the Homeowners Association (HOA) or the Condominium Association, a democratic institution made up of all the condo owners. The fate of each individual abode, and, therefore, every bank account, is tied to the health of the entire structure. So some common knowledge is uncommonly helpful, beginning with:

The offering plan

State law mandates that every building file a full description of the property. Apartments, whether coops or condos, cannot be offered or advertised until the Attorney General approves this massive document, averaging 300 and 500 pages. Densely worded, the offering plan is best deciphered by a real estate attorney–particularly one familiar with new condominium construction.

The plan helps owners estimate the common charges and it also details the developer’s promise to the new owner. That is, it guarantees that the nice reclaimed wood floors and the Viking stainless appliances you saw in the model apartment will actually be in your unit, too. It also confirms the square footage of your unit so double-check that, too. While a mistake of several inches may be acceptable, rooms that are a foot or more smaller than advertised call for a renegotiation in price.

The sponsor’s intentions:

Many banks shun condos that are filled with renters, so too many leased units can affect your ability to get financing. Ask upfront, or have your attorney determine, what happens with unsold real estate. For extra measure, ask her to check the institution that provided the construction financing. Is it solvent? On shaky ground?

Tax laws or abatements:

Particularly in up-and-coming neighborhoods, developers often get financial incentives to build. These can result in lower taxes during a specific period, occasionally stretching beyond several decades. After the abatement ends, taxes rise to match market conditions, so it critical to know the timing.

Banking basics

Mortgage lenders can be tougher on a new building because it lacks any track record, Closing costs also tend to be higher, too, as bank not only investigate the individual apartment buyer, but also the solvency of the entire building. And since new bulding may not have comparable properties available to compare values to, appraisals can be problematic. At the same time, if the developer is particularly itchy to sell, he may more willing to bargain the price down or share the closing costs.

Occupancy status:

A building needs an official Certificate of Occupancy before anyone can move in, so be sure to ask about the C of O status, any potential impediments, and projected completion and move-in dates.

Inspection

Hire an inspector, particularly someone familiar with new construction, to check out your dwelling before you take possession. An antsy developer may cut corners or substitute inferior materials to rush things along. You need to know if those floors are really made of reclaimed wood or unclaimed lumber.

This isn’t the whole list, but it’s a good start. Read it carefully, because you’ll face the ultimate test soon– your closing.