Last month, 88 Morningside, a premier new development located on Morningside Avenue at 122nd Street, hosted a first-time home buyer’s seminar to help New Yorkers understand the mechanics of purchasing a home for the first time.

According to the Developers, “With interest rates at an all-time low, new digital resources and incredible pricing on available products, the real estate market has never been more appealing to first-time buyers.  However, with constantly changing mortgage regulations and overall market concerns, some consumers can feel overwhelmed when making the leap to purchase.”

Morningsider co-hosted the seminar and heard several experts discuss the most important things we need to know when purchasing for the first time.  The one-hour seminar was informative and enjoyable; it was bookended by a lovely reception featuring catering and specialty cocktails from local Harlem gem, 67 Orange.

A summary of top take-away points are below:

THE CURRENT STATE OF THE NEW YORK REAL ESTATE MARKET

-Stephen G. Kliegerman, Executive Director of Halstead Property Development Marketing, LLC, advised: When purchasing in a new development, it is important to evaluate not only the purchase price but also the total monthly expense the home will cost you after your down payment.  Items like Real Estate Tax Abatements can greatly reduce your monthly outlay and thus even if two homes are priced similarly one may actually cost much less per month.  It is also important to evaluate the amenities a property offers to make sure that those amenities suit your lifestyle and needs as you don’t’ want to be paying every month for a pool if you do not believe you will use it unless you feel it adds re-sale value down the road.  Additionally, when purchasing in a new development it is important that the developer and builder have good reputations so you can be assured that the quality of construction is high and warranties you receive will be honored and followed up upon should a problem arise.

THE BASICS YOU’LL NEED TODAY TO APPLY FOR A MORTGAGE

-Dave Forbes, a qualified loan officer at a major bank, said: Gone are the days of the non-document mortgage.  Today, you need quite a bit of paperwork to just apply for a mortgage.  Here are the basics you’ll need:

  • Last 30 consecutive days of paystubs
  • W-2’s for the last two years
  • Tax returns for the last two years
  • Two months of bank statements, all of the pages included, showing where you are getting the funds for the down payment and closing costs
  • The fully executed contract (all pages)
  • 12 months of cancelled rent checks showing you are paying your rent on time
  • A copy of your current lease agreement
  • Check or credit card payment of application fee
  • If you have credit concerns, you will need to explain all issues in writing
  • If you are receiving gifts to fund purchase, important to have those in hand two months prior.  For any large deposits to your account in the last two months, you will have to document the sources of the funds.

THE MOST COMMON MISTAKES FIRST TIME BUYERS MAKE

-Teri Karush Rogers, CEO and Editorial Director of BrickUnderground.com, said: One of the most common mistakes first time buyers make is to fall in love with the apartment without considering whether they’re also compatible with the building and the neighborhood.    If you’re buying, you need to make sure the neighborhood not only has all the basic services you need now (drycleaners, good grocery store, a variety of dining and entertainment, public outdoor space etc.) but also that it will grow with you during the time you expect to be living in the apartment (preschools may become very important). You should also look into whether there is anything you don’t want to live too close to?  Is a high rise about to be erected across the street?  Does the unobtrusive doorway down the block sprout red velvet ropes at midnight and turn the street into a raucous and potentially unsafe block party?

-Next think about your prospective building.  Your personalities should be compatible: Is the staff surly or friendly? Casual or white glove?  Is the board laid back or strict? Who are your new neighbors– will you be the only young family in a sea of empty nesters?  Consider the building’s financial profile. If it’s new, what is the financial health of the sponsor, and does the sponsor have a history of leaving other projects riddled with construction defects? How much will the amenities cost to operate long after the sponsor is gone?   In an existing building, does the board maintain an adequate reserve fund?

-Does it have a five year plan for capital improvements, or is it running around catching water in a bucket? What’s the assessment and maintenance increase history?

EVERYTHING YOU NEED TO KNOW ABOUT A CONDOS, COOPS AND LAND-LEASE

-Steven Matz, Partner of Katz & Matz, PC, discussed important legal considerations for buying in a building. In a nutshell, in a Co-op you own shares in a building and in a condo you own the particular unit.  Cond-ops are hybrids in which you have the upside of a condo of free right to sell and sublet as well as the upside of the coops of low closing costs (no mortgage recording tax or title insurance).

-Along with types of ownership such as a Co-op, Condo or Cond-op, another distinction to be made in NYC real estate is that of the LAND ownership.  We know that the building itself may be run as a Co-op, Condo or Cond-op, but it’s prudent to know who actually owns the land upon which the building sits.  The most common form of ownership is called fee simple, and this means that the Co-op or Condo owns the land itself (which may or may not be subject to a mortgage).  There are some Co-ops and Condos that do not own the actual land, but lease the land from another party; this is known as a land lease.

-Essentially, the building sponsor leases the land, sometimes from the City of New York, or sometimes from an adjacent business or religious institution, under the master Ground Lease.  This ground lease sets the terms of the lease; the length of the lease, the renewal terms and the rent payable under the lease.

-While some ground leases may have expiration dates sooner than others, it’s important to know what the Co-op or Condo may be doing to have the lease extended.  Most of these ground leases expire in the very distant future; of late, some ground leases have 99 year terms, automatically renewable for another 99 years.  Also, when a ground lease has the rent payments and any escalation clauses for future years clearly spelled out, a purchaser can know up front what some expected costs will be down the road.  One should not just summarily dismiss a property they are interested in merely because of the existence of a ground lease.

-Benefits of the lease structure of 88 Morningside include long tenor of 99 years, with an automatic right of renewal as well as low annual escalations of 1.75%, which is conservative. Some coops have maintenance escalations of as much as 6% per year.