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.

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.

I make approximately $50,000 a year and have two mortgages totaling $600,000 and the house is worth approximately $400,000.  Should I consider a loan modification?  

Dear Daniel:

I make approximately $50,000 a year and have a mortgage of $310,000 and the home is worth $340,000.  It is also an interest only mortgage which is set to reset in one year.  Should I consider a loan modification?

These questions are just two examples of the type of questions on loan modifications I hear on a daily basis.  My answer to the first question is a resounding NO and the answer to the second one is a maybe (you cannot have a “resounding” maybe).  Here’s why:

The first person has to figure out that they are not keeping that house.  Its $200,000 underwater and no loan modification is going to help them.  Again, I should say that there are tons of variables here (savings, cc debt, family size, jobs, etc.) but overall what I believe would make the most sense is to walk away from the house altogether.  What I am finding is that many people have such an emotional attachment to these “things” that they refuse to move under any circumstances.  And these arent people that were in that house for 20 some years.  They are people that purchased in the last few years and now, almost subconsciously, refuse to admit a mistake was made.  Even if these people did modify, a $600,000 mortgage, with property taxes and upkeep, would swallow most of that person’s take him income.  Given that the house is $200,000 underwater as it is, it simply DOES NOT make sense to modify.  If you walk away from the home, you can be sure that the difference owed after it sells can be wiped out by filing a Bankruptcy.

The second scenario is a bit trickier because the mortgage amount is lower and the house isn’t as deep underwater.  The homeowner can potentially convince the lender to lower the principle amount and also modify the terms of the loan.  And even if the principal remains the same, it is much easier for a home to appreciate by 10% in a few years, then 33%.  Again, a ton of variables have to come into play here when making the decision, but the one variable that shouldn’t come into play is emotion.  This house is a “thing”.  It’s not a person.  It’s a home that you expected to go up in value, but which is now depreciating and is taking you with it.  Financially speaking, it doesnt make sense to keep throwing money that you don’t have at a depreciating asset.  

If you purchased a new car for an interest only loan at $30,000 and the car was consistently dropping in value and you knew you couldn’t afford the car anymore, would you continue to struggle and go deeper into debt to pay for the car for years, or would you realize you overpaid for the car and give it up?  Most people would realize that they made an error in valuation and move on.  For some reason homes dont have the same effect on people.  Like I said previously, take emotion out of the equation and do whats financially sensible for you and your family.