Seller Concession: What is it and How does it Work?

by George Herrera, Realtor & Co-Owner of the Queens Home Team at Keller Williams Realty. Supporting content provided by Robert Kaplan, P.C.

What is a Seller Concession?

Put simply, a seller concession is when the buyer and seller of a property agree on a purchase price and then also agree to an additional amount (the concession) to help the buyer with their closing costs. For example, let’s say a buyer and seller agree to the purchase price of $500K but the buyer also requested a 6% ($30K) Seller’s Concession in order to assist them with closing costs. If the Seller agrees to offer them a concession, the actual contracted price would be $530K, however, the additional $30K would not go to the seller, it would actually go towards the buyer’s closing costs. Now, in Western, Central, and Northern Queens, Seller’s Concessions are not very common. However, in South Central Queens and in Southeast Queens it is not uncommon to see offers come in with seller concessions included as part of the terms.

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Queens Real Estate Market: NOV 2016

queens_real_estate_market_nov_2016

by George Herrera, Realtor & Co-Owner of the Queens Home Team at Keller Williams Realty.

November 2016 Market Update

The Queens housing market continued on the same path in October with sales declining and prices on a steady rise. Sales have been down (year-over-year) in 7 of the last 10 months signifying that there is probably a lot of buyers who are being priced out as a result of the constrained inventory. Low inventory continues to play a key factor in Queens market conditions because while rates are still low and demand is still high, there just aren’t enough homes on the market for buyers to absorb them. As a result, there is fierce competition for well priced homes, coops, and condos and that is driving prices up significantly. The rate of price growth in Queens is a concern for some because while wages are also increasing, they are nowhere near the percentage increases we are seeing in home prices and that will ultimately affect affordability for first time buyers.

queens_real_estate_market_snapshot

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This Month in Queens Real Estate: OCT 2016

queens_real_estate_market_oct_2016October 2016 Queens Real Estate Market Update

A cooling trend in the Queens housing market continued in September with diminished inventory levels being the primary driving force behind the decline. Despite near rock-bottom mortgage rates and healthy job growth, Queens home sales eased after reaching record-setting levels in August. Affordability concerns have delayed some first-time buyers, which could contribute to pent-up demand in the future. All together, it looks like the tight inventory levels continues to put upward pressure on home prices, which is affecting affordability for home buyers, even with the low rates. Recently we read an article by Lawrence Yun, Chief economist with the National Association of Realtors who stated that while our last housing crisis was a result of too little demand, the next housing crisis will be a result of too little supply.

Absorption Rate: 691 sales/per mo.

Current Available Inventory: 3,670 (Last month: 3,814)

Month’s Supply: 5.3 Months

Last Month: 5.7 Months

Last year: 6.5 Months

*Month’s supply over 6 months is said to favor buyers, month’s supply below 6 months is said to favor sellers, and month’s supply of 5-6 months is said to be a balanced market. Keep in mind that month’s supply can vary by neighborhood and property type. 

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Queens Real Estate Market Update: SEP 2016

queens_real_estate_market_sep_2016

The housing market spiked in August as demand remains at high levels in many neighborhoods, particularly in the 1-3 Family and Condo categories. Affordability does appear to be impacting prospective buyers though, despite near record-low mortgage rates. After five consecutive months of year over year sales decreases, queens home sales increased over the year prior for the first time since February.

Absorption Rate: 671 sales/per mo.

Current Available Inventory: 3,814 (Last month: 3,763)

Month’s Supply: 5.7 Months

Last Month: 5.8 Months

Last year: 6.8 Months

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What Nobody Tells you About Selling a Coop in Queens NYC

by George Herrera, Realtor and Listing Specialist with the Queens Home Team at Keller Williams Realty.

We sell a lot of properties here in Queens, and being that we’re in New York City, a lot of them tend to be Coops. Whenever we meet with first time Coop sellers, we always let them know, selling a Coop in Queens NY is a whole different animal. There are so many intricacies and things you have to look out for that if you don’t know what you’re doing, you can very well end up with a management, board, or bank denial which then leaves you right back at square one. Trust us, we’ve learned this the hard way…

With that said, we’ve created a list of all the things you should know when selling a Coop in Queens NY. Most of this is not told to you when you buy, but extremely important if you want to sell and close in a reasonable amount of time.

Minimum Sale Prices

No one will tell you about this because it’s pretty much illegal. Nonetheless, it is very common when selling a Coop in Queens… Here’s what happens, a Coop’s management company or board might not want to see apts sell for less than a certain amount, and the reason can be because they themselves are shareholders and(or) they don’t want to see values go down in the building/development… Either way, it’s a big problem because essentially, these Coops are artificially inflating the prices in their development. The good news is that usually the minimum sale prices are realistic and attainable as long as your Coop is in good condition. The problem arises when you have a less than desirable unit, or if there is a lot of competition in your building/development… For example, we’ve had several situations where the Coop had a minimum sale price, however, ALL of the offers were coming in below that. So, we typically would have to work out some type of agreement whereby the owner agrees to offer a credit to the buyers at closing. This allows the contract to state the minimum sale price, when in reality, the actual sale price is less because the buyer is getting a credit at the closing… Moral of the story, find out if your Coop has a minimum sale price. Sometimes it’s not even a clear answer, but they may be looking for apts to sell in a certain price range… Do your digging because you don’t want to have a board rejection due to a price that was considered too low, trust us, we’ve learned this the hard way…

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Management Company/Board Requirements

Most management Companies and(or) Boards have clear requirements that must be met in order to purchase in their developments. So, it’s important that you know what these requirements are before you decide to sell. Why? Because they may have changed since the time that you purchased, and if you don’t know what these requirements are, you can easily put somebody through that ends up getting rejected. Requirements can vary by Coop so you have to inquire with your own mgmt company and board. For example, some Coops require that debt to income ratio be below 36%, some 34%, some require 30%, and some even have a requirement as low as 26%. Some have set income requirements which can be a set amount or a specific formula like 3 years of monthly maintenance plus 12 months of mortgage pmts if buyer is obtaining financing… Some Coops have reserve requirements… Some have employment history requirements… Some don’t like to see that you own other properties, especially other Coops… Etc, etc, etc… Suffice to say, some Coops are more strict than others but you should always check to make sure you know what they’re looking for before you start selling. The last thing you ever want to do is accept an offer with just a pre-approval and think that’s all you need… Maybe with a house or condo, but not with Coops.

How Coop Values are Determined

house-and-condos-vs-coops-how-do-resale-values-compare

When we meet with Coop owners/sellers to help them appraise their apt, it is sometimes a surprise how we come to our valuation. Usually Coop owners understand that the best comps are the ones in their development. This is 100% true for a few reasons… 1) A bank appraiser will always look for comps in the same building and those will always weigh the heaviest in an appraisal report. They really don’t like to use comps from outside the building so they will go even further back if they have to find something. 2) Buyers have all the same data as agents, sellers, etc. In other words, they (like you) can see all of the recent sales in your building when they’re on Trulia, Zillow, etc. so it’s very hard to justify a large difference in price for another comparable unit in the same building and which are typically very similar in size. Early in our careers, we tried to help Sellers get more money because apts nearby were selling for more than the ones in their building, however, we ended up learning a harsh lesson that Coop sales in the same development are always the clearest indicator of value.

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Renovations Add Value, but not As Much as they do in Houses

queens-coop-renovations_return-on-investment

When it comes to Coops, renovations & upgrades add value, but unfortunately, it is usually very limited. In our experience, renovations will not add more than $20-$30K (in most cases). In other words, when we comp out Coops, the sales usually range from the original condition units at one price, and the renovated units at another, typically $20K – $30K higher. As a rule of thumb, try to keep kitchen renovations under $15K and bathroom renovations under $5K, that will ensure that you at least recoup the money you spent.

To put this into perspective, let’s say you own a 1 BR Coop on the sixth floor of your building, and the highest sale price for a 1 BR in the building (within the last 6 months) is $190K, another 5 units sold from $165K – $185K. As in most cases, that sale probably had a renovated kitchen and renovated bath, that’s why they were able to fetch top dollar. Let’s say that unit was on the third floor (3 floors down), but aside from that, everything was pretty similar. Now, your apt is fully renovated, DIAMOND condition! Quartz counter tops, viking appliances, mirage hardwood floors, marble bath, spa shower, perfectly staged, etc… You spent about $50K to renovate that apt, and it looks amazing! The problem is, that the highest you can probably justify for that apt (in my opinion) is around $200K-$210K. The reason why you are limited to a “max sale price” is because you have to sell it to the bank too. In other words, the deal still has to appraise, otherwise you run into problems. With that said, put yourself in a bank appraiser’s shoes and imagine how hard it would be to justify $50K in added value from an apt that is in the same building and similar in size. The answer, it is very hard. Maybe you can get $10K-$15K for the kitchen and $5K-$10K for the bath, but anything over that may be a reach because appraisers typically classify the condition of properties as “poor”, “fair”, “good”, and “excellent”. There’s no section in an appraisal report for all of your personal preferences, high end materials, etc. Moral of the story, don’t go crazy with your renovations unless your okay with the possibility of not getting the dollar for dollar return. Trust us, we’ve met with owners who put up to $100K into a small apartment only to realize that there is no way they’re getting that back from a sale.

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Certain things can Affect Financing in your Building/Development

Something important to know is the fact that Coop bank deals, like many Residential bank deals, follow certain Fannie Mae and Freddie Mac guidelines. I won’t pretend to be an expert in Coop financing, but I can tell you what issues we run into more frequently so that you can hopefully preempt and avoid them… One of the issues that can affect financing in your development is if more than 50% of the units are rent occupied… Another issue is if over 10% of the units are sponsor owned… And another common issue is if the Coops financials don’t look good. For example, if the financial stmts, reserves, budget, etc. don’t look healthy, banks may not be willing to lend there. These items are important to know because if your Coop is facing any of these issues, you may need to find a cash buyer which means your pricing will need to be more aggressive otherwise you may sit on the market for a while. And contrary to popular belief, cash buyers are not running out in drones to buy Coops. I would say 95% of the coops we sell are to buyers obtaining loans.

Some Things are out of your Control

We sell so many Coops that we unfortunately get to see a whole bunch of different situations which cannot be explained nor justified. For example, we sold an apt in one development where “supposedly” they didn’t want to sell to any single males because they had a problem with people in the past throwing parties and making too much noise. Then there was another one where we heard that the board wanted to change the demographic of the building so they were only selling to a certain demographic and denying all other applicants. We also had one where the board kept denying our buyers because the managing agent owned the apt upstairs from our unit and she wanted to buy it in order to convert it into a duplex. Another Coop supposedly wouldn’t sell to retirees. Moral of the story, when you sell a Coop you are unfortunately at the mercy of the board, and if there are any inner workings going on that you don’t know about, your buyer may get denied. In all honesty though, most Coops run a smooth and non-bias operation. However, there are some developments out there that are doing some shady, discriminatory, and sometimes even criminal activities. Obviously you can’t control that, but when you decide to sell, it’s not a bad idea to talk to some board members and get as much advice as possible before you hit the market. One thing that is always helpful is having a good relationship with a board member and the management company. We’ve seen these type of relationships help Coop owners in many ways during the selling process.

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The Importance of your Original Stock Certificate

queens-coop-stock-certificate-sample

This is your proof of ownership and it is very important for you to have the original when you go to sell a Coop. If you have a current mortgage on the apt, than your lender will most likely have the original, however, we have seen cases where the loan was sold or transferred to another bank and then the stock certificate was lost in translation. That deal ended up falling apart because it took too long to track down the original stock certificate. Therefore, it’s a good idea to locate the stock certificate early because if you wait until you find a buyer, you may run into an issue that delays contracts which means risk of losing your buyer altogether…

Your Offering Plan and what Happens if you Don’t Have It

queens-coop-offering-planThe offering plan for your building is the prospectus of the building when it was originally converted into Coops. In short, it’s that big book you received when you bought the apt. If you remember the book but didn’t keep it or don’t know where it is, you will need to purchase one because that, along with the last two years financials, are what most buyer attorneys will ask before going into contract with you. The only exception is if your development was originally built as a Coop in which case there would not have been an offering plan… Also good information to know 🙂

Well, we hope you find this information helpful. If you have any questions or would like some advice before selling your Coop, feel free to reach out anytime…

Blog & site courtesy of George and Abigail Herrera with the Queens Home Team at Keller Williams Realty Landmark II.

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This Month in Queens Real Estate: August 2016

by George Herrera, Realtor & Listing Specialist with the Queens Home Team at Keller Williams Realty.

August 2016 Market Update

Queens_Real_Estate_Market_AUG_2016

Home sales in July dropped again for the fifth consecutive month. Despite the drop in transactions, home price increases have 2016 on track to be the best year for home prices since the recession. Near rock-bottom mortgage rates continue to lure more and more buyers into the market despite steadily rising prices and low inventory levels, however, the consistent decrease in year over year sales could be a sign. We may be seeing more people escape Queens as a result of the high prices, or we may be seeing a sign of consumer uncertainty as a result of the political elections. Either way, it will be interesting to see what happens through the third and fourth quarters of this year.

Absorption Rate: 647 sales/per mo.

Current Available Inventory: 3,763 (Last month: 3,812)

Month’s Supply: 5.8 Months

Last Month: 5.7 Months

Last year: 6.9 Months

*Month’s supply over 6 months is said to favor buyers, month’s supply below 6 months is said to favor sellers, and month’s supply of 5-6 months is said to be a balanced market. Keep in mind that month’s supply can vary by neighborhood and property type.

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Interest Rates

Interest_Rates

Interest rates decreased slightly from the month prior and remain near all-time lows. Mortgage rates have declined recently due to the drop in U.S. Treasury rates created by the uncertainty surrounding the U.K.’s vote to leave the European Union.

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Queens Home Sales

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The Long island Board of REALTORS® reported Queens home sales at a seasonally adjusted annual rate of 607 homes during the month of July. This was a decrease of 12.8 percent from June, and a decrease of 18.3 percent from July of last year.

Specifically, Residential 1-3 family Queens home sales were down 16.8%, Queens Condo sales were down 15%, and Queens Coop sales were down 19.2% compared to this time last year. Over the last 12 months, Queens home sales are down .2%.

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Queens Home Prices

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The median home price reached a record $478,000 in July, which was up 2.7 percent from June and up 13.3 percent from July of last year.

Specifically, Residential 1-3 family Queens home prices were up 11.9%, Queens Condo prices were up 4.3%, and Queens Coop prices were up 16.7% compared to this time last year. Over the last 12 months, Queens home prices are up 7.3%.

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Queens Housing Inventory

There was a 5.8-month supply of housing inventory in July, which increased slightly from June. The total number of homes for sale decreased by 16 percent compared to August of last year. Strong demand spurred by dropping interest rates will likely keep inventory levels suppressed, particularly in the Queens starter home market.

Specifically, there are currently 2,395 residential 1-3 family homes for sale, 385 Condos for sale, and 982 Coops for sale in Queens county.

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Blog Courtesy of George & Abigail Herrera w/the Queens Home Team at Keller Williams Realty Landmark II. 

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4 Programs that Queens Home Buyers Should be Aware of

Illustration depicting a sign with a first time buyers concept.

Illustration depicting a sign with a first time buyers concept.

by George Herrera, Realtor & Co-Owner of the Queens Home Team at Keller Williams Realty.

We come across aspiring home buyers all the time in this business. Whether it’s young couples browsing around at open houses, people who call us with questions about the process, or even some of our own personal friends who have their own hopes of owning a home, coop, or condo. What we’ve learned from our experience of selling homes here in Queens is that where there’s a will, there’s a way. The reason we know this is true is because we’ve sold homes to buyers with very moderate income but they are determined to buy, and they explore & utilize every resource available to them in order to accomplish their goal. This includes saving money, credit repair, as well as the several first time home buyer programs available in NYC, and in the USA.

Remember, where there’s a will there’s a way. The first step to home ownership is deciding that you ARE going buy a home. Once you’ve made that decision, take the steps necessary to reach your goal. It may take a few years, but if you have a steady job, with decent credit and a little savings, there’s no reason why you can’t make the dream a reality. What I’ve noticed more than anything is that some people are just determined to buy something, and eventually, they do end up buying because there are just so many options out there.

With that said, below is a list of some first time home buyer programs that we’ve seen people use to purchase homes here in Queens. Take a look and then put yourself on the path to home ownership. If you need any help or advice, feel free to Contact Us and we can connect you with one of our Queens first time home buyer specialists…

1. HomeFirst Down Payment Assistance Program

NYC HPD LogoHPD’s HomeFirst Down Payment Assistance Program provides qualified home buyers with up to $15,000 toward the down payment or closing costs on a 1-4 family home, a condo, or coop in one of the five boroughs of New York City.

Who Qualifies?

In order to qualify for this down payment assistance program you must:

  • Be a first time home buyer
  • Complete a home buyer education course
  • Have your own savings to contribute to the down payment or closing costs
  • Meet the program income eligibility (see below)
  • Buy a 1-4 Family Home, Coop, or Condo in NYC
  • Pass a Housing Quality Standards (HQS) inspection before purchase
  • Live in the home for at least 10 years

Income Eligibility

  • Family Size: 1
    • Max Household Income: $50,750
  • Family Size: 2
    • Max Household Income: $58,000
  • Family Size: 3
    • Max Household Income: $65,250
  • Family Size: 4
    • Max Household Income: $72,500
  • Family Size: 5
    • Max Household Income: $78,300
  • Family Size: 6
    • Max Household Income: $84,100
  • Family Size: 7
    • Max Household Income: $89,900
  • Family Size: 8
    • Max Household Income: $95,700

More details about the process can be found online at: https://www1.nyc.gov/site/hpd/owners/homeowner-downpayment-assistance.page

Click Here for a List of Exclusive Homes for Sale in Queens NY

2. NYSAR Housing Opportunities Foundation Grant 

NYSAR Housing Opportunities Foundation GrantThe New York State Association of Realtors Housing Opportunities Foundation, Inc. is an organization that was established to create and increase affordable housing opportunities for individuals to overcome the barriers of homeownership. Qualifying individuals apply for grants to assist with closing costs and/or down payments. The grants are gifts with no payback requirement and are available to low–to-moderate income families in New York State.

The Housing Opportunities Foundation has entered into arrangement with the Community Foundation for the Greater Capital Region who will receive and review applicants and award grants throughout New York State.

Who Qualifies? 

In order to apply for this grant you must:

  • Be a first time home buyer
  • Income must be no more than 110% of the SONYMA’s Low Interest Program target income limit for the applicant’s county as posted on the SONYMA website on the day the application is recieved.Details on Income Limits:  http://www.nyshcr.org/Topics/Home/Buyers/IncomeLimits/Programs.htm
  • Home prices must be no more than 110% of the SONYMA Low Interest Rate Program’s TARGET purchase price limit for the applicant’s county as posted on the SONYMA website on the day the application is received. Details on purchase price limits: http://www.nyshcr.org/Topics/Home/Buyers/PurchasePriceLimits/Programs.htm
  • Applicant must be purchasing an owner occupied property
  • Applicant must be working with a Realtor

More details about the program can be found online at: http://www.nysar.com/top-navigation/foundations-and-divisions/nysar-housing-opportunities-foundation/grant-opportunities

Click Here for a List of Exclusive Coops for Sale in Queens NY

3. SONYMA Mortgage Programs

SONYMA LogoParticipating Queens Lenders are: 

CitiBank
Queens
P: (516) 297-0041

Freedom Mortgage
Queens Village, Queens
P: (718) 217-7266

Wells Fargo
Astoria, Queens
P: (718) 310-4321

Elmhurst, Queens
P: (718) 310-4300

Forest Hills, NY
P: (718) 730-6100

Click Here for a List of Exclusive Condos for Sale in Queens NY

4. Neighborhood Assistance Corporation of America (NACA)

NACA-logo-flatThe Neighborhood Assistance Corporation of America (“NACA”) is a non-profit, community advocacy and homeownership organization. NACA’s primary goal is to build strong, healthy neighborhoods in urban and rural areas nationwide through affordable homeownership. NACA has made the dream of homeownership a reality for thousands of working people by counseling them honestly and effectively, enabling even those with poor credit to purchase a home or modify their predatory loan with far better terms than those provided even in the prime market.

The NACA program begins with attending a four hour workshop which covers the details of the program, and the additional 9 steps needed to qualify for the NACA mortgage. You can search for and sign up for a workshop at: https://www.nacalynx.com/naca/workshop/workshopIntro.aspx

For more details and information about the NACA program and home mortgage, visit:

https://www.naca.com/

Well, we hope that this information is helpful, and more importantly, we hope that you can see how realistic the dream of home ownership is if you make a concious decision, and commit yourself to the process…

If you have any questions or need any advice, feel free to Contact Us.

Site and blog courtesy of George & Abigail Herrera with the Queens Home Team at Keller Williams Realty Landmark II. 

George and Abigail Herrera_Queens Home Team at Keller Williams Realty 2_HEADSHOT_ROUNDBUY: www.queenshometeam.com/ | SELL: www.queenshomeselling.com