How are rolled-in-financing costs recorded?

As they say, if your not part of the solution your part of the problem.

You have to be careful i believe with rolling in closing costs and should ask the bank this question. If they will only loan you lets say 80% of the value and what you are buying is say worth $500k and that is what the appraisal comes in at, then you would not be able to roll in closing costs because it would blow the LTV ratio.

If this guy can't pay closing costs out of pocket, i.e. if he NEEDS to finance closing costs as opposed to say making some sort of math/financing decision, then he is buying over his head. If the down payment you are providing is a loan, be prepared to kiss your $$ goodbye. If it is a loan, you should be less concerned about how it is recorded and more concerned about what a lawyer costs to get you an iron clad loan agreement.

Its for a new condo. The sponsor is paying the closing costs (NYC and NYS transfer taxes). I'll need financing to cover the mortgage tax - that's pretty much it.

I am using an FHA loan, so I don't need to worry TOO much about the LTV ratio. I think I am getting the apt for slightly less where the comps are coming in at.

W67? Where are you?

the recorded amount will be the total mortgage, so yes, you have to pay mortgage tax on the amount you are financing to pay the mortgage tax.

AH - I am not being clear.

So my strategy is to see how much leeway I have to negotiate the price. If the developer can get away with a comp in the bldg for the ask (even tho I am bidding less than the ask and folding in my closing costs), he still has a sale at the ask as a comp.

So my theory is that I am going to underbid him my closing costs (and a little extra), but he gets that back in something close to ask.

Sound or bunk?

COME ON HIVE MIND

Have you looked at all the closing prices of apts in the building? Sponsors are closing apts (and probably including closing costs) at below ask -- sometimes significantly below ask. Spend $10 bucks for SE listings and see where this sponsor has been closing

apt23, maybe I misunderstood your response, but how can you tell via the SE subscription whether the sale price includes sponsor paying closing? In some situations, the sponsor pays closing costs and lowers the price, in others the sponsor plays closing and the sale price increases by the amount of the closing - e.g., $450k + $15k towards closing, gets recorded as a $465k.

@joseesq - so the mortgage gets recorded as inclusive.

@ apt23...OK then. It's a new condo, so no closings have occurred yet.

Sponsors won't usually pay for mortgage tax, right? That's crazy talk, no?

Nothing is crazy talk it is a matter of what they are willing to do. Where i am buying they were more concerned with being able to show the sale price as close to asking as possible so all my discount came in closing cost credits including mortgage tax.

@mikev - I agree that is one of a sponsors main goals - to make sure the sale price comes in as close to ask as possible.

@biztsarro-Is there a comparable condo nearby that already has closed? Look up closings for that condo on streeteasy or ACRIS. Assume that the people who recently closed received at least the same amount of closing cost concessions that you did and those don't show up on SE/ACRIS. Is the price you are receiving without the closing costs still good?

Often the best way to sucker people is to convince them they are getting a secret/special deal. Please do thorough research before going into contract for your own sake. If you really can't finance this without paying for closing costs, it is a bad idea to buy, even if it is below comps. Transaction costs of selling are high. Hire a good lawyer, not the cheapest one, esp. for new construction.

Regarding the mortgage the way you could do this is to ask to have a % of the purchase price towards closing costs (I think the limit is 6%). You will likely end up paying for the transfer tax and some other sponsor costs, which are often part of the closing costs for new construction (but not for resales) and get recorded as an adjustment to the purchase price (which is why you may see something listed at 500k recorded as 506,744. You would be allowed to use the lump sum at closing toward any closing costs you wish, including mortgage tax. I might be completely wrong about this, so I apologize if this is the case.

@asdf - thanks for your input. Definitely not skimping on the lawyer for new construction. My initial questions was more about how things get recorded, and how I could strageize from there.

In re: transaction costs of selling, those are minimized - I plan on being in the apt for at least 5-7 years. And I put some value on the betterment of my lifestyle. You gotta see the shithole I live in now.

do you mind me asking what the sponsor is asking on a PSF basis for an average 1BR, and what are they actually closing at, on a PSF basis? (PSF = per square foot :D )

it sounds like you are worrying about small numbers on a percentage basis... mortgage tax ffs.

offer the sponsor 30% below ask and see what they say.

@gcondo - they haven't closed on anything yet. No comps.

@gcondo the one beds are adding in the terrace SF - a shady move.

also - "mortgage tax ffs."?

You call apt23 :)

To the financial retard about to pay list and hope for roll in of closing cost. You are akin to a hummer list buyer, who negotiates $100 bp gas card.

@gcondo the one beds are adding in the terrace SF - a shady move.

huge red flag for me. I would scour that offering plan with a fine toothed comb to make sure they are not lying about anything else. Do not take anything for granted. Check the description of property vs the apartment reality to make sure they did what they said they would do. Is it new construction or a conversion?

be careful, sponsors are full of it and will lie as long as they can get away with it.

The situation with condos in Harlem for example, is that the seller (sponsor, owner, whatever) wants more than let's say the same line apt a floor below for no less than what that one sold for last year or six months ago. OK, so THAT buyer overpaid...you're expected to overpay as well? Sponsors will work with the buyer on closing costs with concessions, etc... On pricing? Only up to a point because they are discounting with an eye on previous sales. Will the mentality change? The market will decide...

just remember that sponsors are crapping their pants sitting on their cash-burning developments, and as a buyer, you hold alot of cards. use them.

@gcondo - because I am using FHA, I think that there are other costs associated with completing the approval process - possibly making them averse to going down much further. In addition, I believe the developer's prices are actually somewhat in step with the marketplace.

But nonetheless, I am negotiating hard.

Thanks for the encouragement.

If they haven't closed any apts yet, how long have they been selling? If they have been on the market awhile --even if they haven't-- why don't you just lowball them. You might come up with such a big discount you won't have to worry about financing mortgage tax. When the comps come in on the building how are you going to feel if you are the biggest number on the board? Have you looked at comp threads and condo resale threads on this board? People are taking horrendous losses. You might regret worrying so much about getting sponsor to ask when you are twisting in the wind on a resale. If you lowball and miss out, chances are you can come back in a year and it will still be on the market. And you can always find another apt.

biztsarro - the recorded amount will be the final price on contract which should include the seller concession. Is the purchase price being increased to help pay for closing costs? You have to be careful with that as it can affect the appraisal value. The value may not come in if you increase the price and other comps in the building sold at similar prices without the concession. If youre putting down more than the minimum then you may be ok. sunny.hong@bankofamerica.