Our very own Dan Shlufman has some excellent ideas for attorneys regarding the latest RESPA changes to help facilitate smoother transactions.  Not a bad read for the consumer either:

As most of us are aware, as of January 1, 2010, the new Real Estate Settlement and Procedures Act (“New RESPA”) went into effect.   As it only affects loans that are originated after said date, and closings normally take 6-8 weeks in New York (and often 12 or more for coops and condos in Manhattan), few if any transactions have closed under the New RESPA. 

This is fortunate since the major changes detailed below will have the affect of changing the timing and, in many cases, the occurrence of closings.  As a result, to mitigate this on residential real estate transactions, I strongly recommend that we make some changes to our practices on these transactions and specifically modify our closing procedures with respect to the HUD-1 Settlement Statement (“HUD-1”).   

The intent of the New RESPA was to improve consumer protection.  To effectuate this, lenders and mortgage brokers are required to provide more accurate Good Faith Estimates (“GFEs”) to buyers.  The effect on closings is that the charges listed on the HUD-1 will now be required to track those disclosed on the GFE.. 

Certain charges will not be permitted to change at all on the HUD-1 from those disclosed on the GFE.  These are broker and lender charges such as origination fees, application/processing fees and underwriting fees.  In addition, inexplicably (as many of these have nothing to do with a loan and, even those that do are set by state and local statute), government transfer fees are included as well. In New York, the mortgage tax is included as it should be.  However, so I believe, are the Mansion Tax and the Peconic Bay Tax. Both of these are sizable amounts and might not be known to an out-of-state broker or lender causing a closing issue if they are not disclosed on the GFE!

The second class of charges is those that may vary in the aggregate by no more than 10% over the amounts disclosed on the GFE.  These charges are lender required settlement services such as bank attorney fees, title insurance and government recording charges.  This limit does not apply if the borrower or, presumably, borrower’s attorney selects its own provider for any of these services.

The final class of charges is those that may vary (without limit or tolerance levels) from the GFE and are for escrow reserves (i.e. homeowner’s insurance and real estate taxes); daily interest charges and homeowners insurance itself.  In addition, if the interest rate is not locked at the time of application, the origination fees can vary until such time as the rate is locked when a new GFE will need to be delivered.

To make sure that we are best serving our clients and also to provide for quick and smooth closings, I suggest that all we do the following on all new transactions:

1. Review the GFE:   Have the client send this to you and check to make sure that all usual loan charges are listed (and that unusual ones are not).  Confirm that the mortgage tax and appropriate transfer taxes are listed properly.  If not, let the client and mortgage broker/lender know this as soon as possible so this can be corrected.

2. Title Charges:  Once a contract is signed and prior to ordering a title insurance report (unless your practice is to order it at that time as opposed to when the mortgage commitment is issued as many attorneys do), request a written, binding list of all title charges (including recording fees).  The title companies are all aware of New RESPA and most of them are willing to do this.  Once you receive these charges, forward them to the client’s mortgage broker or lender to include in the GFE.

3. HUD-1: The most important change is with respect to the HUD-1 which has been traditionally an after-thought and completed at the closing.  This can no longer be the case since a lender will refuse to fund a loan if these charges don’t match those on the GFE.  At a minimum this will cause a delay in the closing if the lender’s in-house closer (i.e not bank attorney) is unfamiliar with NY practices.  In the extreme, it can cause an adjournment of the closing if the issues cannot be satisfactorily reconciled quickly.

To avoid this, the HUD-1 needs to be completed, reviewed and finalized by all parties 1-2 days prior to the closing.  To accomplish this, attorneys will need to provide the bank attorney with all charges including managing agent fees, real estate agent commissions, title costs (which they should have from the beginning of the transaction), adjustments, etc. once the closing is scheduled.  They must also insist that a final HUD-1 be provided to them at least 1 day prior to the closing for review.  My recent experience has been that bank attorneys understand this and are willing to comply.

If this occurs, the bank attorney will be able to obtain approval on the HUD-1 prior to the closing. This will not only avoid delays, but speed up the timing of closings.  In the case of a problem, it will get resolved prior to the closing. If it does not, then the closing will get adjourned prior to its occurrence saving all parties time and aggravation.

I believe if we adopt these few, relatively minor changes, we will be able to easily adapt to the New RESPA and continue to protect our clients’ best interests.

PRICED TO SELL...MOTIVATED SELLER...NOW THE PRICE IS RIGHT...OWNER SAYS SELL

You can probably guess where I'm going with this before you even finish reading this sentence but here are my thoughts on these ridiculous mantras that are spewed all over my inbox on a daily basis:

• PRICED TO SELL-isn't this the point always?  To sell I mean?  How else would you price something.  How about this one...PRICED TO SIT ON THE MARKET FOREVER
• MOTIVATED SELLER-one would hope that a seller is at least somewhat motivated when they decide to sell their home but just how motivated is relative.  The irony here for me has always been that when you make an offer to one of these 'motivated-type" sellers, you find out immediately that they aren't quite as motivated as you had imagined.  I like this one...UNREALISTIC SELLER HOPES TO FIND STUPID BUYER
• NOW THE PRICE IS RIGHT-This one actually came in today and was the impetus for this post.  It made me laugh out loud.  The price is right when you have offers and a place sells not just because you say so.  Trust me, I always think the asking price I set is right and that is definitely NOT the case all of the time.  In fact, I have a 4800sf townhouse in Washington Heights that is asking the absolute "RIGHT" price of $1,500,000 (it started out at the absolute "RIGHT" price of $2.495M with another broker 2 years ago) and although we are close to a bid, it still seems that we have missed the "RIGHT" price.
• OWNER SAYS SELL-this is often paired with BRING ALL OFFERS.   Now I don't know about anyone else but ALL of my owners have said "sell."  ALL of them!  Not one has said to me, "hey Doug, please market our home for sale but whatever you do, DON'T sell it!"

I know that you get my point here so why then are so many still using these antiquated sales slogans to try to pique interest?  I have my theories of which the primary is that most people will beat a dead horse until way after they realize there's no pulse.  Innovation and change are rarely embraced and my 18 years of experience in the Manhattan real estate market have served as evidence of that.  Still no official MLS in Manhattan; no standard measure of square footage; listings data still perceived as proprietary; and the industry remains one that puts it's own interests before the consumer more frequently than not.

But change is coming and it's coming fast!  The DOJ continues to investigate the real estate industry, more players are entering the listings business and trying to streamline the process for consumers and just recently I met with someone who is so incredibly well funded and who hopes to change the entire way that the industry operates.  And let us not forget about Google who in my humble opinion is going to redefine our industry and how we do business in about 3-5 years.

Embrace the change my friends...it's coming!

No surprise that reading the "Big 3" Manhattan real estate market reports for Q4 2009 is giving many, including me, a headache.

Check them out for yourself:

1. Elliman
2. Corcoran
3. Halstead

All 3 of these firms have done an excellent job of comprising and interpreting data but which data set is accurate?  And why are the data sets so different in a market that has made information much more transparent?  And lastly, but perhaps most importantly, what does this mean for you the buyer or seller?

I'm not even going to attempt to answer the first 2 questions because I have been asking them for years.  But question  number 3 is near and dear to my heart as many know that I am NOT a fan of averages or generalizations particularly when it comes to hyper local housing market(s).

The best advice that I can give to all of those out there trying to make sense of these numbers is to be very careful not to strictly apply increases or decreases in median or average prices to any specific home that you are selling or buying.  Use these numbers as VERY loose guidelines that basically indicate a few things:  

1. Inventory is down
2. Prices are down
3. Sales activity is up

That's about all you can take away here.  And Happy New Year everyone!!!

I realize that you wouldn't know from the lack of postings here, but TrueGotham is not dead!  As most of you know, I left my former firm and brought the Heddings Property Group to Charles Rutenberg Realty back in June.  It's no surprise that the move has added a plethora of new responsibilities to my job description and since my clients always come first, the blog has had to take a back seat for a short time.  

Our team continues to grow and we have been incredibly busy with a Manhattan real estate market that remains challenging but not impossible to navigate.  After a slow start to 2009, the summer and fall months have kept us all on our toes.  With 7 quality professionals (and growing) currently on our team and a commitment to a level of service unparalleled in the industry, we are enjoying the process of helping buyers and sellers navigate a terribly confusing real estate landscape more than ever before.  Incidentally, I interviewed or spoke with 75 people in an effort to fill the final 2 desks in our Westside office and further expansion is in the works.

Next month we will be opening a Hampton's branch of The Heddings Property Group at Charles Rutenberg Realty located in Southampton and by June we anticipate the opening of a downtown Manhattan office in the Union Square area.    

The ranks of Rutenberg continue to grow as well with over 300 agents creating the 6th largest brokerage in Manhattan in only 3 short years (colleagues please feel free to call me to discuss the many reasons why you too should join the Rutenberg team).  

As cutting edge technology makes its way through the big brand bureaucracy, we continue to syndicate and share listing information globally in over 30 languages.  We are rolling out a buy side tool any day now that will streamline the search process and bring with it a transparency of which most are afraid.   And we have created a real estate broker business model that truly focuses on the best interest of the client by aligning the interests of all team members with that of each and every buyer or seller.

So you see that we are very busy trying to make the real estate buying and selling process a smooth and more efficient experience for those who matter most: the buyers and sellers!                                                                                            

Chris Thorman at SoftwareAdvice.com sent me his latest post this AM:  Own to Rent: Breaking Down Fannie Mae’s Deed for Lease Program.  That's correct, the title reads "Own to Rent," not at all the rent to own scenario of which so many are already familiar.

The Federal National Mortgage Association, more commonly known as Fannie Mae, recently announced a new program designed to keep mortgage-challenged borrowers in their homes. The Deed for Lease (D4L) program allows qualified borrowers to relinquish the deed to their property and rent their home at the market rate for 12 months.

Chris's breakdown of exactly how this program works is excellent and thorough.  Imagine paying rent to your bank with no possibility of upside in equity after you once "owned" your home.  Ugh!

 The impetus for this post is a question that was recently asked of me from one of my sellers.  They are in the early stages of selling their Manhattan co-op and have simultaneously bid on a house outside of the city.  The seller wanted to know precisely when we will have confirmation that her current apartment is sold to give her confidence in proceeding with their purchase.

The answer:  You will know your apartment is sold when you have walked away from the closing table with certified checks and the buyer has left with the keys.

To further elucidate this point, here is a step by step guide of what to expect from the point a contract is sent to a buyer's attorney until that glorious day at the closing table.  And don't forget to review your closing costs early on in the process so you have no surprises.

1. A contract is sent to the buyer's attorney from the seller's attorney from a boiler plate form with attached suggested riders
2. The buyer's attorney does their due diligence for their client which consists of but is not limited to reading of the Co-op Board minutes, reviewing the building financial statements, offering plan, proprietary lease, and house rules.
3. The buyer's attorney then marks up the contract with suggested changes and it goes back and forth until both attorneys agree on language.
4. Once the contract is finalized, the buyer will sign and provide a 10% deposit check to be delivered to and deposited in your atty's escrow account until closing.
5. The seller will then sign the contract.
6. Once the contract is fully executed (signed by all parties), it is delivered to the buyer and they have typically 30 days to submit their application to the Board with their mortgage commitment letter.
7. The seller's real estate agent reviews the board application and almost always has to request additional documentation or changes which takes approximately 1-5 business days.  
8. Multiple copies of the application are made by the real estate agent and delivered to the managing agent.
9. The managing agent then takes 1-2 weeks to "process" the application running credit reports, etc and then they disseminate to Board members.
10. Board members then review the purchase application and all supporting documentation to determine if they will interview.  Members may choose to review and give their opinions via email, they may require a discussion to take place at a set monthly meeting time, or they may decide to review packages together on an as needed basis.
11. Assuming they find the application acceptable, a notice of interview date can come anywhere from 1 week to month after Board receives package from management (this is where a seller can reach out to board to kindly request them to expedite the process).
12. Board interviews buyers
13. Typically approved within 1-3 business days but some buildings take longer.
14. Closing is then scheduled to take place approximately 10-14 days after approval or as stated in the contract (most Manhattan deals NEVER close on the date specified in the contract).

Lastly, it is imperative to mention that banks are also slowing the process considerably these days with tighter lending standards.

So realistically, one should expect a closing of a Manhattan co-op to take approximately 2-4 months from the time a contract is sent out. Having said that, things like holidays, vacations of Board members and other pressing business that a Board may have to address are all factors that can lead to further delays.

Hopefully this will help to manage the expectations of all who are venturing into the sale or purchase of a Manhattan co-op.

 I had the pleasure of joining Tracy and Chris on the Noon edition of FoxBusiness.com Live today to discuss recent housing numbers that continue to confuse.

August home sales up 1% and September sales down 3.6% when an anticipated uptick of 2.6% was expected.  It is all very confusing and I still maintain that these macro numbers are incredibly inaccurate when discussing a specific region and even more so when discussing a specific property.  Perhaps these numbers can be useful in determining overall national trends but those trends mean very little to the individual homeowner who is my number one priority.

Not soon enough for me, but it seems that the Manhattan real estate market is becoming less of a paper wasteland.  Finally managing agents and co-op/condo boards are taking into consideration the ridiculous amount of paper that is being wasted in the application and home sales process.  

In the past 2 weeks, we have had multiple attorneys thank us for sending them offering plans, financial statements, and purchase applications in electronic format.  But we've been doing that for a long time.  More exciting than our paperless efforts are those like this.  At least one building that we know of is requesting applications, which can often be hundreds of pages of tax returns and supporting financial documents, on CD.  I' don't know for sure but 5 reusable CDs seems like a smarter option than more than 1000 pieces of paper.  Other buildings are also adopting more green policies by developing websites for prospective purchasers to retrieve documentation as well as submitting those completed applications in electronic format to board members for their perusal.

Anyone who has attended a closing or sold property in Manhattan knows that we are a long way from even putting a dent in the amount of paper that is wasted in a real estate transaction.  And for what...so the bank can store this paper in a warehouse in Iowa only to tell you that they have lost it when it comes time to sell again thereby charging you more money to make more paper copies of those that they lost.

Kudos to all of the agents, their brokers, property managers and building boards who have reduced their paper usage exponentially.  For those who haven't, shame on you.

Video still isn't killing the virtual tour star but it is gaining considerable steam.  The once averse Manhattan real estate market is now more frequently embracing real estate video as a powerful marketing tool to transparently represent and efficiently sell homes.  But unlike many housing markets across the country where MLS rules disallow agents actually appearing in these videos, Manhattan, chock full of agent/"actors" permits agent guided tours.  This creates a double edged sword.

The trend that I'm beginning to see is that some of the agents seem to think that their appearance in the video is much more important than the home itself.  Obviously I don't begrudge anyone for appearing in a guided real estate tour as I have been doing just that for almost 3 years.  However, many of the new videos that I am seeing are elaborate "performances" that feature the agent more than they do the home.  Let us not forget that these videos are primarily created to make the sales process easier and more transparent for the consumer (both buyer and seller) by allowing them to view a property in more detail than ever before possible prior to deciding to schedule an in-person visit.

So why are we seeing so many real estate tours that focus more on the seller's agent than the property itself?  EGO.  Don't get me wrong here, I thoroughly enjoy appearing in all of my property videos but my camera person and I are always very careful in determining when my appearance helps show the property (i.e. opening closets or standing in a room to show ceiling height) or hinders/takes away from the impact that the property itself may have on the viewer.  For example, just yesterday we decided that shooting a gorgeous pear wood eat in kitchen in a penthouse at 2 East End Avenue without me pointing to appliances would be a much more effective and less distracting way to show the property.

My point:  I think that sellers and their agents should be mindful of the way a video shows your home and not so much the way in which it shows the agent.

I was contemplating NOT chiming in on the big company's 3Q Manhattan residential real estate market reports, but alas I must give my two cents.  Never has the answer to the "how's the market?" question been so complicated.  It is all relative of course and if you compare the the 3rd quarter 2009 to the first half of 2009, then yes the news is good and the market is much busier.  But despite a few stats that show some YoY increases, like sales volume of 2BR apartments, the market is nothing like it had been for the past decade and that's not necessarily a bad thing for everyone as a correction albeit fast and steep was absolutely necessary.

Check out this snapshot from Curbed of the numbers from Elliman, Corcoran, and Halstead/Brown Harris Stevens (same owners):

Average sale price

1) Elliman: $1.323M - Down 10% from last year, up 0.8% from last quarter
2) Corcoran: $1.282M - Down 16% from last year, down 11% from last quarter
3) Halstead/Brown Harris Stevens: $1.274 million - Down 13% from last year, flat over last quarter

Median sale price

1) Elliman: $850,000 - Down 8.4% from last year, up 1.7% from last quarter
2) Corcoran: $799,000 - Down 18% from last year, down 4% from last quarter
3) Halstead/BHS: $781,000 - Down 14% from last year, down 1.7% from last quarter

Number of sales

1) Elliman: Down 16% from last year, up 45.6% from last quarter
2) Corcoran: Down 38% from last year, up 16% from last quarter
3) Halstead/BHS: Down 25% from last year

Here we go again!!!  How can the biggest players in the Manhattan real estate market come up with such differing reports of what has happened in the marketplace (big emphasis on "has")?  I still have never received an explanation for this that made any sense.

All of this said, I think it is very fair to say that the deep and rapid price decline that happened over the last 18 months has slowed.  Activity for me and all of my colleagues has definitely picked up as sellers have accepted market conditions and some buyers feel that now is the time to grab their piece of the Big Apple.  

So where is the market heading?  That is the billion (let's say trillion) dollar question and I still believe that we may see another 10% decrease in prices before we stabilize for a period of a few years.  If I'm wrong, it will only mean that the economy has become healthier more quickly than anticipated, banks are more freely lending (uh oh), and a huge influx of cash will pump up prices again. That sounds a bit eerily familiar no? 

This enormous sign was placed outside of my office on the corner of 83rd Street and West End Avenue to ANNOUNCE an open house last night.  I haven't seen this ever and it has been 15 years since I remember similar "marketing" attempts as flyers were taped to light posts.  I'm off now to Marshall the 3rd running of The Hamptons Marathon...go all you crazy runners!!!

As far as who is more realistic in terms of their expectations in today's Manhattan real estate market, the scale has definitely tipped toward sellers.  Before you get all crazy on me, here me out. I'm not AT ALL suggesting that it is a seller's market...because it's not.   That said, it also is NOT the buyer's market that many believe it to be.

With prices down between 10 and 40% from peak levels across the city, buyers are again sweeping in to snatch up what appear to be bargains relative to the recent housing boom.  But navigating today's real estate market has become incredibly confusing for buyer's and their agents as media reports trumpet that "now may be the time to buy."  That may indeed be the case for some but the major obstacle that I'm observing today is the misinformed buyer.

Most sellers and their agents have already adjusted asking prices to reflect recent depreciation.  Of course some are still delusional but it seems to me that asking prices are down almost the same 10-40% from peak levels.  Buyers bidding another 20% below these already adjusted prices are experiencing overwhelming frustration at the inability to negotiate with sellers.   Few are successful and most can't understand why their ultra low offers aren't being at least countered.

It has never been more important than it is today to analyze an apartment's price and how it compares to peak pricing levels as well as recent sales and contract signings.  If a property is priced properly based on recent market depreciation, an ultra low bid is likely to be met with silence from the other end. 

The recent increase in sales volume is largely in part to more reasonable sellers finding sophisticated buyers who recognize a property's value relative to the recent boom.  Although I personally think we are likely to see another 5-10% decline in prices before stabilization and sideways movement for a few years after that, a psychological bottom is being explored. Anecdotal evidence is showing that aggressively well priced properties are receiving multiple bids which may indicate that we are nearing the "bottom."  Just last week a buyer of mine had an offer accepted only to be gazumped by another bidder a day later.  That property had languished on the market for 6 months.  Once the price reached what buyer's perceived as "bargain level" (20% below the original ask and 35% below peak pricing) the sellers received 3 bids in 2 days.  

So despite the fact that we have witnessed one of the most rapid price declines in housing market history, buyers must take into consideration that many sellers have finally accepted this fact and adjusted prices accordingly.  That said, buyers need to do their homework and bid appropriately if they want to own a piece of the Big Apple.  

Happy New Year!!!  

I'm no longer going to apologize for my lack of blogging because i sound like a broken record.  It's been a busy summer (more like a Spring market) with a couple of long vacations and now I'm the lucky recipient of an IRS audit that is consuming blogging time.

Speaking of the IRS audit, this is exactly how I reacted when I got the news:

I have since accepted that it is more of a nuasance than anything but can't help but being a bit aggravated that trillions of tax dollars have been handed out to banks who still aren't freely lending and I'm being audited.  Just seems odd to me.  But c'est la vie!

Hope to have some time to blog in the days after Labor Day but making no promises.