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NY Metro blog Curbed presented an interesting article and subsequent discussion about brand new condominium apartments selling in Brooklyn for $355,000. The Buyer needs only $10,000 for downpayment; the builder is paying all the closing costs.

This certainly is a wonderful opportunity for anyone to buy a first home with minimum investment: one of the defining philosophies of my entire career.

I was very intrigued by the subsequent discussion. And more than a little bit concerned once again at people’s lack of tolerance, rudeness, and downright nastiness when posting to internet discussions.

I posted some observations to the Curbed thread. Here they are:

“This article points to a truth I learned when I started in the mortgage biz eighteen years ago: people want to own their own home, but, living in NY Metro area, it’s difficult to come up with large downpayments and closing cost monies.

Say what you will about the location, the opportunity to own a “piece of the rock” for $10,000 is fantastic. And, as someone pointed out, the cc’s on new construction are substantial, usually 8% of the mortgage amount ($27,000 in this case). So, having the builder pay that is not only unique, but enhances an already great opportunity.

I wanted to make an observation on the whole location argument. From my reading of this thread, it appears there are those who believe the location of this condo is horrible, others who think it’s fine, and others who don’t care about the location, they just want to own something at a reasonable price.

I started out lending mortgage money in 1989. That’s long before NY was such an attractive place to live (in fact I escaped to the suburbs just three years later; couldn’t wait to get out of the city I grew up in). Back then, graffiti, filth, dog-poop everywhere, crime, poor subway service, were all the norm for life in the Big Apple.

New York was not then the shining star it is today.

You all might find it difficult to believe, but even then, people bought homes and apartments in New York City. And they did it in huge numbers. People weren’t thinking about the dismal state of things around the city, instead, they wanted to make a dream come true, own a home, and improve their financial (and ultimately personal) situation.

Homeownership does that. No matter your opinion on renting versus buying, bubble versus crash, or where your money really goes (landlord or bank): owning a home is one of the single most beneficial experiences any one person or family can undertake.

Finally, I wanted to address the observation about high foreclosures with a low downpayment. Forget it. I’ve been putting people in homes with very little money down for nearly twenty years. And folks pay their mortgage.

The notion that low down is more likely to lead to foreclosure is a myth. I know it from real world experience. Foreclosure is more likely to result from a financial cataclysm like job loss, illness, or divorce, not from putting low downpayments.”

We only put up a Christmas Tree once a year. We’re only human, and we forget things. Whether you put up a real tree or an artificial one, it’s good to keep in mind some basic safety tips.

From the National Safety Council.

Happy Holidays!

An excellent article in today’s NYTimes.com about investing in Commercial real estate. I love this article because it echoes much of what I say to my clients when investigating commercial real estate opportunities; namely: proceed carefully.

Too often the urge to jump into an opportunity with the “get rich quick” mindset makes people foggy of the brain. The careful research they normally might apply to a consumer purchase such as a car or airline ticket to Orlando gets tossed out the window. A sense of urgency compels folks to jump now and check the parachute rigging later. Such reckless behavior is very dangerous.

If we can draw any lessons from the recent run up in residential real estate prices it should be that of cautious due diligence.

This NYTimes.com article professes just such an attitude. So do I.

Sometimes I meet a new client whose fervor to jump in causes them to lose patience with my careful—and much slower—approach. I’ll take my time to thoroughly prequalify every aspect of the transaction. I wouldn’t be servicing my client properly if I didn’t. I need to work with a view towards anticipating problems and solving those problems to get the loan approval and ultimately the closing.

My attorney John McEntee once told me, “The best way to make money in real estate is just to buy it.” He did not say, “…throw all caution to the wind and buy it.”

Commercial real estate is a very unique market, different from residential real estate in every way including the financing.

I’ll choose the cautious “due diligence” approach every time, thank you very much. If that’s how you want to approach your investment in commercial properties, then I’m your (financing) man!

The NYTimes.com article is here:
10 Ways To Stumble In Commercial Real Estate

Thanks to Lifehacker.com for the link:

Be sure your smoke alarm is checked, maintained, and up to date. It amazes me when I speak with someone on the phone and hear the unmistakeable sound of a chirping smoke detector in the background on the other end of the phone. Or when I visit homes and see the installation plates up there on the ceiling sans detector!

The ridiculously tiny investment of your time and money buying and maintaining a smoke detector can save your life!

Here’s the link to the Arlington, VA Fire Department info page: Smoke Detectors

The truth about buying a home in Bedford Stuyvesant
I have helped people buy their first homes since 1989. I have helped all kinds of people, in all kinds of markets and with all kinds of loans. Have I seen it all? Probably.

Bedford Stuyvesant is the HOT place to buy. But it’s confusing.

The desire to own a home in BedStuy is strong, but you may not know where to buy, and when you get out there you quickly discover how nutty this market really is.

I did mortgage loans in Bedford Stuyvesant as far back as 1990.

In 2004 I refinanced a beautiful home on Greene Avenue for a young couple. They needed to pull some equity out to buy the home next door. When I arrived at their house, I recognized that block. I had refinanced a home there in 1990. There were seven burnouts on the block back then. Several other houses were boarded up. Flash forward to 2004 and I saw only homes that were immaculately restored, or in the process of restoration.

I know BedStuy. I know that block to block can be a world of difference there. I know from looking at hundreds of houses in person when you’ve got potential problems at hand or when you have original details like pocket doors.

A little more here: An Englishman in BedStuy

We are definitely seeing a change in the market. And we are not seeing a change in the market. Boy, it’s more confusing than ever.

Here’s the feedback I’m getting from Buyers:
-Some Sellers have reduced the prices, and actually listening to offers
-Some Sellers are still sitting with their prices in 2005-mode. And, well, you know the deal there…
-Some Agents are clueless when we try to tell them a property is overpriced.

Bottom line:
-Sellers with overpriced properties are still for the most part sitting high and mighty and waiting for the right Buyer to come along. They may be waiting quite a while.
-Sellers who really want to sell are selling.
-It’s not a Buyer’s market.
-The changing market hasn’t shaken out the clueless real estate agents yet.

Memorial Day is an important National Holiday.

It is a day when we as a nation remember those who gave up their lives in defense of our nation, our freedom, and our way of life.

The origin of the holiday is unclear; many different groups around the country began traditions of remembering the war dead. Eventually, these many and varied traditions coalesced into a national movement. In 1966 Memorial Day was officially sanctioned a National Holiday by an Act of Congress. The process took one hundred years since its first stirrings after the Civil War.

More here: Memorial Day History

You can do something in commemoration in less than a hundred years; less than a year; less than a day.

If you love the home you live in, or you’re just dreaming about owning a home, take a few minutes this Memorial Day weekend to remember the many men and women who made the ultimate sacrifice in service to their country to make that dream possible for you.

I will take a few minutes to stop by Cypress Hills to visit an early Civil War military cemetery and pay my respects. I pass this cemetery frequently when driving on the Jackie Robinson Parkway. As you round a bend you get a glimpse of hundreds of small white headstones arranged with military precision on a bucolic hillside.

It looks so peaceful, and in that glance, you can appreciate how many people have gone off to fight wars in defense of liberty.

A few words about PropertyShark, the wonderful online resource everyone should be using.

When I was first introduced to propertyshark, I was pleasantly surprised by the ease of use of the site, the lack of advertising banners, and the overall straightforward approach to doing what the site sets out to do: provide current information about houses. It’s kind of a “background check” on a property. Too many other “information” sites on the web clutter the works. They dilute the intent of the site and thus confuse those who use the site seeking information.

Propertyshark does it right and does it best. Clear intent and purpose and the site gets you what you need with the least fuss possible.

In the beginning I was warned by my underwriting staff to be wary of the accuracy of information on propertyshark. I have found, though, over time, the site is very accurate. I use the site mostly for verifying property taxes for my clients when I qualify them. I want to be as accurate as possible when quoting a monthly mortgage payment.

The site is loaded with other features which I really don’t use. I imagine the average house-shopper doesn’t need those features either.

These extras seem to be directed more for people interested in investing in properties. In my experience, Buyers have always wanted to know what’s “behind the curtain,” when considering buying a house. To my mind the behind the scenes information just doesn’t have any value in the Buyer’s decision-making process.

What does it matter what someone paid for the house back in 1997? What does it matter how many mortgages they have on the house now? Is that going to affect your quality of life when you buy the house? No. Is that going to help you to negotiate a lower price on the house? Heck, no. If anything, that extra information can just confuse an already complicated process.

Therefore the best use of propertyshark by a prospective Buyer is that of verification. Verify the legal status of a house: is it a legal OneFamily or a 2? Verify the property taxes so you have the best idea possible of your monthly mortgage payment (now THAT is something that affects your buying decision!). Take note if there are any liens against the property that may delay your closing on the house longer than you’d like.

These are important considerations in a buying decision. That’s why I like propertyshark for my clients. Verification information that helps them decide, “Buy,” or “No Buy.”

In Nassau County, the information on propertyshark is just not useful at all. That’s not propertyshark’s fault. The site is only as good as the information available to it. I think that is a result of the ultra-slow record-keeping process out here on the island.

The best source for Nassau County info is the Tax Assessor’s office. The link to that site is on my Links page. There you can find current property tax information and usually the legal status (1 or 2) for the property in question.

You should be aware that any house located within an incorporated Village in Nassau County is going to have another set of taxes, the “Village Tax,” that is not reported on the Nassau County website. You get that info the old-fashioned way: call the Village Hall to verify the taxes. (This hasn’t changed at all since I bought my first house in 1992 in the Incorporated Village of New Hyde Park; I called to verify the taxes back then, too)

So, for New York City propertyshark is an excellent and straightforward resource for Buyers. Just remember to keep it simple and use the site for basic information. All the rest of the stuff on the site really isn’t going to assist you to get the house at a better price, or faster, or with a prettier coat of paint.

I know I’ve been lax of late. I haven’t updated this blog since St. Patrick’s Day!

Well, it’s Spring and I’m busy! Sorry, but this is the prime selling time and, well, umm, you know, I get a lot of phone calls and a lot of new business at this time of year.

One thing I can say is this: This ain’t no Buyer’s Market. No way, not by a longshot. If you’re out there thinking the market is cooling and Sellers are giving way to aggressive Buyers, disabuse yourself of that notion but quick. I know Buyer’s markets (I bought my first house in a true Buyer’s market) and, believe me, this is NOT such a beast.

Sure, the market has changed slightly. Sure, there are older listings hanging around since last fall. Overall, we see those Sellers sitting tight on their prices. They’re not budging, not giving in to lowball offers. The winter was not so cold this year, but it was definitely chilly in the housing market. Properties didn’t move. So, it would seem many Sellers took the difficult path of sitting still until a Buyer comes along willing to pay the asking price.

And that has begun to happen. In the last two weeks we have seen several houses we were looking at with our Buyer clients go for full price. We’ve had a couple of Buyers go to full price in a “blink,” after offering less than asking.

It’s Spring. If you’re still sitting on the fence about owning your own home, you’d better jump off real soon. Interest rates have gone up, the market is heating again, and you had better get going while the going is still good. That is, don’t let yourself get priced out (either by market prices or interest rates) of a bigger house or a house in a better location.

Get on it, Spring has sprung.

I wanted to provide a “snapshot” of how we qualify a loan for a commercial property.

First, a commercial property is defined as that having 5 or more residential units, or a 1-4 family residential “mixed use” property where there is a commercial space incorporated into the property (think “corner store” with apartments upstairs), or any other type of non-residential property. That would include: hotels, gas stations, office buildings, strip-retail, warehouses, and factories.

For the purpose of this post, I will limit myself to a description of qualifying for an apartment building loan, say, six families.

Here’s what we do to qualify the loan:
1. Verify existing rentals in the property. We get this information from the Seller of the property. This is checked against New York City DHCR filings (if the property is in the confines of New York City). We may request leases.

We then multiply the monthly rentals to determine the annual “gross” income.

2. Next, we subtract an automatic vacancy percentage, usually 5% of gross income. Thus we create an “effective gross income” of the property annually.

3. We outline the expenses of the property including property taxes, insurance, utilities (for common areas), management fees, water/sewer, fuel, and various other miscellaneous fees involved in the operation of an apartment building.

We define an annual figure for the expenses, then subtract this from the effective gross income.

4. The bottom line number is the figure used to qualify a loan. Inherently, the rental income should be sufficient to sustain income for the property within a “Debt Servicing Ratio” predetermined by the Lender.

5. Appraisal value is not determined purely by market valuations. Instead, the appraiser must base the final valuation on the Income and Expense approach. That is, as in item 4 above, the net income must be sufficient to support the value.

This last part is where we run into trouble most often. In this crazy overheated market, we have such properties being sold for more than the rental income will sustain. And it is not just a matter of your having made a large downpayment. I have a client who is putting 50% downpayment, yet the appraisal will come in far short of the purchase price, thus requiring the Lender to lower the allowable loan amount. Unfortunately in the case of this client, that lower loan is $50,000 less than what he needs to acquire the property.

Of late there have been an increase in “limited documenation” or “no income verification” commercial loans. Lenders are responding to the market conditions. The money is out there to be had, but the Lenders view these loans as a riskier venture since the income of the property may not currently sustain the loan. Accordingly, interest rates are higher.

I received offers from three lenders this week for the client described above. The loan amounts met his needs, but the interest rates were, 7.50%, 7.37% and 7.00%. The loan types varied from variable rates to short term fixed rates.

I know a fourth Lender where I can obtain a substantially lower rate, but they are hitting the value of the property with the Income and Expense approach, thus offering my client the $50,000 lower loan.

There you have a “snapshot” on commercial loans. More to come, especially about the loan types and the process of obtaining a commercial loan.