Board to Buyer: Nah. Not at That Price.

 

BUYING or selling a Manhattan co-op has long presented unexpected pitfalls and moments of unique drama. But as real estate prices continue relatively flat, one obstacle has become more prevalent: Co-op boards are rejecting sales outright if they deem the price of the apartment to be too low.

Some boards are so determined to hold the line on prices that they are unswayed by buyers’ offers to place years of maintenance fees in escrow, to increase the down payment and even to pay in cash.

Co-op boards aren’t required to disclose the reasons they reject applications, which makes it difficult to determine just how often buyers are being turned down because the offer isn’t as high as the board might like. But interviews with more than a dozen Manhattan real estate experts, including brokers, board members and real estate lawyers, suggest that boards are saying no more often as they seek to maintain the value of the apartments in their buildings amid a sea of price-conscious buyers.

“In the last month,” said Aaron Shmulewitz, a real estate lawyer, “I must have had 5 to 10 questions about that from various boards that have turned down or have contemplated turning down purchases for price, as well as various purchasers who contacted us for being turned down.” Mr. Shmulewitz oversees the co-op/condo practice at the Manhattan law firm Belkin Burden Wenig & Goldman.

“I don’t know if prices have gone down, or if boards are expecting the price to go up,” he added. But the incidence of board rejections because of low sales prices has been “markedly increasing.”

Outside of New York, such impediments to homeownership are largely unheard of, because co-ops are so rare. But they account for 75 percent of the housing stock for sale in Manhattan, according to Jonathan J. Miller, the president of the Miller Samuel appraisal firm. And although some condos now also ask buyers to submit financial information when they apply, co-op boards subject potential shareholders to more rigorous scrutiny, often requiring reams of financial and personal information, right down to references for pets.

Many buyers are willing to undergo the anxiety-inducing process to get into the Manhattan market, where inventory has become particularly tight. But few are willing to overpay. At the same time, some sellers who lack equity or the economic stability to trade up to a new apartment have decided to cut their losses and list their apartments for prices lower than they had hoped.

“If you’re desperate to get out because you’ve been waiting for two years,” Mr. Miller said, “you sell for what you think you can get.”

Evelyne Luest hasn’t quite reached the desperation level, but her patience is running thin. Ms. Luest, a professional pianist, listed the Hudson Heights one-bedroom apartment that she uses as a practice studio for about $300,000 in 2009, just as the market was beginning to plunge.

Earlier this year, after repeatedly lowering the asking price, she was pleased to receive an all-cash offer for $225,000 — slightly less than 6 percent below the asking price of $239,000 —from a fellow musician, Thomas Bergeron of South Hadley, Mass. They went into contract in the summer. Mr. Bergeron made plans to move. Everything seemed to be falling into place until the board rejected his application.

Ms. Luest said she had spoken with two board members and the building’s sponsor, who all confirmed that price had been a deciding factor. “It’s a business problem,” she said. “It’s not good business for them to sell apartments for a low price.”

After he was turned down, Mr. Bergeron, who recently began a two-year teaching fellowship, offered to put a year’s worth of maintenance in escrow upfront and to have his mother sign as a guarantor — even though he was paying the $225,000 in cash. But he drew the line at paying a higher price, which was suggested by Ms. Luest and her broker as well as Mr. Bergeron’s broker, Kelly Cole of the Corcoran Group.

“In my opinion,” Mr. Bergeron said, “the price we went into contract on was the market price.”

In the end, Ms. Luest decided not to pursue the offer. Mr. Bergeron is now renting, and she has relisted her apartment at the slightly higher price of $259,000.

The board, reached via the building’s management company, declined to discuss its decision.

For all anyone knows, there may have been other reasons Mr. Bergeron was turned down. His profession as a trumpet player could have raised the issue of a potential noise threat.

“I don’t understand how it can be legal for them to deny people without giving any reason,” he said. “It really surprised me that that was O.K. to do.”

As long as it does not discriminate illegally, a co-op can turn down a sale for practically any reason. And recent court decisions have held that a board’s decision to reject apartment sales because of a low price falls within its business judgment.

Compared with just three years ago, “a board’s price-based rejection of an apartment transfer is much more likely to be protected and insulated from challenge in 2012,” said Eva Talel, a partner at Stroock & Stroock & Lavan in charge of the co-op/condominium board representation group. In January she co-wrote an article in The New York Law Journal about co-op rejections based on pricing. “I think courts began to feel a greater comfort level in addressing the issue of the scope of the board’s business judgment to deal with what is a legitimate concern for buildings,” she said. “If prices are not sustained at a certain level, then it would likely have a negative impact on the values of other apartments.”

If the only thing holding up a sale is the price on paper, brokers say there are ways to get around the problem. Earlier this summer June L. Gottlieb, a broker at Warburg Realty, encountered a seller who would not accept her buyer’s $690,000 cash offer for a Midtown East pied-à-terre listed at $700,000 for fear the board would consider it too low and not approve the sale. The buyer refused to increase his offer because the apartment, which was part of an estate sale, needed a total renovation.

“The only way to get the deal done was to agree to split the flip tax,” Ms. Gottlieb said. The buyer paid more for the apartment in the contract, but at the closing the seller wrote him a check for part of the flip tax, “so the contract read at a price that would be acceptable at the board,” she said.

Another creative solution, brokers say, is to increase the purchase price on paper and create an offsetting credit, or a “seller’s concession.” A buyer willing to pay, say, $770,000 for an apartment listed at $800,000, would assent to the $800,000 price, then at closing receive a credit of $30,000 in the form of a check from the seller to be used for renovations or other improvements. That way, the buyer would pay no more than previously agreed, the seller would be able to sell the apartment, albeit at a cost, and the transaction would be recorded at a price that pleased the co-op board.

Such deals are completely legal, as long as the marked-up sales price is disclosed in the transaction documents and all parties understand and agree to it, said Mr. Shmulewitz of Belkin Burden Wenig & Goldman.

But Barry Weidenbaum, a New York real estate lawyer, pointed out that some banks and co-ops “may not view such an arrangement as proper.” Some banks, for example, limit seller’s concessions or credits, often capping them at 6 percent, he said.

While secrecy is typical in cases of rejection involving price, some co-op boards are taking a more direct approach. Steven R. Wagner, a real estate lawyer who is on the board of Southgate, a five-building co-op complex in the East 50s near the East River, said sales price had not been an issue there until earlier this year. “Suddenly, there were three or four apartments that came up, all of which were significantly lower than where the apartments had been previously selling for,” he said.

But rather than flat-out rejecting applicants who otherwise would have passed muster with the board, he said, “we actually took a chance and raised the issue with the broker and individuals and said, ‘Listen, before we say no to this application, we want you to know it’s because of this, and if you wanted to submit a different contract price, very likely no would be yes.’ And people did in fact come back.”

Still, even with the best intentions, boards that try to control sales prices may end up hurting themselves. “The irony,” Mr. Miller said, is that “by being too aggressive in policing transfers of property in your co-op, you can actually make it worse.” When apartment deals are repeatedly turned down because the board wants a higher price, the properties end up lingering on the market. The inference, he pointed out, “is they are overpriced when they’re not.”

The board unwilling to approve a lower price for an apartment may also be missing a signal from a seller who is experiencing financial distress and could end up defaulting on maintenance if unable to sell. And co-ops that repeatedly turn down applicants for price reasons also run the risk of gaining a reputation as a tough building — which could ultimately backfire.

“This always says something to me about the board in the building,” said Ms. Cole, the broker who represented Mr. Bergeron, the trumpet player, “and it sends a really bad message. Now, when working with a buyer, I say: ‘By the way, just know there was a board turndown here with a cash buyer, and they pulled the rug out from everyone. So buyer beware.’ ”

 published by nytimes.com

 

Tips for making your house a hot sales commodity

Want to be the seller who goes to market instead of the one who stays home? The difference might be a few of the things you do before you plant that "for sale" sign.
Your house has competition, and that means you have to do some work to get it ready to sell. So, while your home looks great compared to the neighbor's foreclosure, it might not quite compare to that house a block over where, rumor has it, the owner clips the lawn with an electric razor.
You don't have to spend a ton of time or money. A few simple tricks can get your home ready for the market.

Here are tips from top agents to give your home the edge:


Break out the cleaning supplies
"Give it a really good cleaning," said Jeff Wiren, immediate past president of the Portland Metropolitan Association of Realtors in Oregon.
The problem: "A lot of sellers might not have the same perception of 'deep cleaning' that a buyer would," he said. For that reason, "it might be worth spending a couple hundred dollars to have professionals come in and clean."
Two places where clean can be critical for buyers are kitchens and bathrooms, says Pat Vredevoogd Combs, past president of the National Association of Realtors. Having those rooms clean and sparkling can make a huge difference in the perception of "whether a house is kept up or not," she said.
Windows and baseboards are crucial, said Mark Ramsey, broker with The Ramsey Group at Keller Williams Realty in Charlotte, N.C. If you're not replacing carpets, have those cleaned, too, Wiren said. The potential outlay for a cleaning service and carpet cleaning is likely in the neighborhood of $300 to $500 total, he estimated. "It has a much greater impact than most sellers think."

Ditch junk and clutter
"This is now a showcase," says Patricia Szot, immediate past president of the Dallas-based MetroTex Association of Realtors. "You are no longer living in it; you are showing it."

Laundry room: Make it neat and orderly, Szot said. Your goal is to make it look like the room is plenty big enough for the job.

Pantry: It's for food only, Ramsey said. Using the pantry for general storage screams, "Not enough cupboard space."

Garage: If it's a two-car garage, make room for two cars, Szot said. For a lot of men, if the garage "looks small because of the clutter, there's an issue."
"And while you're decluttering, you're depersonalizing," Wiren said. "You really need the buyer to be able to picture your home as their home." A picture of your kids on the nightstand is "not a big deal," he said. But you don't want the family portrait gallery lining the hallway.
With paint, stick to neutrals, several agents said.
"I have had people who painted some of their rooms and picked the colors themselves" in shades of pink and purple, said Combs, who is vice president of Coldwell Banker AJS Schmidt Realty in Grand Rapids, Mich. "And it was more of a negative than a positive when they put their homes on the market."
Their mistake wasn't DIY painting but color selection, she said. Opt for neutrals, which have broader appeal.
"Then consider the flooring. If the carpeting is old and stained, put in new carpeting," said Szot, operating principal with Keller Williams Realty, Lake Cities at Firewheel.
Keep any planned changes to the house reasonable and in character with the home and the neighborhood.
"Don't lie to yourself," said Wiren, a principal broker with Re/Max Equity Group. If the house has areas that show wear, get that work done before offering the home.
"The price of your house is going to determine what things you should do," Combs said. One client spent $10,000 putting in hickory cabinets and granite countertops in the kitchen of a home that listed in the $100,000 range, she recalled.
"In that price range, it wasn't necessary," Combs said. "And we couldn't get any more money for the house."
View the house from the buyer's perspective. "Pull up and stop right in front of it, just like a buyer's going to do," Ramsey said. Then "let yourself in the front door, like a buyer's going to do."
How does your home compare to others on the street? Is it inviting? Does it make you want to see more?
"Walk through the home with the eyes of a buyer," Szot said. If you're buying another house, think about what you want to see in your new home, she said.
Pay special attention to the entryway, Ramsey said. "You want it to be open as much as possible," he said. Look at the furnishings you have in the area, and err on the side of less-is-more. "When in doubt, get it out," Ramsey said.

Newsday.com

LI mortgage rates fall in national trend

WASHINGTON -- Fixed U.S. mortgage rates fell again to record lows, providing prospective buyers with even more incentive to brave a modestly recovering housing market.
On Long Island rates followed the national trend, according to figures supplied by HSH Associates of HSH.com. The 30-year fixed was 3.77 percent, down from 3.83 percent. The 15-year fixed is 3.35 percent, down from 3.41 percent. The one-year adjustable was 2.75 percent, down from 3.27 percent.
Mortgage buyer Freddie Mac says the nationwide average on the 30-year loan dropped to 3.62 percent. That's down from 3.66 percent last week and the lowest since long-term mortgages began in the 1950s.
The average rate on the 15-year mortgage, a popular refinancing option, slipped to 2.89 percent, below last week's previous record of 2.94 percent.
The average rate on the 30-year loan has fallen to or matched record low levels in 10 of the past 11 weeks. And it's been below 4 percent since December.
Low-interest mortgages have provided some lift to the long-suffering housing market, which has slowly improved this year.

Newday.com

Kitchens Sell a House

It's a tool used by house flippers all across the nation. Stagers know its power. Real estate agents push its importance. What is this not-so-well-kept secret of real estate? A kitchen can sell a house.

A kitchen is the heart of a home. This is true all across the globe. The old saying that the "stomach is the way to the heart" carries a lot of truth. Kitchens are where we spend much of our time and most of that is with our families. It's the room where we nourish our bodies and our spirits.

Kitchens are integral to entertaining and in today's age of open floor plans, they're a focal piece of many family rooms. It's because of this that kitchens play such an important role in the buying and selling process.

This one room is the showpiece of the house. You'll see it every day and your guests will see it during most visits. This means buyers want homes with up-to-date kitchens.

Kitchens, however, can be one of the most expensive rooms to renovate. These projects can also be the most labor and time intensive of all home renovations. It's not just a new layer of paint.

Instead you find a complicated array of flooring, tiling, cabinets, and counters. This means buyers may want a home with an up-to-date kitchen but they aren't willing to tackle this problem themselves. Most buyers want a kitchen that is ready to use the day they move in.

What do buyers look for in up-to-date kitchens? A lot of this depends on what price range your home is in.

The main thing to remember as a seller is to not price yourself out of your market. If homes in your neighborhood are selling for $100,000 with tidy, but not luxury kitchens, then this is no time to upgrade to granite, travertine, and marble at the price tag of $40,000+. You simply won't find a buyer.

Scope out the competition. Use open houses in your area or MLS listings to find out what your competitions' kitchens look like.

Do area homes have new solid wood cabinets and granite counters in today's designer colors? You'll be wise to consider making the same move. Are they including new stainless steel appliances and add-ons like dishwashers, wine-coolers, and trash compactors?

Are you in a higher-end neighborhood? It's time to think high-end. Your older home may have a highly functional kitchen, but a buyer will take one look at your formica counters and white appliances and become lost in the stress of how much money and time it would take to remodel. If you don't want to put in the time yourself to make upgrades then you'll have to make concessions in the price.

Don't become overwhelmed, though. Sometimes a kitchen update can mean doing just a few minor changes. Change the paint color to a warm, neutral tone. Get rid of any clutter. Update your appliances, paint your cabinets, change the pulls, or get a high-end looking counter for a fraction of the cost (faux-granite or lower end granite). You might even save a bundle by doing much of the work yourself.

The bottom line is a kitchen can sell a home. Do a little research and find out what your kitchen needs to make it competitive with area listings.

By Carla Hill RealtyTimes.com

Real Estate Outlook: Home Inspections

What does your home inspection cover? And who is liable if a problem develops down the road? We'll answer these questions in today's outlook.

You need an inspection on any property you are buying, regardless if it's old or new construction. An inspection is like a check-up for your house.

What repairs will need to addressed now and what might need to be addressed later down the road? This is what you have answered during an inspection.

Having an inspection done prior to signing a contract allows you to negotiate your findings into the deal. Does the roof need replaced? The seller may give an allowance to pay for the repairs. If you don't ask, you'll never know!

Perhaps you've fallen in love with a fixer-upper and are dreaming of doing the repairs yourself. If the inspection discovers hidden damage and costs, you'll be given the option to keep looking for a more suitable house.

Keep in mind, however, that simply because a house needs repairs doesn't mean you shouldn't purchase it.

Nearly every house will have a list of repairs that need to be done to get it "shipshape." It is your decision to choose how much you are willing to spend and how much work you are willing to do.

A home inspection varies depending on what type of property you are interested in.

According to the American Society of Home Inspectors (ASHI), "the standard home inspector's report will cover the condition of the home's heating system; central air conditioning system (temperature permitting); interior plumbing and electrical systems; the roof, attic and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement and structural components."

There are limits, however, to what a home inspection will cover. They aren't required to identify conditions that are concealed or are considered latent defects.

That means if personal property, plants, snow, or debris is covering an issue, the home inspector isn't require to move those items to inspect it and isn't liable if he misses it. They aren't require to make determinations on systems that aren't readily accessible.

And they aren't required to note the presence of potentially hazardous plants and animals. That includes "wood destroying organisms" or even molds.

This means you should find a home inspector that you trust. The ASHI recommends you choose from their list of licensed professionals. "ASHI members know houses, ensuring that you can find a home inspector. They are trained to objectively communicate to you, the home inspection buyer, what the house has to say. ASHI members have demonstrated technical proficiency and report-writing skills, and they have committed to continuing education in order to achieve and maintain their member status."

Having a trusted inspector means that most every problem that can be identified, will be. And inspection is about peace of mind, and a good inspector gives you that.

by Carla Hill- RealtyTimes.com