Pros and Cons of Buying a Harlem Coop Apt via HPD Lottery?

i would first find out what 50% below market means. the market has changed drastically and is still going. getting something 50% of 2008 price will be close to paying market in the next year or so. there would not be a worthwhile investment with requirements and restrictions.

how do you get in the lottery??? thanks

There is information on the lottery here: http://www.nyc.gov/html/hpd/html/apartment/lotteries.shtml

Pay very close attention to EXACTLY what the "profit sharing" is: we did a deal a couple of years ago where what was supposed to happen is 40% of the profit was supposed to go to the City and 30% to the Coop meaning the owner would be left with only 30%.

OTOH, an awful lot of the HDFC Coops in Harlem over the past few years have been ignoring what's been written in their Offering Plans and Agreements with HPD and having owners selling at HUGE numbers and keeping the profits (NB I'm not talking about NEW HDFC Coops, I'm talking about one's which have been around for a substantial number of years.)

All the lotteries have very different terms. You really need to talk to a real estate lawyer about the specific terms. We almost purchased a brownstone through a lottery recently but our lawyer convinced us that the terms, which were adopted during the height of the market, were quite onerous if the property were to go down in value (which of course it did). Also, if there is a city subsidy, the apartment may have to assess for the purchase price plus the subsidy in order for you to get the mortgage that you need.

redelm -- would you be kind enought to share how one gets the brownstone in the lottery?
I keep hearing of people doing this and see closings, and have monitored the NYC HPD site, but have never seen an ad for such a lottery. Very mysterious
Also, could you please elaborate on the terms a bit.
Many thanks

I check the New York City housing website constantly for new lotteries, but as far as I know, there hasn't been a new Harlem brownstone lottery in over 2 years:

http://www.nyc.gov/html/hpd/html/buyers/lotteries.shtml

The house we were offered couldn't be resold within 7 years without substantial penalties, and there was a $500,000 city subsidy which was reduced incrementally over a 20 year period, but which would have to be partially repaid if it was sold before 20 years. The house was priced just under a $1 million, and we felt given the current price trends in Harlem, we could get a better deal waiting out the market. These 2 houses, for example, are probably already better deals than the brownstone lotteries concocted 3 years ago based on 20-30% yearly appreciation forever:

http://www.streeteasy.com/nyc/sale/404475-anyhouse-207-west-131st-street-central-harlem-new-york

http://www.streeteasy.com/nyc/sale/384770-townhouse-470-west-148th-street-central-harlem-new-york

thanks very much redelm
we have a group for buyers looking to buy in Harlem. You may want to join
http://groups.yahoo.com/group/harlembuyers/

Hi Scatter,

Congrats on winning the lottery. Are you willing to share which building it is? We're looking to purchase at Beacon Towers located at W.138th and 5th. I know that they had a lottery last year but it came nowhere even close to selling out. People had trouble securing funding and others felt that the prices were too high. I believe that HPD sets the prices on the affordable units and they are less flexible on changing them than the developers are (read: less desperate).

I haven't been around long enough to say how hard resale is, but we personally have decided that don't want to purchase in a building unless the income restriction is $195K ($250% of median income). The HDFC buildings typically have limits of $70K, $90K, or $110K for 2 people which we feel will make it much harder to resell. For Beacon towers, you can get 50% of the profit for years 4 - 15 which is not ideal but seems fair. And you don't get punished if the value goes down for some reason.

There's a 2bed estate sale at 1787 Madison which is listed for $425K. It needs significant floor and bathroom renovations so its probably going into contract for about $400K. I couldn't say how old this apartment is or what the initial purchase price was.

My advice to you is to be certain that you would be willing to stay for at least a few years, and to buy a place that will allow you to expand if you plan on getting married and having kids. My wife and I are getting a 2bedroom / 2bath which is unnecessary right now but will be very helpful in few years.

I think in many respects it is a good deal. You will have a mortgage and maintenance that is based on your current income rather than the market. It's a great way to get into homeownership if that is what you are seeking. There should be a tax abatement attached to the unit as well.

The profit sharing clause is to ensure that you will stay in the unit. Basically, the city does not want to provide a subsidy to you to get housing only for you to flip it.

congrats redelm! you had made a very sound decision imho.

i agree, 7 years is a really long time to hold onto a property to not be penalized for resellin
those 2 you posted are beauties - anyone wanna lend me half a mil?

Thanks for the advice. I've decided to consult with an attorney to get a better understanding of any resale restrictions before making any down payment or moving forward.

Another question - this one about the tax abatement that many of these Central Harlem developments are getting. What is the long-term impact of these abatements? Can I - should I - assume that the proliferation of these new developments in Central Harlem will have a negative impact on the public school systems (due to depressed taxes) - or is that not the case?

I don't think that nyc works that way. My understanding is that all of the taxes from the city are collected and then disbursed to the schools using some formula too complicated for any mere mortal to comprehend. Regardless, the public schools in Harlem will never improve unless the middle-class sends their children there to learn.

I also got called and the contract for the condo stated I wouldn't get my deposit back if for some reason the bank doesn't approve the loan. Is this common?

On a side note anybody know about down payment assistance grants besides the 6%?

Programs like this are like stealing from others. This is worse than rent control.

don't be so so. A friend got called for the "lottery". The apt was overpriced and certainly not a deal.

defneu, the city sells property in relatively blighted areas for little to no money to developers in these programs. the developers make a tidy profit, neighborhoods are improved, and people are able to buy a home. often the developments also include "market" rate homes, which are in theory less expensive than in other parts of the market because land costs are so low and the neighborhood is "emerging." these programs hardly steal from others. without them no development would occur at all, or would be stalled for decades.

AR - I don't think its worth arguing.

ItzJimmy - What kind of deposit are you talking about? The post-lottery HPD sponsored property we're looking at has a mortgage contingency in the contract so you can get your money back. This was written into the offering plan, so I don't know what the original deal was with the lottery winners.

Have you looked into a SONYMA loan?
http://www.nyhomes.org/
They have ones with downpayment assistance although there are income restrictions

I've read on the internet that the 8K first time homebuyers credit can be given as a short-term loan to apply to downpayments, although I have have not actually encountered this in real life.

mmarquez, you're right, but fresh off of vacation i was feeling game.

mmarquez110- The original contract doesn't have that contingency. Can you shoot me a email mikebsrow@gmail.com