Daniel Gershburg

Real Estate closings in New York have been creeping up lately at our offices in Sheepshead Bay.  More and more people coming into our offices are first time homebuyers.  Many of them are purchasing real estate in Park Slope.  Ive devoted seperate blogs about Real Estate in Park Slope previously, but I would very much like to re-iterate a few points, specifically about new construction homes.

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.

As we move closer to the New Year and look back on what was 2008, so much has changed.  We began the year knowing of the strength of Bear Sterns, Lehman Brothers and AIG.  Also….people had jobs.  The situation now seems absolutely dire.  All you hear about on the news are new scams, new indictments, more foreclosures, less credit, etc.  Aside from the staggering unemployment figures we are facing, there is one…very very large…diamond in the rough.  It looks like its never been better for someone to purchase some real estate in New York City.   Let me please be clear about this.  It’s a great time to buy some property in New York as long as you have a sizeable downpayment, good credit, a stable emergency fund, and are not looking to get on any TLC shows for “flipping”.  

Why is that?  Well for starters mortgage rates are great and it looks like they will likely fall to historic lows pretty soon. If people thought 6% was good,  imagine having a 4.5% mortgage 10 years from now.  Perhaps even more importantly is that you are starting to see a ton of unsold inventory around New York City (specifically Brooklyn).  Prices in many of these new construction buildings have dropped anywhere from 10-20% already, and its likely they will fall even further (Im beginning to sound like a sales rep).  But without even expressing opinions on the market (because no one is ever right about that), the one thing you should know is that if you are purchasing any property in New York City right now, keep negotiating as hard as you can.  My clients have had transfer taxes and a large amount of closing costs paid by the sellers on several recent deals (not promising the same will happen to you, but it seems to be happening more and more).  Sellers are sitting on new construction developments with huge construction loans and they have to get rid of these units.  They’re really not interested in keeping your 10% deposits if you can’t close on time as they need the entire purchase price.  Having said that, make sure you are aggressive in terms of the price you ask for, as well as the credits you ask for (transfer taxes, etc.).  When you combine all of these with low mortgage rates, a lot of qualified (say it with me…qualified) people who can afford the home they are purchasing will be in a great position very soon.  

Also, please be wary of this FHA loan nonsense that is flying around.  FHA loans are not some savior loan that will make your couch more comfortable or the air smell fresher as they make it seem on TV.  Its a loan.  With a lot of drawbacks and points and escrow amounts that you have to put aside.  Sometimes its good, and sometimes its not so good.  Make sure you look into the pitfalls and benefits before you decide to go FHA.