Financing and Appraisal Contingency and Why They are so Important

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If you ever find yourself buying or selling a home anywhere in or around NYC, Westchester, Rockland, Orange, and Putnam or Dutchess Counties, be sure you have a knowledgable real estate attorney who knows how to best protect your interest.

While my wife and I recently lost on a bid we had for a home in Rockland County, I learned something very important. You see, any attorney my wife and i would choose to work with understands the need for a strict financing contingency and appraisal contingency. Why is this important you ask? Well, for anyone putting down more than 20%, a lender / bank might approve your mortgage even if the home or property does not appraise at or above the contract price. Typically lenders will lend up to 80% loan to value. So, if you put down more than 20%, a lender/ bank may still approve your loan even if it appraised at less than the contract price – as long as the lender / bank is not lending you more than 80% of the home’s appraised value.

Since my wife and I felt the home we liked was way over-priced and would not appraise anywhere near the asking price, after having our “reasonable” offer rejected we offered to allow the seller to name their price for the contract. We told them that if the house appraised at or above the contract price, we would be bound by the contract price. If however the home appraised for less than the contract price we would pay 5% less than the appraised value. This forces a seller and their broker to think before they price a home for sale. We found out that the other offer they had included a 40% down-payment. I had a conversation with a very knowledgeable Rockland County broker, I was told that they had never seen a local real estate attorney ask fro an appraisal contingency, not even a basic one that say if the home does not appraise we are out of the contract and get a full refund of our deposit. Needless to say, I was shocked. Being in real estate now for 8+ years and having owned and invested in real estate I thought every real estate attorney would protect their buyer clients with a strict financing contingency and appraisal contingency.

If you find yourself needing a knowledgeable real estate attorney, do not hesitate to contact me.

Visit Manhattan Apartments, for your Manhattan and Riverdale real estate needs.

The website owned and operated by Lee Presser, a New York State licensed real estate salesperson associated with The Corcoran Group and member of The Real Estate Board of New York. The opinions expressed here are those of the authors and do not necessarily reflect the opinions or policies of The Corcoran Group. This website is not the official website of The Corcoran Group or its affiliated companies, and neither The Corcoran Group nor its affiliated companies in any way warrant the accuracy of any information contained herein. Any product and/ or services offered for sale on this website shall not be considered an offer to sell such goods and/ or services in any state other than New York. Information on this site is not intended as legal or financial advice. I operate a business practice that supports fair housing.
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Rockland County Above the Curve?

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So here in Manhattan and Riverdale buyers and sellers of residential real estate, namely coops, condos, townhouses and some 1-4 family homes have come to realize that the market is down from the highs of 2007, and many minds are meeting and agreeing on price. In some cases, this is being helped by the potential $8,000 home-buyer’s tax credit, which is in play for all properties sold for less than $800,000 that are in contract by the end of April and closed by the end of June, 2010.

So why is it that Rockland County, NY feels they are different than every other local in the country? Pam and I have been looking for our house in the burbs, and the Rockland brokers, who admit that sales volume is way down, insist on taking over-priced listings and then appear to encourage their sellers to hold firm. One Rockland broker told me median home prices for the county are down just 2.4% from the 2008 highs. I find it difficult to believe that home prices in Rockland continued to climb in 2008, given that just about everywhere else in the tri-state area prices peaked in 2007. I think brokers in Rockland County feel good just having listings . I guess someone needs to remind them they are hired to sell those listings, and doing so means you must give your clients, the sellers, honest advice, and sometimes the truth hurts a bit. One real issue I see is that many Rockland brokers are in denial about their home prices because if prices in the county are down it means that their own home is worth less. Perhaps they feel if nothing sells for less than what they believe homes should sell for then the market has not declined? Why would anyone want to work with a broker who is not honest with them?

I provide my clients with detailed financial analysis of a home’s and/or apartment’s value, and can peg a selling price usually to within in 1-3% of my financial analysis. some intangibles may skew some a tad bit higher or lower.

While no one can predict what will happen after March 30 (supposedly when banks will begin to raise mortgage rates because they may have to begin to portfolio loans), buyers and sellers alike in Manhattan real estate are finding that now is the time to  buy or sell a home. Remember that prices need to fall nearly 10% to offset a 1% increase in mortgage rates. Borrowing $100,000 at 5.25% (30 yr fixed) will cost the borrower $552.20, while borrowing $90,000 at 6.25% will cost the same borrower $554.15. Since many experts predict that mortgage rates will climb to over 7% this year, unless you believe home prices will fall 20% if you plan to have a mortgage, now is the time to buy.

If you know anyone who is looking to buy or sell in Manhattan or Riverdale, have them contact me.

Do not hesitate to contact me if you have any questions.

Best,
Lee