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New Yorkers Deal With The Crunch
Last Updated: 12:58 AM, May 15, 2008
Posted: 12:00 AM, May 15, 2008
FEEL THE CRUNCH
In recent years, New York real estate could for the most part be summed up thusly: Person buys apartment, person sees apartment's value go through the roof, person sells apartment and makes a killing. Lately, however, the story has gotten a lot more complicated. Yes, there's still a fair amount of moneymaking going on (we're looking at you, 15 CPW), but with the ongoing credit crisis and market slowdown, it's crunch time for many.
Some homeowners are fighting off foreclosure. Some now realize they have to lower their asking price to get a deal done. Some are finding loans harder to come by. And others are finding creative ways to turn the market's weaknesses to their advantage. Here are four stories of New Yorkers and their struggles and (relative) successes navigating the current crunch.
FIGHTING AGAINST A FORECLOSURE
When Queens Village resident Orville Durrant applied for a home equity loan in the fall of 2005 to buy equipment for his construction business, he never thought it might cost him his house.
Construction jobs brought in less money than he'd anticipated, however, and at 9.6 percent interest, the $55,000 he'd borrowed from First Franklin Bank raised the 51-year-old Durrant's monthly payments from around $2,200 to more than $3,800.
He fell behind on his payments, and in January of this year his house was scheduled to go to auction. His lawyer managed to have that date postponed, but unless Durrant came up with $50,000 by the beginning of March, his home would go back on the block.
Happily for Durrant, several nights before this second auction date, he attended a meeting held by the city comptroller's office for homeowners facing foreclosure. There he met with staff from the comptroller's office and credit counselors who helped him restructure the terms of his loan. Durrant worked out a deal that allowed him to keep his house for a lump sum of $7,000 (as opposed to the original $50,000 he needed) and bring his monthly payments down to a more manageable $3,300.
Durrant isn't alone. Since opening a year ago, the comptroller's Foreclosure Prevention Hotline has fielded calls from more than 3,100 individuals. And in April, the number of foreclosures in New York City broke 300 for the third month in a row, clocking in at 329.
Durrant is just glad not to be No. 330.
THE WAITING GAME
There was a time not so long ago when it seemed all you had to do to sell an apartment was slap up a classified ad and wait for the crowds of buyers to arrive. That, at any rate, was Katie Leonard's mindset when she put her East Village studio on the market earlier this year.
Leonard, 30, was looking to get around $500,000 for her 550-square-foot unit - a price she now admits might have been a little high. Then again, since buying the place on East 14th Street five years ago, she'd seen the average price of a Manhattan studio nearly double. Who could really blame her for pricing her property a bit ambitiously?
She listed the apartment on Craigslist and in the Village Voice and the New York Times. Then she waited.
Leonard went two months without getting an offer. But it wasn't just that buyers weren't making offers - they weren't even calling to inquire.
After another few weeks of this silent treatment, Leonard decided she couldn't go it alone anymore. She hired a broker to help move the studio. Two weeks and a $75,000 price chop later, the apartment sold.
"I don't feel like it's a good time to sell," Leonard says, "but I feel like no time in Manhattan is a bad time to sell."
And having at last unloaded her apartment, Leonard is thinking it might actually be time to get right back in the game.
"Everything is so inexpensive right now, I might be tempted to buy something again," she says.
NO LOANS FOR YOU
Buying an apartment might be a big hassle for most of us, but you'd assume that for a real-estate broker it'd be less of a problem, right? Wrong.
Last August, Brandon Isner, a 33-year-old managing director with Bond New York, came across a two-bedroom co-op in West Harlem for $260,000. It was a little small, but the price was good and, even more important, the board agreed to let him buy with only 5 percent down. He made an offer on the apartment, which was accepted, and then put down his deposit and began looking for a loan.
That's when the trouble started.
Isner was initially approved for a mortgage by three different banks. As the credit crunch worsened throughout the winter and the fall, though, each of them reconsidered and backed out.
First up was Citigroup, which, Isner says, rescinded their offer and told him that they no longer gave the type of loan he had requested to real-estate professionals. (Isner had applied for a SISA loan, which allows buyers to get a mortgage without providing documentation of their income and assets. Due to fears that buyers with inside knowledge of the housing industry could easily manipulate their applications, many banks have made such loans off-limits to real-estate and mortgage professionals, says mortgage broker David Steinberg of Summit Funding.) Then in late December, Wells Fargo backed out. Isner had asked for a 10-year interest-only mortgage. The paperwork the bank sent him, though, was for a standard 30-year mortgage. When he sent that paperwork back asking for the interest-only forms, Wells Fargo decided to walk away.
Last up was Countrywide. On Feb. 28, the night before Isner was scheduled to close, the bank informed him that they could no longer offer him a mortgage. The reason? His apartment was on the top floor of a walk-up building - a unit type they no longer gave loans for.
"After that decline, my mortgage broker just told me, 'Look, there's nothing more I can do for you,' " Isner says.
And so, in March of this year, Isner decided to back out. He's a renter once again.
THE PRICE IS WRONG
"We went about it backwards," says Javier Gandara of his family's apartment search earlier this year. Most people, he notes, put their home on the market and then start looking for a new place. In Gandara's case, he had already found his new home - he just needed to sell his old one before he could buy it.
Not that he expected to have any trouble unloading his Gramercy apartment. Property, after all, had been moving quickly in the neighborhood for years. The two-bedroom had been appraised a year before at $1.15 million. Gandara, 42, put the unit on the market at that price and waited for the offers to come in.
"All of a sudden things slowed down," says Gandara, a French horn player for the Metropolitan Opera. "We had tons of people looking, but no one was buying."
In a hurry to sell, Gandara took his broker's advice and dropped his price to $995,000. The price cut got people's attention, and, after a brief bidding war, the apartment sold for $1.05 million - a nice chunk of change, no doubt, but still $100,000 off the unit's recent appraisal.
Bummer, right? Well, yes and no.
As it turns out, Gandara wasn't the only one struggling to sell his apartment. The developer of his new building on West 46th Street was also finding business to be slow. The unit Gandara wanted had already seen its price fall from $1.35 million to $1.2 million. Gandara's offer was even lower - he bid $1.14 million. It was accepted, though, and at the end of the day he'd netted a $210,000 discount - more than enough to make up for any losses on his own sale.
So, you see, there is such a thing as a happy ending.