The Lawyers perspective on the real estate deal

Jerry M. Feeney, Esq. Reporting

Eye on Real Estate's special guest, Jerry M. Feeney, Esq. has real experience in "the trenches."
His overview should be required reading before your next real estate deal.

1. The Basics

a. Lawyers
i. Do buyers and sellers need a lawyer when buying real estate?

1. Why is it important to use an experienced real estate attorney?

It is imperative in this market to have an experienced attorney, it is a minefield out there, and the fact that 20% of my clients are other lawyers should indicate something.

ii. Tell us what the lawyer does in a typical real estate transaction?

Two major things: (1) due diligence, ensuring the coop or condo is fiscally healthy, and (2) negotiation of the contract. After that, the lawyer guides the transaction to closing, and ensures effective title passes.

iii. What advice can you give buyers and sellers in picking an attorney?
Be sure they are experienced.

b. In New York City, most of the housing stock here is in the form of an apartment. Explain to the listeners the difference between buying a coop and buying a condominium?

i. Difference in costs
Coops have lower closing costs.

ii. Type of ownership
With a coop, you own stock, and typically the coop has to approve the transfer. With a condo, you have a deed, no right of approval necessary.

2. Market Changes

a. Last Week

i. As a lawyer practicing residential real estate in NYC you are on the front lines here, tell us what you are seeing in the trenches over the last week

1. Conforming loan limit

FNMA guidelines have increased the conforming loan limit, Monday it goes up again

2. Refinances going crazy

With lower interest rates, owners are refinancing variable rate loans

3. Increased shopping by buyers (open house activity)

Traffic is way up

b. Since September 2008

i. What about in the last six months, what are the major changes you have seen?

1. Ability to get financing

The ability of a buyer to get financing is more challenging than it used to be

2. Ability to negotiate

You can negotiate, before it was a sellers market, now the pendulum has swung

3. Speed of transaction
Transactions take much longer, due in large part to delays by banks. Also, buyers take longer to make decisions
4. Short sales

With a declining market, some sellers do not have enough equity to payoff mortgages at closing, and therefore require bank permission to remit less than the principal balance.

ii. New home buyer credit

1. Tell us about the new home buyer credit, how does it work?

iii. What advice do you give a seller in this market?

1. Be realistic
2. Decide if you will be a seller in this market
3. Don’t take the offers personally, leave emotions at the door
4. Cash deals should be given priority
5. Don’t strip the property (e.g. remove fixtures, installed electronics, window treatments)

iv. Should sellers in this market give a financing contingency?

Yes, they should consider it, we don’t have the luxury of multiple buyers

v. Should buyer’s expect one?

Yes, there is no question that the trend is toward financing contingencies

vi. What advice do you give a buyer in this market?

1. Enter the market
2. Talk about timeline to get into a deal vs. timing the “bottom”
3. Look at the “big” picture

vii. How is negotiating different in today’s market vs. six months ago?

1. You can do it
2. Buyer’s get taken seriously
a. Financing contingencies vs. funding contingencies
b. Buyers can get more flexibility on closing date
3. More creativity in deals
a. Rent with option to buy
b. Extended closing with pre-closing occupancy
c. Seller’s concessions

viii. What about foreclosures, we hear a lot about that on the news, what is happening in the metropolitan area concerning foreclosures?

The metropolitan market is not seeing what we have across the country, for many reasons, not the least of which is self-policing financing policies by coops.

3. New construction

a. There has been a lot reported concerning issues with new construction, let’s talk about some of the questions people have.

i. What happens to a buyer in contract if the sponsor loses financing and cannot finish the building?

Typically another sponsor takes over and finishes, or the sponsor abandons the plans and returns downpyaments.

ii. Sponsor in arrears then goes bust

Unpaid common charges become liens against unsold units.

4. Due Diligence

a. Tell us what buyers in this market need to look for when buying in a coop or condo?

We try to get a sense of how the building is run, and what the financial position of the building is.

b. How do you know what you are buying into in an established building?

i. Financials

ii. Board minutes

iii. Questionairres

iv. Offering plan

v. Experienced counsel may know other clients in the building

c. How do you know whether maintenance will be going up after you buy?

No magic formula, but looking at board minutes and financials can give some insight.

d. What about pet policies in buildings, how does that work?
Buildings have a right to set policies, or require owners not keep pets. It is building specific.

5. Brokers In This Market

a. Talk about selling a property on your own vs. using a qualified broker?

b. What about commissions, what trends are you seeing?

i. Some buyers are offering increased commissions to co-brokers bringing qualified buyers to the table