1.  Many people realistically don’t  know if they qualify for the credit:  Many of my clients, but not all, make a nice amount of income and therefore, based on the income limits set forth by the IRS, may not even qualify for this credit to begin with.  However the majority of first time purchasers I have spoken to (and not just my clients) have had absolutely no contact with his/her accountant before proceeding with the purchase to make sure there are no caveats involved in qualifying for this credit.  They just are hoping they qualify.  Nice.

2. An $8000 credit on a $600,000.00 residence is like me enticing you to buy a Mercedes by offering you a free snickers bar and one shoe.  Lets face it, $8000 is $8000 and were in a recession.  But I would base my decision on whether or not to buy now on factors such as the neighborhood, the price of the place, the interest rate you’re receiving, whether or not you see yourself living there for more than 7 years, and/or whether or not the floors are caving in.  Over the life of a loan for a property worth $600,000.00 or even less, $8000 would mean absolutely nothing at all.  Doesn’t matter, people are still offering their first borns for this credit.

3. If you are purchasing a new construction condominium and you haven’t had the place inspected AND you’re rushing forward because you wanted to fit into this 8k credit, then you’re signing a letter absolving me of any responsibility as your attorney.  Look, I’m not a real estate broker, you can go to Trulia.com for that, but lets face it, there are serious legal consequences involved in buying a home, especially if its a new construction.  Half of Park Slope is suing their developers because their windows are falling off.  Williamsburg looks like California after the Gold Rush left town.  The most important thing I tell clients these days is to get their place inspected and to make sure to list the things that need repaired inside the actual contract itself.  If you’re foregoing this crucially important step which can ultimately cost you tens of thousands of dollars down the line because of an 8k credit, then we you have some ‘splainin to do.

At the end of the day what I see, and what I completely empathize with, is that people are very emotional about the places they want to live and purchase.  The ones that are completely unemotional (Ive found something cheap in a decent neighborhood with a low interest rate, low common charges, good condition, and I get this 8k credit) are the ones that may very well come out ahead.

Ive spoken to several New York City Real Estate attorneys last week, who, like me, were burning the midnight oil attempting to get deals done in time for the deadline.  And they all say the same thing:  We’re happy this is finally over.

Think Im crazy?  I am.  But ask any people you know who purchased a condo/co-op or a home in New York City in the past year what the process was like.  They will tell you it was pure unadulterated hell.  Banks have no clue what they’re doing anymore.  Absolutely none.  And because of that, what you thought would be a smooth loan process has turned into a loan nightmare.  Therefore, here are some friendly tips from your Manhattan Real Estate Attorney:

1.  Everything on time, all the time, with confirmations of receipt.  If youre dealing directly with a bank, you may be speaking to Jim in Omaha on Monday, and Tyle in Akron on Tuesday.  You want to get a point person whenever possible, because you can verify all the documents the bank asked to be sent, were in fact sent in received.  Absent that, I would ask to always deal with supervisors, as they seem more helpful on most occassions.

2.  Do not believe anything they tell you.  Im serious.  The loan process is fairly simple, but they keep saying nonsense that confuses both client and attorney.  They’ll say “We need your lawyer to close by March 9th” but they wont assign a bank attorney who is required to be present at the closing and to actually clear the file to close.  Once you get any response from them, call your lawyer and tell he/she what the bank said.  I don’t care if they get annoyed, they shouldn’t.  It can delay your closing and your rate can expire.  If your lawyer has to call (we do it all the time), so be it.  Its a crazy market out there and you need someone who knows that and doesnt care.

3.  Bankrate.com .  I dont care if your neighbor told you their mortgage broker got them a free house.  Before you do anything, go to that site.  Completely unbiased and independent and offers you a comparison of tons of banks, their rates, closing costs, and even contact information, plus informative articles.

4.  Aspirin.  Take it a lot during the process because you’ll need it.  I know I’m making this sound so dreary but the reality is that the process has become quite painstaking and can take some time and patience to navigate.  Have a good attorney by your side, always always always follow up with the bank (also have a back up bank in case the first isnt moving quick enough) and youll be fine at the end of the day.

Case in point.  My client is selling a co-op apartment in  Brooklyn.  Again, she is SELLING the apartment in Brooklyn, not buying it.  Weve found purchasers who are paying cash.  We have a closing date.  But we cannot close because the bank is unable to send us the stock and lease (analogous in some respects to a deed for a home).  Weve called in approximately 10 times (not a typo) and have been on hold each time for approximately 30 minutes.  Th bank cannot tell us why they cant send us the stock and lease and state that someone will get back to us within 24 hours or 2 weeks.  Can you imagine if you called a friend and they said they would either get back to you later today, or Mid February.  Unless this was your mother in law where youd be happy to wait the 2 weeks, you would not be pleased.  We were not pleased.  Also the bank cant communicate with the proper department because that department doesnt have phones.  The dept has live people, and computers, but no phones.  Again Id like to emphasize all we are currently looking to do is pay the bank lots of money but the bank is saying “We know, and wed love to take the money, but we cant take the money, we dont know why we cant take it, and we dont know when we could tell you why we cant take it, but someone may or may not be able to tell you why we cant take it within 2 weeks.”

On another closing, the bank appraised a home for a certain sum and said “Youre ok to close.”  They then came back the following week and re-apraised the house for $50,000 less.  Lets again use a real life example.  I come to you and tell you Id like to buy your Mercedes, and that Id be willing to pay you $20,000 for the car and tell you I’d like to meet you the following week to pay you.  You agree.  The following week I show up announced and say “Let me look at the car again” and after looking at the identical car I tell you I will pay you $14.32 right now on the spot.  Absurd no?  Well folks welcome to 2010, the year when the recovery will hit.

In business, companies are always obsessed with bottom lines, and thats normal.  However, when you’re looking to buy a home in New York City and the lender is telling you that they’re telling you that they dont have phones, there is something wrong.  No business can recover financially if they are acting completely irrationally.  You may be reading this and thinking that there is something more to the story.  Something is missing because it doesnt make sense.  I wish there was.  Our firms Manhattan Real Estate practice has shifted in that we now do so much more on a daily basis for our clients than we ever have just to get them into the homes they wanted.  There really should be no discussion of a bottoming of the market in New York City without discussing why we’re stuck here now in the first place.

In the simplest way of saying this, lets compare what happened during the mortgage crisis and whats happening now.  During the real estate bubble, individuals were purchasing real estate in lets say the West Village, New York.  And they didnt have any income verification or any money to put down for an apartment.  No problem.  Banks were giving out financing like crazy and so the purchasers would take out 100% financing.  Sometimes they would even walk away from their New York City purchase WITH MONEY in their hand after they purchased a unit for a few million.  We know how the story ends.  It’s not a stretch to say the majority of people who purchased homes in the West Village, Park Slope, Williamsburg, or anywhere in New York City with 100% financing have either foreclosed, are behind in their mortgage payments, or are having issues.

During this bubble, FHA wasnt a word that was used much.  The FHA is basically a government agency that insures the loans private lenders give out, and there were caps on those loans in 2004, 2005, etc.  Here is an explanation from the New York Times:

“F.H.A. insurance was created for minority and low-income families who could not come up with the traditional down payment of 20 percent required by private lenders. Buyers receive loans from government-approved lenders and are required to document their income and assets. They must pay a substantial insurance premium of 1.75 percent of the loan. But in return, their down payment can be as low as 3.5 percent”

So basically the FHA wasnt insuring very many loans then (proportionate to the loans being taken out.)  So if a purchaser just bought a new condo in Union Square New York, and he/she stopped paying, the bank was screwed, and maybe the underwriter of the loan, but not the government.

Fast forward to 2009.  This Manhattan Real Estate Attorney is seeing tons of deals being financed using FHA Loans, for individuals who have very little if anything to put down.  Sound familiar?  Well for the privilege of receiving an FHA loan, which now insures the Private lender that Uncle Sam will step in if the purchaser of that condo in the Financial District defaults, all the purchaser has to do is put own 3.5% of the purchase price.  And guess what?  The credit requirements aren’t too stringent to get a loan.  Lastly, a seller can actually give a concession to help the purchaser pay for the closing costs for his/her shiny new construction closing in Park Slope. Does any of this sound familiar?

Lets go a bit further.  That same New York Times article states:

“At Guarantee Mortgage Corporation, which has 150 mortgage brokers in the Bay Area, Seattle and Portland, Ore., F.H.A. loans have grown to about 15 percent of its business, from less than 3 percent a few years ago.

“”It sure has helped us put a lot of deals together,” said Guarantee’s chief sales officer, Bob Siefert. He predicts that a quarter of Guarantee’s deals will soon be guaranteed by the F.H.A.

Some F.H.A. borrowers here say they have the cash for a full down payment but would rather invest it in the stock market or use it for remodeling.”

And even more troubling, courtesy of the LA Times:

“This year alone the agency has backed nearly 2 million mortgages worth at least $328 billion. It insured 21.5% of all new mortgages last year, up from fewer than 6% in 2007.”

Look here is the issue for me.  If you’re looking to buy a condo in the East Village, and you have money for a downpayment, thats great.  Good luck to you and I’d love to be your East Village Real Estate Attorney.  And for the many people who are using FHA to buy homes they can afford all over Greenpoint Brooklyn, Williamsburg, or wherever, good luck to you too.  But this Manhattan Real Estate lawyer fears that FHA is being overused.  Really, the only distinction between this subprime mess and FHA is about 3.5%.  In other words, where before you could buy a condo in Harlem and finance all of it, now, after everything that weve gone through in the Real Estate market, you could buy a condo, but only finance 97.5%!  Its insanity to me.  Its almost like this is an artifical prop to the real estate market all over New York, let alone the country.  Except the difference is, when people start defaulting on their purchase of a Condo in Brighton Beach, the lender wont be on the hook, we will.

And some more news:  Representatives in Congress are looking at way of INCREASING the amount an individual can borrow to qualify for an FHA loan.  The limits on an FHA backed loan is now about $730,000.00.  Which means the government is insuring every penny of that loan if the purchaser defaults.  This is downright scary in my opinion.

So Mr. Sheepshead Bay Real Estate Lawyer, what is the best advice you can when purchasing a co-op in Sheepshead Bay?  Well, what I can tell you is that when you buy a co-op in Sheepshead Bay, or anywhere for that matter, the first thing you should do is do some internet research on the address.  You can try looking on Trulia.com.  But my search would be more general.  There are tons of forums online discussing issues with co-ops.  From aggrieved co-op owners complaining about poor management to lawsuits against corporations, you can find everything.  But thats just the start.  You should also ask your real estate broker about whether they have had past clients in the building and if they could put you in touch with any so you can ask them about their experiences.  Is this out of the box?  Absolutely.  But it works better than many other things out there.  Do your research before you purchase a co-op in Sheepshead Bay.

Great tip, Sheepshead Bay Lawyer Daniel Gershburg, but lets say I am purchasing a co-op in Sheepshead Bay.  Ive done my research, spoken to people in the building, and now I have my interview.  What can I expect?

Anything.  That’s right, anything.  A co-op is a corporation.  The board of directors are therefore making a business judgment as to whether or not you “fit in” financially and otherwise with the building.  Now unless you have a habit of fighting pit bulls in your apartment, you’ll likely be fine so long as your financials are ok.  Having said that, IF you are rejected for one reason or another, the co-op technically does not have to disclose the reason you were rejected, other than saying, “Sorry you can’t live in this co-op in Sheepshead Bay, try Brighton Beach.”  Yes yes you can try and sue and all those good things, but it will cost you money and will usually not leave you in any better position.  The best way to avoid this embarrassment is to literally be as prepared as possible.  Each co-op has a “package” which has to be prepared including your financials,references, etc.  Make sure you go over this diligently before the meeting and everything is complete.  Make sure you look prepared for the meeting.

When you buy a co-op in Sheepshead Bay, when will the closing take place?

This is one of those “Why is the sky blue?” questions.  There are so many variables involved here.  Typically a closing for a co-op in Sheepshead Bay will take place immediately after the co-op approves the individual and the bank clears financing.  There are, however, many hurdles and obstacles that your attorney will have to navigate for you.  Sometimes the bank is late, or they haven’t apprised you of issues they have, which delays financing.  Sometimes the board won’t meet for several months, thereby delaying the closing and causing you to make sure your rate for your loan is locked with the bank.  Sometimes the management companies attorney will request a delay in closing to make it occur at a convenient time for them.  There are literally multiple variations that could delay your closing, so make sure you choose an experienced Real Estate Lawyer in Brooklyn to help you through this.  It’s not a sales pitch, its reality.  Just ask anyone who has gone through the process.

Heres the deal:  Many people are buying in Park Slope, specifically new construction condominums, and many of them have absolutely no idea what they are getting into.  Many of these new construction sites have used materials that you wouldn’t use to build a dog house (even for people who don’t love dogs, of which Ive found none).  The materials are ridiculous.  They’re absurd.  They’re cheap.  But the fact is they were used and the owners now have the privilege of living in new buildings where the elevators dont work, they hear their neighbors coughing (or…you know…) and/or the actual owners are suing the developers.

Why am I creating such a doomsday picture?  Because I am a jewish guy from Brooklyn and its in our blood to kvetch.  Not really.  I am saying this because I know of many individuals who have had the same problem.  Dont be fooled.  New construction doesn’t mean better.  New construction doesnt mean less headache.  New construction doesn’t mean more value over the long term.  Please, please, please make sure to have your potential new home inspected by an inspector with a great reputation.  In this economy, no one in Brooklyn wants to shell out a few hundred bucks if they are not going to buy a place.  But think about it.  You’re trading in a few hundred dollars for perhaps a life time of headaches and expenses.

Don’t get me wrong.  There are some places which were built well during the Real Estate boom in Brooklyn.  In my opinion, not legal, just personal, they are just few and far between.  If you see that your new construction has multiple mechanics liens filed, and there are lawsuits pending, then there is a good shot the developed weren’t shopping at the expensive aisle at the Home Depot.

Always remember:  Caveat Emptor.  That cost me about $150,000 and 3 years of education to learn.  Its fancy schmancy Brooklyn lawyer talk for  Buyer Beware.

1.  Pleasantness on the phone during the initial call.  Lawyers may think I’m crazy for saying this, and thats fine, but I think one of the most overlooked keys in picking out a good Real Estate Attorney in Manhattan, Brooklyn, etc., is the way he/she talks and LISTENS to you during the initial phone call.  Are you being rushed?  Is the attorney not listening to what you’re saying?  Is he/she simply trying to force you to come in for an appointment?  If thats the case, this should raise a red flag.  As lawyers, after a few real estate deals, most of them seem to look and sound a like.  The problem is that there are critical differences in each and every deal and you don’t want to use someone who may think of you as Real Estate closing #45 for the year as opposed to Don and Alice, or Don and Adam (its 2009) buying their first home.  Again, the tone of the phone call may not mean the attorney will never listen to your issues, but it may be a red flag to look out for.

2. Fees.  Im going to get killed for saying this, and rightly so, but I haven’t come across any deal, which in my mind, validates a lawyers fee over $1500 at most.  Unless the lawyer is setting up a Sponsor for new construction, the work is the same for a $400,000 and a $1.4,000,00.00 deal.  The amount of work that can go into a closing may differ, but it won’t differ greatly.  Watch out for this.

3. Responsiveness.  This is the most crucial aspect of picking and sticking with an attorney.  If you email, call, write him/her, do they get back to you in a reasonable (24 hour) period of time.  If not, in my opinion, that is a serious serious problem.  In my Brooklyn office, there are approximately 30 attorneys within a span of 3 city blocks.  The only legitimate way to differentiate yourself is through responsiveness.  We as attorneys MUST get back to you clients quite quickly, otherwise we run the risk of you leaving and going somewhere else.  Thats why its critical that your attorney get back to you quickly.  I have clients who barely ask a question through the entire closing process and I have others who think they’re getting paid by the question.  Either way if you’re attorney doesn’t respond its a problem.  Especially if you brought it up to them (usually a message from his/her receptionist saying “why doesn’t the attorney call me back) and they still don’t respond.

4.   Is he/she showing up to the closing, or is someone else?  Again, something you should ask.  You paid for Rick the Attorney and not Sam the assistant.  If you really want the attorney to show, make sure you ask ahead of time.  If they can’t necessarily commit, you may want to think again.

I will have some more tips up soon, and again, this is personal opinion.  If you’re happy because your aunt Ruth told you that the attorney is amazing, thats fine.  These are just some things I think clients should consider.