Gea Elika's Blog, page 158

Deal or No Deal?

It has been a long and grueling process. You have done all of the legwork, from finding a buyer’s agent, receiving your pre-approval, looking at dozens of properties, negotiating back and forth, and having your offer finally accepted. There may have even been a competing bidder. You think it is time to relax, but it is too early to let your guard down.

A contract

Until you have a signed contract from the seller’s attorney, your team still has a lot of work to do, and time is of the essence.

After a price has been agreed upon, each day is crucial. Your broker is now waiting on a deal sheet, which is one or two pages outlying all the parties involved and the terms of the deal. The deal sheet enables the seller’s attorney to draft a contract and rider that will be sent to your lawyer. This includes the price, concessions, and any contingencies put in place. A deal sheet should be drafted by the seller’s agent and delivered to your attorney within 24 or 48 hours after an accepted offer has been reached.

 

Image by osool magazine /Flickr

 

The next steps

Upon receiving the contract, most transactions are expected to be signed, and a contract deposit of 10% exchanged within five to seven business days. During this time, your attorney should spring into action and conduct his or her due diligence. You should be prepared with your financing, and have the funds available for a wire transfer at your attorney’s request.

When conducting due diligence, your attorney will review the contract, rider, offering plan, board minutes, financials, and inquire about any questions he or she may have with the seller’s attorney or the building management.

Don’t get too comfortable

Everything may seem to be moving along well. However, there is a still a chance you could lose the deal while in attorney review. Some sellers are honorable and have a conscious, while others are hardcore businesspeople that are only concerned with money. The latter can make the process more difficult.

Depending on your price point and the state of the market at the time, you may have to fend off competitors until the ink is dry and a copy of a countersigned contract is in your hands.

 

 

Communication is crucial during the five to seven days of due diligence. Your team should be on the phone and behind the computer working for you to get things done. If another buyer is aggressive and comes along before the contract is signed, you might receive a disappointing call saying there is a higher offer and the deal is on hold. Although unfortunate, at least you are abreast of the situation and can decide, with your broker, the next course of action.

The right thing for the seller and his/her agent to extend the opportunity for you to match or beat the offer. You should be forewarned that not all sellers and their agents proceed in this manner, however. What would stop a seller from coming back to you yet again, after another buyer reappears? The best protection for you is to get a written agreement from the seller’s broker or attorney. Although verbal agreements are binding in New York, a written confirmation is the way to go.

This unpleasant scenario sounds harsh, given all you have been through to get to this point. But, it does happen, especially if the property strikes an accord with an emotional buyer.

Review is complete

Once your attorney has completed the review, and he or she believes the terms of the contract and rider are fair and proper, he/she will advise you to sign and proceed with the deal. He or she should have found the building to be in good financial health. This includes a review of potential liabilities and assessments. A good attorney will have answered any questions you may have had throughout the entire process.

After signing the contract, transferring the deposit and receiving a counter-signed contract from the seller, you are safe from other bidders. You are now officially “in contract,” and have earned a good night’s sleep. The next step is to proceed with the condo or co-op application, which your agent can help you to complete.

Concluding thoughts

Remember, having an experienced team, including a broker and local New York real estate attorney, is crucial to finding you a home. A seasoned buyers agent will help you manage a process that can get hairy.

 

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What Does a President Trump Mean for Homebuyers and Real Estate?

In October, we posted an article about how President Clinton or President Trump would affect the overall economy and the housing market in particular. At the time, Hillary Clinton had a large lead in the polls. Trump overcame a lot in his improbable victory. His policy proposals on the campaign trail were not as detailed as hers were and even were contradictory at times. Nonetheless, we can cobble together his major campaign positions to prognosticate the economic impact.

A large tax cut

The centerpiece of his economic plan called for slashing tax rates. There are currently seven tax rates, ranging from 10% to 39.6%. The top rate is on income above roughly $470,000 if married and filing jointly and roughly $418,000 if single (note: this is the marginal tax rate, which means it is just income above this level that is taxed at this rate). High-income earners also pay a 3.8% surtax on net investment income (e.g. rents, royalties, etc.strong) that was instituted as part of the Affordable Care Act (a.k.a. Obamacare). Certain other types of income, such as qualified dividends and long-term capital gains, are taxed at reduced rates, which is a maximum of 20% for those in the 39.6% tax bracket.

 

Image by Gage Skidmore /Flickr

 

Trump has proposed reducing the seven brackets down to three: 12%, 25%, and 33%. Under the Trump plan, the lowest rate would apply on income up to $75,000 for those married and filing jointly ($37,500 for single filers), a 25% rate for incomes from $75,000 to $225,000 ($37,500 to $112,500 for singles), and a 33% tax rate on incomes above $225,000 ($112,500 for singles). The net investment tax would be eliminated under his proposed plan. He also plans to do away with the estate tax and cut the corporate tax rate to 15% from 35%.

What it means for homebuyers – the pessimistic view

Back in July, the bipartisan Congressional Budget Office (CBO) estimated Trump’s plan would add over $9 trillion to cumulative deficits over the next decade. The CBO also projects the national debt would spike to 127% of the GDP. This year, it was about 72%.

The deficit has been shown to have an impact on interest rates. Generally, long-term budget deficits are associated with higher interest rates. In the 1990s, under President Bill Clinton, deficits and Treasury rates both fell. This led to lower mortgage rates, helping fuel the bullish housing market.

For a first time homebuyer that is ready to make the purchase, and has a long time horizon in mind, the next few months may be the time to take the plunge. The Federal Reserve has sent signals that it will raise short-term interest rates at its December meeting, which could push up longer rates. Donald Trump’s fiscal policies may well be the force to drive longer-term interest rates higher in the coming years.

The tax cuts may provide a short-term boost to the economy. This would be positive for the housing market in the near-term but could be negative over the medium-term given the mounting deficits and potential for higher mortgage rates.

What it means for homebuyers – the optimistic view 

Many are upset with Donald Trump’s election, particularly in this area, which is strongly a blue state. However, there are reasons to be bullish about the economy and real estate.

The stock market, after initially declining Wednesday morning, came soaring back. Over the next two days, the S&P 500 gained over 1%. This upward move is fueled by the belief that lower taxes and regulation will drive higher economic growth. Lower taxes will put more spending power in the hands of people, which could be used to purchase assets, including houses. The trade barriers he has talked about erecting could create a stronger dollar, which would make the United States an attractive long-term investment opportunity. New York City, as a major metropolitan area, would be in a prime position to benefit. All of this would be bullish for the housing market, should it come to fruition.

Final thoughts

It is difficult to determine which policies Trump will strongly advocate for given his often bombastic and sometimes contradictory vitriol on the campaign stump. Still, he has been less combative following the election, including complimentary remarks about President Obama. He does not have a track record as a politician, but he has been a businessman, having learned the real estate industry from a young age.

President-elect Trump has Republican majorities in Congress, which are likely to be supportive of his tax policies. Nonetheless, he has had a contentious relationship with certain members, including the party’s leaders, at times. Republicans do not have a filibuster proof 60 seat majority in the Senate, either. In other words, the political situation is fluid.

 

Related Post: The impact of the presidential election on the housing market

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Retiring Soon? Here Are the Best NYC Neighborhoods to Live in

We typically associate a New Yorker’s lifestyle with the younger crowd because New York City is notorious for its hustle and bustle, commerce, and vibrant nightlife. But over 1.4 million NYC residents are age 65 or older, and this number is expected to increase dramatically as the baby boomer generation begins to retire in droves.

In response to the increase of retiring residents, the NYC Department for the Aging (DFTA) and the New York Foundation for Senior Citizens (NYFSC) have opened senior centers across the city and continue to expand their programs and services.

The six neighborhoods highlighted below are near DFTA and NYFSC centers, programs, and services. Each one has something different to offer, so retirees can find something that suits their tastes.

 

Image by Douglas Palmer / Flickr

 

Murray Hill

The Stein Senior Center is on East 23rd Street, a few blocks from the infamous Fifth Avenue shopping mecca.

Murray Hill has a low crime rate compared to the rest of New York County. There are also multiple medical and urgent care facility options every few blocks.

Grand Central Station is in the neighborhood, making it easy for friends and family to visit. The Empire State Building and the Chrysler Building are only a stone’s throw away.

Inwood

The Rain Inwood Senior Center is located on Vermilyea Avenue, and the Dyckman Senior Center is located on 10th Avenue.

Inwood is a good option for retirees on a budget because housing prices in the neighborhood continue to decrease, with a median around $400,000. Crime rates remain low.

This neighborhood is a mini oasis for residents who enjoy being outdoors. Inwood Hill Park provides almost 200 acres of space, and Fort Tyron Park offers 66 acres. The Bronx Zoo and New York Botanical Gardens are a short commute away.

Hell’s Kitchen

Affordable housing for seniors is located at Clinton Gardens on West 54th Street – a block from the Clinton Senior Center on 55th Street.

Hell’s Kitchen boasts a low crime rate and is blocks away from Central Park and Columbus Circle.

Residents can easily get to Broadway Theatre shows and visit Carnegie Hall because they will be next door to the Theater District. For those who like to be close to entertainment and shopping, Times Square lies a few blocks away.

Chelsea

Hudson Guild Senior Services is located on 9th Avenue, close to the Joyce Theater.

Although real estate prices in Chelsea are currently on the rise, crime is not.

The Chelsea Piers Complex is nearby if one feels compelled to work on his or her golf swing or take a dinner cruise. The High Line Park is also available for traversing.

Bensonhurst, Brooklyn

Narrows Senior Center is on 63rd Street.

Some co-ops and apartments are selling between $250,000 and $359,000. Crime is low in this neighborhood.

There are a lot of nearby hospitals and parks, and residents can easily get to downtown Manhattan.

Sheepshead Bay, Brooklyn

Bay Senior Center is on Nostrand Avenue.

Two-bedroom, one-bathroom bungalows are as low as $315,000. Crime is low.

Sheepshead Bay offers extensive boating, fishing, and sailing opportunities for relaxing shore-front living.

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Why First Time Buyers Should be Buying

There are many investment strategies when buying stocks: some investors research the quarterly and yearly statements of companies, others buy stocks that are everyone talks about and have a volatile day to day movement.

And yet there are others that look at the unusually large purchases of stocks or options that represent them. These investors believe that they’re willing to make large purchases of a company and they ride along with those large investors.

This last strategy I would like to talk about and apply it to New York City real estate and why right now it’s giving us a buy signal for first-time buyers.

 

Image by dumbonyc / Flickr

 

As you walk the streets of New York, you see construction everywhere. As of matter of fact, spending on new developments will surpass the record set just before a financial crisis.

There are a couple of factors driving this.

First, New York is experiencing an all-time high in city jobs, and that drives strong demand for new housing and office space. The New York Building Congress forecast construction spending will reach $43.1 billion this year, which represents 26% increase from 2015 and it is the first time the city eclipsed the $40 billion mark. The same association projects construction spending to reach $42.1 billion in 2017 and $42.3 billion in 2018, making it the largest building boom since 1980’s.

Second, the steady pace of city employment remains high. Up 18% since 2009, this is the strongest pace in decades according to the New York Department of Labor.

 

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Third, millennials. A new demographic force in real estate, they seek to live, work, and play in urban settings and as such contribute to a strong private sector job increase in New York, up 2.3% since September 2015. This is 21% higher than a national average.

Finally, this year spending on residential and commercial buildings is 47% greater than a previous peak of $31.1 billion in 2007 on the inflation-adjusted basis.

As mentioned above, a significant investment technique is to ride the wave and follow the widely-used stock market strategy of buying following where the smart money flows.

Developers are making large bets on New York City’s future using low-cost capital. Many of them possess decades of experience, comprehensive data, and a thorough understanding of market trends. They’re not afraid to enter New York market like the Toll Brothers did in 2007. All areas of the city experience the renaissance. Developers are hungry for new sites and opportunities, and it’s increasing challenging and expensive to find sites to develop or structures to renovate.

It is not easy to borrow and spend billions of dollars and stay in business. Your decision and understanding of the current market must be good to do so.

For first time home buyers, especially those looking for apartments under $1 million, the strong benefits driving the development boom in New York right now are also applicable to them. The increasing demand that’s driving development suggests that property values will increase over the longer term, and with the low rates available right now, first-time buyers can look to achieve a positive ROI for their home sooner rather than later.

Opportunities come to the ones who are not only brave but are also retrospective of the market.

New York City real estate offers superior and safer returns on invested capital and provides an asset you can live in as it appreciates. For first time buyers, now is a very good time to start building a nest egg that will serve you and your family for generations to come.

‘As the saying goes: “You have to be in it to win it!’

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A Mortgage Contingency You Can Live With

A mortgage contingency clause provides the buyer with crucial protection. Many sellers frown upon contingencies since it complicates the process and puts the deal at risk should financing not be obtained. However, it is typical to include this clause in a real estate purchase contract. You should fully understand this contingency and how it protects you, the buyer. It is particularly useful if you are a first time home purchaser, and you have never been through the buying process.

What is a Mortgage Contingency?

The mortgage contingency provides the buyer with a certain amount of time to obtain a mortgage. If the lender denies the mortgage, the buyer does not have to proceed with the purchase and is entitled to a full refund of the contract deposit.

 

Image by Daniel Bertsche /Flickr

 

The standard time for the purchaser to get a mortgage commitment is thirty days or sixty days. This may seem to be a quick turnaround. Therefore, it is incumbent upon you to speak to your lender before signing the contract and keep in contact throughout the process. Any paperwork requested by the lender should be sent back promptly to keep things moving. Asking for a few extra days does not usually present a problem, but it is advisable not to go past this or have to ask for a second extension.

Never leave home without one

You may decide to forgo the mortgage contingency in the belief it makes your offer stronger, particularly in a seller’s market. Resist this urge, even if you feel confident, particularly if you have been pre-approved. However, a loan pre-approval is non-binding, and other factors may come into play. Moreover, credit conditions can change, and this clause protects you in such an event. You will be able to void the sales contract without penalty, providing a good faith effort has been made during the specified time.

The seller, naturally, wants the deal to close. He is indifferent to the level of interest rate you will have to pay, or if the other terms are onerous. The buyer may want to ensure a deal only if he can receive certain favorable mortgage terms. For instance, a 30-year mortgage rate below 6% might be the contingency. There is a compromise, but it is important to have one included unless you are an all-cash buyer or putting down a deposit of 50%. Otherwise, you risk losing the 10%-20% deposit you have put down.

 

Image by bds4us /Flickr

 

Types of contingency clauses

We have seen that there is flexibility with the mortgage contingency clause. Aside from that, there is the active contingency provision, passive loan contingency, and a hybrid.

The active contingency gives the buyer more control. It requires the buyer, in writing, to waive certain conditions for the deal to go through.

A passive contingency is more stringent and less favorable to the buyer. For instance, it could require the buyer to notify the seller at a particular time that he has not obtained a mortgage. Failure to do so puts the buyer on the hook to purchase the property, even if there is no mortgage. A hybrid contingency is a middle ground, as the name suggests. Buyers agree to forfeit a portion of the deposit. The wording of the mortgage contingency is crucial.

In a seller’s market, if a bidding war breaks out, you can propose a mortgage contingency for the sales price. If the appraisal falls below the sales contract price, the buyer would promise to cover the shortfall. Alternatively, the wording could allow the buyer to walk away, or this may serve as an impetus to renegotiate the deal.

Concluding thoughts

The tide turned in New York City’s housing market several years ago. You may feel you have found the perfect home, and are at risk of losing it. However, the mortgage contingency clause is there for your protection. Before choosing to forgo a contingency that could get you in severe financial straits down the road, consult your lender, buyers agent, and attorney.

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A Contingency You Can Live With

A mortgage contingency clause provides the buyer with crucial protection. Many sellers frown upon contingencies since it complicates the process and puts the deal at risk should financing not be obtained. However, it is typical to include this clause in a real estate purchase contract. You should fully understand this contingency and how it protects you, the buyer. It is particularly useful if you are a first time home purchaser, and you have never been through the buying process.

What is a Mortgage Contingency?

The mortgage contingency provides the buyer with a certain amount of time to obtain a mortgage. If the lender denies the mortgage, the buyer does not have to proceed with the purchase and is entitled to a full refund of the contract deposit.

 

Image by Daniel Bertsche /Flickr

 

The standard time for the purchaser to get a mortgage commitment is thirty days or sixty days. This may seem to be a quick turnaround. Therefore, it is incumbent upon you to speak to your lender before signing the contract and keep in contact throughout the process. Any paperwork requested by the lender should be sent back promptly to keep things moving. Asking for a few extra days does not usually present a problem, but it is advisable not to go past this or have to ask for a second extension.

Never leave home without one

You may decide to forgo the mortgage contingency in the belief it makes your offer stronger, particularly in a seller’s market. Resist this urge, even if you feel confident, particularly if you have been pre-approved. However, a loan pre-approval is non-binding, and other factors may come into play. Moreover, credit conditions can change, and this clause protects you in such an event. You will be able to void the sales contract without penalty, providing a good faith effort has been made during the specified time.

The seller, naturally, wants the deal to close. He is indifferent to the level of interest rate you will have to pay, or if the other terms are onerous. The buyer may want to ensure a deal only if he can receive certain favorable mortgage terms. For instance, a 30-year mortgage rate below 6% might be the contingency. There is a compromise, but it is important to have one included unless you are an all-cash buyer or putting down a deposit of 50%. Otherwise, you risk losing the 10%-20% deposit you have put down.

 

Image by bds4us /Flickr

 

Types of contingency clauses

We have seen that there is flexibility with the mortgage contingency clause. Aside from that, there is the active contingency provision, passive loan contingency, and a hybrid.

The active contingency gives the buyer more control. It requires the buyer, in writing, to waive certain conditions for the deal to go through.

A passive contingency is more stringent and less favorable to the buyer. For instance, it could require the buyer to notify the seller at a particular time that he has not obtained a mortgage. Failure to do so puts the buyer on the hook to purchase the property, even if there is no mortgage. A hybrid contingency is a middle ground, as the name suggests. Buyers agree to forfeit a portion of the deposit. The wording of the mortgage contingency is crucial.

In a seller’s market, if a bidding war breaks out, you can propose a mortgage contingency for the sales price. If the appraisal falls below the sales contract price, the buyer would promise to cover the shortfall. Alternatively, the wording could allow the buyer to walk away, or this may serve as an impetus to renegotiate the deal.

Concluding thoughts

The tide turned in New York City’s housing market several years ago. You may feel you have found the perfect home, and are at risk of losing it. However, the mortgage contingency clause is there for your protection. Before choosing to forgo a contingency that could get you in severe financial straits down the road, consult your lender, buyers agent, and attorney.

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Condo vs. Co-op: What’s the Difference?

In New York City, there are two major real estate options. Before buying a property, you’ll want to fully understand these two options and what each has to offer.

Most of what you will find for sale in New York are coops or condos. The most important distinction between these two types of real estate is that with a co-op you do not own the property, a corporation does. You own shares in the corporation, much like you would in a business venture.

Since you’re buying shares in the co-op, you do not own your apartment; you own a part of the corporation that owns the building. The Board of Directors for the corporation sets the value for each apartment based on a number of shares. Obviously, the larger and better the real estate, the greater number of shares the apartment will be worth.

 

Image by rollingrck / Flickr

 

The Board of Directors runs each co-operative building, paying for its mortgage, taxes, and upkeep. The money you pay for your shares covers these expenses and contributes to the building’s reserve funds.

To keep a co-op solvent, the Board of Directors needs to ensure that each person who joins is going to be able to maintain the company afloat, so-to-speak. For that reason, the Board must approve each new member.

Condominiums make up the other available real estate choice in New York. They are a more traditional choice in that buyers actually, purchase the real estate itself. That means that the expectations and responsibilities are different than a co-op. For example, if you buy a condominium you will have to pay the real estate taxes on the property.

Another point of fact to consider is that in New York City, there are fewer condominiums available than there are co-ops. About 80 percent of the available apartments in New York are co-operatives. Co-ops, however, are less expensive than condos.

 

 

Condo vs. Co-op: What’s the Difference?

Most people who already live in New York City have a relatively solid understanding of the real estate market and how it differs from other cities. This is particularly true in regards to the trade-offs between a condominium and co-op. However, if you’re new to New York City, or are thinking of moving there soon, you may want a better understanding of what type of real estate will work best for you.

Considerations: The differences between a condominium and a co-op can be somewhat complicated. For example, depending on the neighborhood, there may be more co-ops than condos available. The co-op ownership vetting process can be strict, but that usually translates to greater financial security for the building. It can also be highly discriminative, especially when finances are concerned.

Although most people coming to New York feel like they must buy a condo, there are many factors to consider so that you end up buying the property that best fits your needs.

 

COOP Factors: The word “co-op” is short for “Cooperative,” which has more in common with a business arrangement than with owning real property. For example, as a resident of a co-op, you don’t own your apartment – a corporation owns the building or complex. Residents are not owners; they are shareholders in the corporation. The legal relationship is that of a “proprietary lease,” which allows the resident to use the apartment, but does not imply ownership.

 

 

1. Apartment Size: The number of shares you own in the co-op is directly tied to the size of your apartment. The larger your apartment, the more shares you will hold.

2. Co-op Approval: To move into a co-op, the board of directors must first approve your application and interview. This allows the board to weed out individual’s they don’t approve of living as part of the co-op. This kind of discrimination could be a good thing or a bad thing depending on your acceptance ( We cover this more extensively in our article about “Co-Op Interview Tips.”)

3. Down Payment: The down payment for a co-op is more than is expected for condominiums. Down payments start at 20 percent and can go as high as 50 percent. In the most prestigious co-ops, financing isn’t allowed.

4. Other Expenses: As a member of the co-op you are expected to pay for your apartment, but also a portion of the monthly maintenance expenses that cover building amenities if any, real estate taxes, heat, insurance, water, staff salaries and building management company.

5. Landlord-Tenant Relationship: Co-op shareholders are considered tenants of the co-op, as opposed to owners. This grants them legal protections according to the New York City landlord-tenant law. Condominium owners don’t have this advantage.

 

CONDO Factors: Instead of owning shares in a much larger piece of real estate, when people buy condos, they are purchasing real property. They receive a deed, and they pay taxes and ownership fees. They also have the right to sublet if they so choose, or sell the property according to their desires.

 

 

1. Financing Options: Although condos allow for 90% financing, most banks in today’s market require 20% down.

2. The Application Process: The acceptance ratio for condominiums is much higher than those for a co-op.

3. Common Charges: There are often common charges for a condominium, but in most cases, they are considerably lower.

4. Taxes: Must pay real estate taxes, which can be deductible in many cases if those deductions are carefully itemized.

The truth of the matter is that, in New York City, there are many more co-ops available than condominiums. The good news is that the gap between the two is narrowing.

Currently, the ratio of co-ops to condos is 75 to 25 percent. In the 1990s, the ratio was 80 to 20 percent. In the 1980s, it was 85 to 15 percent.

This gradual shift has been taking place because apartments in newer buildings tend to be sold as condos. In areas with newer developments, there are greater numbers of condos available for purchase.

 

Differences in Price: According to brokers and analysts, another factor that affects availability is the price of a premium condo. Condominiums can cost up to 40 percent more than co-ops. The second quarter of 2014 saw the average price of a condo in Manhattan at $2.283 million dollars, compared to $1.24 million for a co-op.

However, Jonathan J. Miller, the president of the Miller Samuel appraisal firm, compared apartment size with amenities in a 2006 study and found that the prices of condos and co-ops approach each other when you look at both factors. “We concluded that all things being equal, the value of a condo is about 9 percent more than the value of a co-op,” Mr. Miller explained.

Condos built since 2010 are larger than co-ops built in the 1980s, though they share the same number of bedrooms. Add to that the additional closing costs in buying a condo, and you can see how the numbers creep closer together.

Owners also will need to get title insurance and pay the mortgage recording tax—in New York City, this will equal approximately 2 percent of your mortgage’s face value. You won’t have to worry about these costs when buying into a co-op, though.

 

Rules: Co-ops tend to have stricter rules, particularly when it comes to having a dog, loud music after 10 p.m., or installing a washer-dryer. These are possessions and actions that will have to be approved by the co-op. They are particularly strict when it comes to subletting.

Should the board approve renters, they reserve the right to approve whom you sublet to and the duration of time. For co-ops that allow your subletting, most require that you reside in the apartment for no less than two years before doing so. The subletting also likely will be limited to one or two years maximum.

Another frustration occurs because many of the rules have a tendency to change on a whim. You are at the mercy of the board, as they could only decide items like washers and dryers will no longer be part of the co-op.

There is a lot to explore as you search for an apartment, but these significant differences should be fully understood before buying into the New York real estate market.

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What Can NAEBA Do For You?

Real estate brokers and agents have seen their reputation tarnished, particularly in the last several years, spanning from the start of the recession. Working on commission, the rogue agents, have been known to go to dire lengths to close a deal, including pushing buyers into inappropriate homes at prices they cannot afford and repairs they weren’t expecting.

However, it does not have to be that way. The National Association of Exclusive Buyers Agents (NAEBA) is a professional organization of real estate agents and brokers. If you are searching for a home in the US, a buyer’s agent might be right for you. It is worth exploring the NAEBA in further detail.

 

Image by Son of Groucho / Flickr

 

What is the NAEBA?

Members of the NAEBA exclusively represent buyers, unlike the traditional real estate brokerage that stand for the seller’s interest. This means there is a fiduciary duty owed to the buyers, including loyalty, obedience, confidentiality, accounting, reasonable care and skill, and disclosure. These agents must disclose information to the home buyer; that materially affects the buyer’s interest. This is in contrast to a traditional agent, who owes his fiduciary duty to the seller, and cannot reveal anything that would be detrimental to him.

 

 

Turning this relationship on its head can be an enormous help to the buyer. For instance, the exclusive buyer’s agent can advise you on how much the property is worth, not just by sharing comparable sales data, but any information that would influence the price to your advantage. For instance, if there is a divorce situation or a pending foreclosure, the buyer’s agent would be required to inform you. The buyer’s agent also negotiates on your behalf, seeking the best price for you while also protecting you by potentially putting in contingencies.

 

Image by Arden / Flickr

 

Ethical standards

NAEBA members have a strict code of ethics and standards of practice that they are required to follow. There are seven articles and expand on the fiduciary duties discussed previously.

Why it might be for you

The NAEBA was formed in the 1990s with the idea that there was a better way for the real estate industry to conduct its business. The previous creation of a dual agency structure appeared to be a positive step, allowing agents to collect commissions from buying and selling transactions. However, there was still an incentive for the agent to try to obtain the highest price for the seller, meaning there is still a need for an exclusive buyers agent.

 

Image by Wally Gobetz / Flickr

 

The NAEBA, with its standards and ethics, created a fiduciary duty to the buyer, a set of legal obligations and standard of care that must be followed.

You will only conduct a couple of real estate transactions in your lifetime unless you are a professional real estate investor. The real estate agent will almost certainly know a great deal more about the process, how to get the best price, and help you evaluate the condition of the home. Many complexities can get you hooked into a bad deal. If you are in the market to buy a home, having a buyer’s agent that is legally bound to protect your interests is a good place to start.

 

Image by Ian Freimuth / Flickr

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10 Things Young Professionals Need to Consider Before Buying Property in NYC

Young professionals are a force to be reckoned with in New York City real estate. NYC’s comptroller reports that 1.6 million millennials were living in the city in 2014.

Here are 10 things young professionals should consider before they buy property.

1. Know When to Buy and When to Rent

Before committing to buy property, research the pros and cons of renting versus buying. Are you thinking about buying real estate as a long- or short-term investment? Are there market trends that you should consider?

 

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2. Investigate Financing Options

Will you need to take out a loan? If so, what type of loan will be the best option for you – a 30-year fixed or a 15-year fixed? Will you need to participate in a first-time home buyer program? Work with a mortgage lending professional while navigating your options.

3. Stabilize Your Finances

When entering the home-buying process, your spending habits should be conservative, especially if you’re seeking financial assistance. Having a large debt-to-income ratio or making expensive purchases could hurt your chances of securing financing.

Even if you aren’t borrowing money, you should save as much as possible for down payments and closing costs.

 

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4. Evaluate the Lifestyle You’ll Have in 5-10 Years

If you’re buying a “forever home” and want to have a family in the future, this will influence the floor plans and neighborhoods you consider. If you want to rent your property while you work overseas or after you move, this is important to know upfront because it’s not always possible to rent out a property you buy.

5. Create a List of Pros and Cons Throughout the Process

It’s unlikely that you’ll get everything you want. As you explore properties and financing options, keep a list of pros and cons for each and rank them based on your priorities.

6. Work with a Buyer’s Agent You Trust

Be sure to work with a buyer’s agent who has your best interest in mind, is consistently easy to contact, and has experience.

7. Determine the Type of Property You Want

Consider building and apartment size, property taxes and maintenance/common charge obligations, and included amenities.

8. Scope out Neighborhoods

Don’t assume you know everything about a neighborhood before you’ve commuted to work from it or have stayed there overnight. See if you can rent a room on Airbnb or bunk with a friend. Explore different neighborhoods and weigh all possibilities.

 

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9. Identify the Forms You’ll Need to Fill out

There’s a lot of paperwork involved in buying a home. Be aware of the forms you’ll encounter and what they mean before you sign them. Always consult a professional if you have questions.

10. Learn About the Neighborhood

Look at crime ratings, school zones, transportation options, future development projects, grocery stores, and anything that’s important to your lifestyle and well-being before you buy.

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8 Ways to Mentally Prepare Yourself for NYC’s Challenging Market

Regardless of your price range, attractive, well-maintained properties never stay on the market long. You’ll want to develop a basic understanding of NYC’s tight inventory market before you even begin, though. This will help you negotiate the best price later down the road, and it will reduce your risk of losing out to other bidders:

 

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1. Prequalify for a mortgage or provide Proof of Funds if paying cash. Sellers are more willing to negotiate with buyers who have proven their ability to purchase a home.

2. Talk to your buyer’s agent on a regular basis to stay on top of new listings as soon as they hit the market, and make time to visit properties you are interested in promptly.

3. Be ready to make a decision. That means knowing exactly what you want and what you can afford so that you recognize, and can act on, a good opportunity when you see it.

4. Compromise: Whether you reside in New York currently or you’re relocating from another state, most buyers experience a bit of sticker shock when they realize the usually modest size of condo or coop they can actually afford. For this reason, compromise is an integral part of the home-buying process in New York City. The question is, just how much should you compromise?

You don’t want to overextend yourself by buying too big, but you also don’t want to be forced to sell down the road because you didn’t allow room for growth. In a buyer’s market, you should accept a place that satisfies 90 percent or more of your wish list. In a seller’s market, you should buy if a place has 80 percent or more of what you want. When you make out a list of pros and cons for the places you view, consider including a column for compromises so you stay flexible in your demands.

5. Even in a competitive market, protect your interests by insisting on the proper inspections.

6. Before you make an offer, do due diligence on the property with your agent. Get sales data on the property you are interested in, as well as on comparable properties in the neighborhood. Develop a three-tiered price target: The lowest price you could reasonably offer without offending the seller, the price that you and your agent think the seller is most likely to accept, and the maximum price you are willing to pay for the property. Make your offer based on the lower price target, and stick to your limits if the negotiation takes the home price beyond your maximum amount.

7. If financing, ask for a mortgage contingency clause, but if you are in a competitive bidding situation, consider dropping it; it may give you an advantage with the seller. Don’t place restrictions on the sale, such as a delayed closing date, or a contingency clause on the sale of your existing home. If your home hasn’t sold, talk to your lender about a bridge loan to cover both mortgages for a short period.

8. Be accommodating to the seller by offering him the opportunity to choose a closing date at his convenience. Some sellers have not lined up a new place to live by the time their house sells.

When it comes time to make an offer, don’t panic if your first offer is rejected, or if it turns out you are in a very competitive market. Some buyers are tempted to buy a property at any price if they’ve lost a bidding war in the past. While you want to make your offer as attractive as possible, don’t work against your interests. On the other hand, depending on market sentiment, it may also be worth paying a reasonable premium to win the property. For most buyers, their home is their largest investment; whatever you choose to do, just make sure your investment is a sound one.

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