Closing

Good luck with it MCR! Of the 14 deals we have in contract all but one are similarly a bit anxious to get their deals closed, definitely an emotional component to that. We had two successful zoom board interviews over the last 10 days.

The real fun will begin when you're trying to actually complete the closing process.

And regarding your thoughts that a buyer could manipulate the financials to make a bad presentation to the board, that could get them in trouble. I knew a buyer who did that, the sellers called him out on it and refused to return the escrow deposit. I know this wound up as a lawsuit, not sure what the results were. Of course if their financials have taken a big hit and they simply present the truth and get turned down that's a different story.

Keith
TBG

Thanks Keith. I do suspect any buyer who tried to manipulate their financials would have a problem with any right-minded coop because our coop would not have approved them based on initial financials if the picture painted was one that was overly vulnerable to market fluctuations such that any bad-faith update would not make sense.

Yeah, I believe that falls under "bad faith" in most contracts. If you were barely approved for a mortgage it might be easy to "throw" the financials, but I think if the bank gave you high scores (so to speak, I don't mean any specific rating) it would be hard to convince everyone things had changed so much. Except during these times it does seem much more conceivable that someone could have become suddenly unemployed indefinitely.

But I believe that only applies if you're still in the mortgage contingency period – if closings are delayed, aren't you usually out of the contingency period?

@ovid - I can’t say without looking at specific contracts at issue, but were I a buyer contingent on financing and financing fell through prior to closing, I would certainly triple check the contract to see what it says w/r/t that issue. It is precisely that uncertainty that always leads us to prefer cash offers/no financing contingency.

Right. As far as I know, the contingency periods still hold weight even during pandemic. I suppose some leeway wold be given if you had strong evidence of hardship (restaurant or theater owner/worker). In my personal "buyer's drama" I, and my lawyer, felt there was no way for me to claim financial inability before contingency expired. Nor, fortunately, has my salary been drastically affected by the pandemic – but whose to say what tomorrow brings? But fear of tomorrow's pecuniary difficulties is not an out for a real estate contract.

You're actually out of your financing contingency period once you're issued a commitment letter by the bank. Unless of course you have a funding contingency, which is not very common in New York City. Financing contingencies aren't always well understood by clients.

Oh right, that's correct -- I forgot that. But could the bank revoke the commitment based on changed cirumstances? i.e. A restaunteur who got a commitment letter on Feb 25th, let's say, but wasn't closing until mid-April and now has shutdown the business and has zero projected income?

That's why a funding contingency can be important in the very unlikely event the bank decides not to fund the loan after issuing a commitment letter. I have a feeling you'll see funding contingencies on more deals under the current circumstances, then of course as market conditions improve it becomes more difficult for buyers to get more protections. We've also had clients negotiate limited funding contingencies to protect them under specific circumstances that arise due to issues not related to themselves that might cause a bank to pull funding.

I would speak to your attorney regarding the situation you refer to above, Ovid.

Keeping buyer's deposits isn't as easy as it might sound. It's in an attorney's escrow account and while attorneys can get away with a lot of slimey things, the easiest way to get disbarred is usually to fuck with escrow funds, so the tend to be extremely scrupulous when it comes to releasing them. So while you can instruct your attorney not to release that deposit back to the buyer, getting them to hand it over to you is another matter. Especially when you need to prove bad faith, which isn't exactly easy.

ovid,
What you could ask your attorney about is at what point you can send the seller a time is of the essence letter, even though the delay is out of their control.

Well I've been in constant contact with my lawyer, of course. A little confused by the idea of sending a Time is of The Essence to the seller. The seller is happy to sell, I'm unhappy to buy (so to speak). The seller is pressing to close (understandably).

The question is can they? In other words are all the parties necessary for a closing prepared to actually execute one?

Yes everyone (bank, coop, seller) are ready to execute. Everyone but me is happy to execute the sale. So, most likely it will happen – I'm fully cognizant of that fact.

so we're engaging in discussion with (c)ovid again? wasn't this guy just a few days ago cussing everyone on this forum? mr bottom line

Then it sounds like you are expending your energy rearranging deck chairs on the Titanic rather than looking for the least leaky lifeboat.

Well the longer it takes to close, the better – as far as I'm concerned. I'm in no hurry to move in NYC currently. Mr. Confused believes I'm looking for some sort of bargaining chip or something, I'm not sure what. Obviously the market will dip at the very least, or tank, so it's true I'd rather have it cheaper than at the price I signed on for. But I'd rather not have it at all – a desire which many on this forum seem to view as some sort of moral failure on my part for which I gave them by best sailor's tongue lashing and Mr. Confused is still bent out of shape about.

@30Yrs, I'm curious what the "least leaky lifeboat" would mean to you?

The one that gets you out of the deal with the smallest loss.

Well I don't know that I have any options other than losing the full deposit or buying the apartment.
Currently I feel that losing my entire deposit is too high a cost. I'm not wealthy by NYC standards, and the 10% would be a big financial hit for me. It sucks to weigh health-risks against money, but that's the world NYC realty has put me in. As a drop-dead closing gets nearer, perhaps I will change my mind.

Thanks for your reasonable input, @30yrs. Appreciated.

Ovid, there is a financial component and a health component to your concerns. On the financial side, you clearly have a financial loss of 10% if you don’t close. However, you haven’t said what your financial loss will be if you do close. What do you think that number is?

If you think it is 10%, then is there really any need to weigh health-risks against money? You’ve already lost the money. Or does losing the cash feel different financially than having an apartment that is 10% underwater in equity? If you think it is 0%, then you should (financially) close.

Health-wise, remember that this issue will only last about a year. You seem to think the risk of a smaller building vs. larger building is material. Taking your reasoning a step further, wouldn’t being in somewhere other than your small building (e.g., a cabin in the woods) be even safer? So regardless of the apartment purchase, perhaps you should spend 2% to put yourself somewhere safer for the next year, whether or not you close, until your health concerns are reduced.

Ovid, there is a financial component and a health component to your concerns. On the financial side, you clearly have a financial loss of 10% if you don’t close. However, you haven’t said what your financial loss will be if you do close. What do you think that number is?

If you think it is 10%, then is there really any need to weigh health-risks against money? You’ve already lost the money. Or does losing the cash feel different financially than having an apartment that is 10% underwater in equity? If you think it is 0%, then you should (financially) close.

Health-wise, remember that this issue will only last about a year. You seem to think the risk of a smaller building vs. larger building is material. Taking your reasoning a step further, wouldn’t being in somewhere other than your small building (e.g., a cabin in the woods) be even safer? So regardless of the apartment purchase, perhaps you should spend 2% to put yourself somewhere safer for the next year, whether or not you close, until your health concerns are reduced.

inonada:

Well as to my view of living with hundreds of tenants vs a few – I'm quite sure science backs me up on that point, especially for single people like myself who have no other day-to-day infections vectors in their lives. I agree that the health risk in NYC will probably not last longer than a year (or two max), and possibly a much shorter time period. But, I'm not sure I can afford to spend the money to continue to rent and to own at the same time.

And to your second point, I am not currently living in NYC (where I have a rental apartment). I rented a place outside the city and left town about 7 weeks ago. I have considered trying to stay out of the city while closing, but right now I am paying 2 rents and I certainly cannot afford to pay effectively 3 rents if I close on the coop. As closing approaches it has become a difficult juggling act – out of the city rentals are in high demand as the pandemic continues and spring is upon us so I cannot just "week to week" my current abode.

In answer to your other question – yes, as a current renter I do feel losing 10% and owning an apartment is a better idea than losing 10% and continuing to rent. The latter is an absolute 10% loss, while buying the apartment is obviously a more unknown amount -- and could be a much smaller loss that I recoup sooner, I'm sure one day I will recoup it.

And honestly, from the financial view, it's less about 10% then about the full 20% down payment – it's a lot of cash that I have to tie up into the NYC real estate market right now. To me this is more about the loss of flexibility (cash on hand, no property) during a time of crisis. But as I noted above, the 10% is a big chunk of change for me and I can't see just throwing it away to get out of this deal.
If the deposit were something more like 2-3%, as in many other parts of the country, I'd probably feel fine walking away from the purchase.

ovid, what I mean is , did you buy this coop unit with a good discount (say 30% off asking or near asking?)

also, just feel interesting your name is (c)ovid as Mr. confused pointed out, is it just a coincidence you chose it years ago?

No, I signed the contract before the pandemic. Only a few percent below asking.

Ovid is a poet from Ancient Rome. No connection to the virus.

Ovid, then you probably pay too much for the unit, hope you can get out of it. Good luck and let us know, be safe!

Ya think?

ovid, please take this constructively, but I have 2 words for you:
Sunk costs.

Lol. Yes, REO, your point is taken. But as far as I'm concerned at this point, the longer this deal drags on the better (short of truly risking my deposit). I don't want to move-in right now, so even a little bit of expense to not move is worth the savings I get in mortgage+maintenance I have not paid. Because New York is on Pause, ain't you heard? And before you say "essential business", I will note that the pause has effectively frozen any closings where parties want them frozen. Surely they will begin to unfreeze at some point, but it is unclear when that will be (weeks, months?). If the seller is eager to seal the deal in a timely fashion, they should be a lot more interested in renegotiating. If they're willing to wait, then at least I'm not paying mortgage.

So far it seems like a little bit win-win for me.

Well, except for the big sunken cost at the end!

Ovid, the buildings don't want you to move in now either. The future is unknowable, but I think you're "safe" from closing, if that's what you wish for, for at least another two months, honestly. The flip side of a slower timetable is that I would think, as the pause drags on, you might be facing interest-rate risk on your loan.

front_porch,

My loan has been extended so far for free. My broker says I can extend indefinitely, but if rates rise the cost of extensions may rise above "free". But again, the cost of extensions is very likely to be less than money saved in mortgage+maintenance.

The coop allows move-ins currently. To do otherwise would jeopardize sales like mine, is my understanding. That is where I feel it seems like buildings are opening themselves up for lawsuits down the road – but I'm no lawyer and I've been told I'm wrong on that count. I mean lawsuits generally, not specific to my transaction. I have near zero interest in any litigation.

But, for the time being at least, it seems lawyers and realtors have agreed that no one needs to be forced to close. It's unclear to me how long that will last. In my situation, all parties except me are pushing for a close – so it is really my feelings of safety (backed up somewhat by the state) vs. a bunch of people who stand to make money off the transaction. I am the only person in this transaction will actually have to consider whether to move throughout the state and city once we close, so it seems ludicrous that anyone but me should set the time of the closing as long as NYC is on "Pause". Once restrictions are lifted, of course I think the seller has every right to demand a closing.

I wouldn't be discussing this so much if I had other important things to deal with, but you know it's just me and my computer all goddamn day long.

There is a sameness to the days, isn't there? Here in the city we amuse ourselves by playing refrigerator Tetris when the grocery deliveries come earlier than we expected them to.

Not to beat a dead horse ovid, but this is clearly about money for you and not safety. Closing just has to do with who carries the cost of the apartment after closing; nobody is obligated to move into any apartment they buy. You do have to pay the maintenance, but you don't have to live there.

(c)ovid is just looking out for his bottom line. wait, isn't that what he's accusing others of doing on this forum of doing?

Multicityresident, I'm happy to walk away from the deal and give some money to the seller. If they don't want to do that, it's them that is worried about money and not safety.

No shit I don't have to move in, we all understand that. But I cannot afford two (or three) rents concurrently for very long, so the sooner I close the sooner I will have to move. And I would rather not move into a large building in NYC if I can avoid it, that is the fucking god's honest truth. And yes, my view has changed in the last few months, as has almost everyone's.

I'm not a rich motherfucker like you with your multiple dwellings so, no I can't afford to eat the whole deposit to have my way. If you think the fact that I won't eat 10% makes me "all about the money", mulitcity, then frankly you have nothing to contribute to this conversation.

I'd also note, Multicity, that being able to safely move in to an apartment is what is necessary to close on a contract. That is why lawyers and realtors throughout our fair city have decided to essentially freeze all closings, because everyone believes it is reasonable to not want to move right now if it can be avoided.

So while technically you're correct, I am allowed to move in if I must, legally you seem to be dead fucking wrong – no lawyer has yet, to my knowledge, forced a closing against a seller/buyer's wishes during this "New York on Pause". You cannot close on a contract if it is unreasonable for you to move in. Right now, the law seems to agree with me that it is unreasonable. They don't think that means the contract should be nullified, only that it the should be extended.

If the seller wants me to do something "unreasonable" it stands to reason that they should pay something for it. Soon this may change, and it is deemed "reasonable", at which point I will likely close.

Ovid, this isn't reddit. Watch your language. We get that you're feeling screwed. That is nobody's fault but your own. And maybe your ex-girlfriend's.

You've given a clear picture of your moral character, both on this thread and on that now-deleted thread where you tried to get around the HFDC income limits.

I would think the lender would want to do another appraisal report considering the environment.
Appraisal reports expire in a sudden change in marketplace values whether higher or lower.
If the new report appraised out to less than the contact price, depending on what your mortgage contingency clause says, you may be able to renegotiate the price.

Also commitments do expire.

If prices aren't going down why would appraisals? If rates are in danger of going up why wouldn't that negatively impact prices by the time we get back to selling?

I don’t know where this property is located. But I believe I read earlier in the thread that the buyer thinks the price of the property went down due to Covid-19.
If the market is at a standstill, the appraiser may see this in a negative light.
You think rates are in danger of going up? Then you ask if so, why wouldn’t that negatively impact prices. What’s your point?

My point is that 2 separate posters in this thread have warned ovid of his rate going up and his appraisal going down, but aside from myself I haven't seen any Real Estate professionals here admit the market is tanking. In fact if anything the opposite. And I just don't buy that as a narrative.

OTOH I see 10% to 15% off being characterized as unrealistically low offers, when I know more than a couple of circumstances where buyers got that or more off and still aren't going through to with the deals because they came to the conclusions that it wasn't enough.

Brokers eat when they get the market to clear, not when they drive up sellers' expectations to a point at which buyers aren't willing or able to pay. With some brokerages already looking at bankruptcy (see the TRD article today saying Compass has 6-9 months of runway), I'd think brokers would be more realistic with their clients (sellers) to close the bid/ask spread. If the market-clearing price is indeed 20-30% below ask, and I believe it is for many >$4M Manhattan properties, then brokers should be telling sellers to expect such offers and price aggressively low in hopes of perhaps generating a bidding war. So far, I'm not seeing it. I've even seen some 20% price chops last year failed to attract buyers - they probably need another 20% to generate interest. I don't know where the market is, but I know where it isn't. And I have a feeling that it won't be much better 6 to 12 months from now.

You've got codependent behaviour between brokers and sellers reinforcing delusions. You have 30,000 Real Estate Agents chasing deals in Manhattan; it was bad enough when there were close to 15,000 sales a year - what happens if volume falls anywhere near half that? There won't be a humane "Broker Season" like with deer so we'll have a lot of starvation. But what also will happen is that the concept of 2 brokers on each transaction will only make things worse. Because when you had open listings the successful agents were the ones who beat up sellers to take the market price as opposed to telling them whatever the wanted to hear in order to keep (or get) the exclusive. Now when you have a buyer who is making a bona fide market offer instead of being able to make a reasoned argument to the seller you have to go through a gatekeeper who's interest will often be defending the promises they made to get the exclusive rather than convincing the seller they need to take a haircut.

I only know one current seller in the over $4m price range, and rather than face the reality of the market, they have chosen to take the property off the market indefinitely. It is completely empty; they don't use it, and they are choosing to pay $120,000/year in maintenance plus the cost whatever capital they have tied up in the property to carry the it rather than sell. They just cannot accept that they bought a property for $5.5m in 2014 whose market clearing price at this moment is likely below $3.5m. As I've made clear over all of my posts, I'm not a finance person, but I would be curious to hear from those who are whether or not they think this is the right call. FWIW, I would likely make the same call myself.

@mcr i agree with your seller friend. they should just put it up for rent and carry it at breakeven. if no pressure to sell, then wait it out for a better market - even if that's several years ahead. by no means should anyone sell in this market. nobody can predict the future and too many brokers giving kneejerk advice based on nothing. gov't is literally injecting trillions into the economy. there will be inflation.

We can't get any clarity on where prices will start to clear until we can actually show apartments and transactions start to take place. No surprise there are literally no transactions taking place, apartments can't be shown, the marketplace has been shut down for the most part.

It's hard to say the market is tanking when there are no transactions taking place to verify that. However I think a reasonable person would agree that prices are going to be lower in two months than they were in January or February. You can certainly take a stab at it, but the reality is nobody knows what that number will be.

As I previously stated, we're advising our buy side clients (approximately 45) to be patient over the next one to two months. Let's make decisions about where to bid once the market starts to trade again.

That said we do have a handful of buyers fishing around, including a recently accepted offer on a three bedroom on the upper East side yesterday.

On another note, Dr. Ed Yardeni's morning note, he called the s&p 500 bottom on March 23rd. He believes we'll see 3500 by end of year although it won't be a smooth path along the way. Ed's had a pretty good track record over the years, I'm rooting for him!

@mcr buying at the peak in 2014 and having to sell now is a very unfortunate situation. Wishing your friend all the best either way.

Keith
TBG

ovid, not sure if we covered this topic or not, but does the (c)ovid situation affect your income at all? If it does, you are obligate to inform the mortgage bank, and they might re-consider the loan commitment

Interesting paper from the SF Fed, mostly focusing on the traditional management of the fed funds rate, and caveats that the model doesn't take into account the asset purchases, but generally finds little inflationary pressure. I don't agree with all the elements, but it's an interesting read.

"Mitigating COVID-19 Effects with Conventional Monetary Policy"
https://www.frbsf.org/economic-research/files/el2020-09.pdf

I'm not convinced that the market will trade again in 1-2 months. Social distancing could be a fact of life through 2022 at least, possibly 2024 (see the link below). And if realtors are all telling sellers that they should just wait a little longer, and buyers are being advised the same, we could be in for a lost year and a very long wait.

30 makes a good point about there being far too many realtors in NYC, and some may need to starve to exit the business and let it be healthier with fewer competitors for listings. The way they'll starve is by convincing sellers not to sell or that they can price at Jan/Feb prices - this will simply make the problem worse when the dam does break. Perhaps there will be enough sellers desperate enough to leave the city that they will capitulate and properties will trade as soon as restrictions are loosened (they won't be eliminated). I'm skeptical.

There is pent-up demand, including from Mrs. George, but the present global recession is so severe that she understands that home prices have to come down in a way that she didn't a few years ago.
Thus she understands that there's no point in doing anything with sellers or their agents who don't appreciate that -- which is to say, most of them, right now.

https://science.sciencemag.org/content/early/2020/04/14/science.abb5793

Yes, we're certainly in uncharted waters. I'm a little bit more optimistic than you are George. I personally don't think we're going to lose an entire year. And although we're far from out of the woods, the outlook is certainly much better today than it was a few weeks ago. Let's hope we continue in that direction, especially once we get some scientifically proven medications that will help battle the worst cases along with a vaccine.

There certainly are an abundance of licensed agents in New York. But I wonder how many of them are truly active, what percent are generating enough income for it to even be viable?

12 years ago I worked at a large firm, an email meant for management mistakenly was sent to all agents. It basically said that something like 80% of all the agents were making less than $35k a year. That essentially a small percentage of top producers apparently generate most of the income.

The herd will certainly be thinned.

The REBNY feed shows 209 contracts signed this month (119 in Manhattan) so saying "there are literally no transactions taking place" is just flat out disinformation.

The problem with the whole "thin the herd" idea is that the barriers to entry in real estate are about three inches high. Yes, I imagine that some agents will exit the business if the downturn drags on, but the minute transactions start up again they will come right back (or newbies will come flooding in to take their place. )

While we're at it, can we have a moment of R.I.P. for Robby Browne? I didn't have many dealings with him, but he was always an old-school gentleman to me.

ali

George,
As in MCR's example, affluent people who own their units cash and are asset rich are never forced to face reality and matk-to-market. But those who normally are under the pressure to do so are being buoyed in their delusional thinking because of the current moratoria on foreclosures and evictions.

As I've said several times, the market is going to be defined by foreclosure sales. This is because those are the only sellers where (by and large) they are devoid of emotion and selling based on facts and figures. They are also regulated so that they can't carry more than a certain level on their balance sheets so they need to move product (however since there is so much non-bank mortgage lending and third party mortgage ownership at this point even this market may be impacted).

But this won't kick in for a protracted period of time now due to these moratoria. And while I understand the humanitarian aspect I think in the long run it will contribute to stagnation of the Real Estate market and ultimately a worse crash because of the sheer volume of bank sales unleashed on the market in a relatively short time which will crowd out "normal" sellers ability to move their properties. What I mean by that is the things which usually save normal sellers from the scourge of banks dumping foreclosure properties are the low volume which means there aren't enough to fill a demand for bargain prices, and also that most people choose house they want as opposed to price. But at a certain volume of foreclosure sales, there are enough so people can get both those boxes checked.

Ali,
I hope the Dept of State wakes up and starts cracking down on some of this behaviour that could be construed as entertainment on some moronic Reality TV show but when certain agents don't understand that it's unacceptable to outright fabricate stuff IRL it needs regulatory intervention.

If you speak of commercial foreclosures, ie sponsors losing control of projects to financiers who just want their money back to shore I their own balance sheets, then I see your point. Too many Manhattan luxury condos are owned outright, and foreclosures take so long, that I don't see foreclosures of individual units driving the Manhattan market.

When you look at properties under $1.5 million the vast majority have been heavily financed. Especially outside Manhattan.

And Coop foreclosures don't take long at all.

You made this prediction about foreclosures after 2008 30. It didn't happen then in Manhattan, and I don't see that happening this time.

We've got a lot of issues to deal with but I don't think foreclosures will be one of them. Meaning Manhattan and much of Brooklyn. Perhaps I'm wrong, time will tell...

I think this comment from Douglas elements latest market report alludes to what I've been saying about recent market activity:

" In the final two weeks of March 2020, awareness of the global pandemic known as COVID-19 cooled conditions after two significant rate cuts by the Federal Reserve and the statewide shutdown of non-essential businesses. Current sales contract activity does not account for the market impact of the coronavirus yet since it lags the “meeting of the minds” by two-to-three weeks. From the New Year 2020 through mid-March 2020, the number of sales jumped year over year after two straight quarterly declines. All three overall price trend indicators declined annually for the third consecutive quarter. Re-sale listing inventory fell year over year for the first time in ten quarters."

That's terrible news about Robby!... Was always a pleasure to do a deal with him and his team, consummate gentleman.

30, How many foreclosures do you forecast in 2020 and 2021 in manhattan coop and condo (below 96th Street)? I would like to buy some.

None if the don't lift the moratoria.

Coops were spared the ravages of 2008 because of their financial requirements. I would think this pattern would continue.
Everyone loves condos because of ease of purchase- times of turbulence shows the pitfalls

New York was spared the ravages of 2008 because of the $780 billion bailout which lopsidedly benefited Wall St and NYC while not sparing many other areas in the country which not only suffered tons of foreclosures but either only recently had their Real Estate recover to pre-2008 levels or not even that. If the current bailout does the same then the results will be the same, but so far it doesn't look like it.

One of Noah's best interviews, someone is interviewing him:

https://youtu.be/oFuNfpgvAoI

@30yrs - Assuming foreclosurs occur in the under 1.5m price range in the outer boroughs, would that affect the over 4m market in Manhattan? Seems like deep developer pockets and deep coop owner pockets may keep those prices from adjusting downward?

@30yrs - Assuming foreclosurs occur in the under 1.5m price range in the outer boroughs, would that affect the over 4m market in Manhattan? Seems like deep developer pockets and deep coop owner pockets may keep those prices from adjusting downward?

Deep developer pockets? Developers were being squeezed before this crisis. Did you see the articles I had posted about some of them being downgraded on the Israeli bond market? The project in FiDi already in foreclosure? The whole thread about developers playing chicken with the market (what's going to happen now that their timelines have all gotten stretched considering the are all highly leveraged and have zero or close to that from their projects)

As far as rich Coop owners, that will stave off high end Coops from being foreclosed, just like it always has, but the luxury Coop market was crashing before this (as has been noted with many examples posted here over the last year) so it's not going to stop prices from continuing to fall even without foreclosures. And as appears to be noted in another thread, those people have currently fled the city! What do you think that portends for the prospects of demand for buying Coops, especially in larger buildings?

I think where I can perhaps agree with 30 is on a Development level foreclosure and selected ultra-luxury bought in 2015 where it is not owner's primary residence and there is no recourse in the mortgage to the individual.

Thanks for the replies - I have not followed the developer stuff and that is what I was wondering. And I agree that coop pricing is sinking regardless of
foreclosures. I don’t know what macro implications would be, but on consumer level it would be great to see new developments become more accessible.

You're ignoring cash-out refis which end up as "sale to bank."

I'll also note that for close to a year we've been discussing some rather extreme drops in value in Upper East Side high cash requirement buildings. This was before this crisis. Given the further drop in demand because the buyer profile for these buildings seems to be congruent with the profile who won't be buying in Manhattan for the foreseeable future it's not impossible to imagine a scenario where units in 35% to 50% down Coops will still be under water.

300, New York is a recourse state -- the bank can go after the borrowers assets for deficiency claims

Reno, In most cases, the borrower is an LLC for ultra-luxury and the individual behind the LLC does not always guarantee the mortgage.

What would stop a co. like Blackstone from buying new condos in bulk at distressed prices and then renting them out?

They can get higher cap rates in the rest of country 4-5 percent. And new development are not built as rentals which have higher number of bedrooms per sq ft. For example, 2 bed room rental is 900-1100 sq ft but new development is built for luxury living with anywhere from 1200-1800 sq ft in Manhattan with some exceptions. And rent in per sq ft is higher for smaller apartments with higher number of bedrooms.

That's true, I wasn't thinking about the LLC buyers

Most merely rich llc buyers (Call it $5-10mm net worth) do provide a personal guarantee to the loan but not necessarily ultra-wealthy (more than $100mm).

For practical purposes people shouldn't worry about deficiency judgements on residential property. I'm not aware of cases in New York where banks sought them where there wasn't fraud in the inducement.

I think the oversaturation of units (which would lead to both lower prices and extended lease-up timing) along with high CC/RET would make getting a decent return on a portfolio of ultra-luxury condo units as rentals hard to get a decent cash-on-cash return return unless they got picked up at very low prices. It would probably makes more sense in a lot of buildings to somehow rework the property (split units, etc).

Ovid, this one's for you:

Urban Digs interview with Steven Katz, a real estate attorney

https://www.youtube.com/watch?v=XdBNNdnpYbQ&feature=youtu.be

The first bit of the podcast talks about going to contract now. Start 20 minutes in to get him talking about existing contracts.

ali r.
upstairs realty

Lot of good information in that vlog!

Keith
TBG

https://therealdeal.com/2020/05/07/chetrit-goes-to-the-mat-with-sl-green-over-busted-daily-news-deal/

And also sold his Townhouse:

The Real Deal: Joseph Chetrit sells UES townhouse for $25M.
https://therealdeal.com/2020/05/07/joseph-chetrit-sells-ues-townhouse-for-25m/

https://streeteasy.com/sale/1313314