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March 10, 2010
In our monthly newsletter, Madison Abstractions, you will find company and industry news, tips for better business, and information about upcoming events. Keep up to date on industry events and changes that are important to your business.

Visit our Newsletter Archive for past issues of Madison Abstractions.
August 2008
View Printable Issue
Feature Article
REFINANCING SUCCESSFULLY IN 2008

Times are tough and for some, a secure income stream may be a luxury, forcing a decision toward refinancing as a possible means of having a nest egg in the event of an emergency. But, the fact of the matter is, lenders are becoming more and more stringent in their criteria for loan distribution and engaging that escape chute may not be as simple as you had imagined. In fact, it may not even be feasible. However, if you must refinance for whatever reason—because a debt is coming due or because you need additional funds for capital improvements or property repositioning, be aware that it will require serious due diligence on your part in order to ensure success.

First of all, you will need to be knowledgeable about your property’s physical condition prior to making contact with your mortgage broker or loan officer. Patrick Niland of First Funding of New York says that being able to communicate your property’s profile in complete detail is vital to establishing a positive first impression, as well as achieving quick results. Lenders can certainly appreciate immediate access to pertinent information about a property including the address, block and lot, number of units, square footage, number of elevators and floors, lot dimensions, heating system and fuel, parking spaces, etc. If the property is a rental, a good thing to prepare would be a rental roll of all tenant spaces, including tenant names, move-in date, lease term, unit or square feet occupied, rent amounts, increases, renewal options, etc. It is also advantageous to pull together important real estate documents like leases, renewals, service contracts, mortgage and operating statements, and any other important materials for quick and easy review.

Property owners are also advised to meet with professional advisors in order to prepare a comprehensive plan of the property’s current and future financial needs. A contingency plan is recommended for unexpected repairs amounting to 10% over the loan amount for short-term loans and 20% over for the loan amount for 10 years or longer.

Property owners should make every effort to know their own needs specifically, and the financial market in general. Publications like The Wall Street Journal, Forbes, Business Week, Barron’s USA Today, and The New York Times are excellent resources in order to get up to speed on what is currently happening in the real estate market. Talk with other property owners to determine what problems they may have encountered and use that information to make decisions of your own as it pertains to the potential loan: is it really worthwhile? If so, how much do you wish to borrow, and what kind of terms would you even be comfortable with? Do you wish to do the legwork yourself in securing the right lender or do you wish to employ the services of a mortgage broker? When choosing a mortgage broker, interview a couple and check references to increase your chances of a reputable, knowledgeable, and efficient representative. Regardless of who you choose, broker or lender, Niland suggest that honesty is still the best policy. Disclose to him/her all that you need to, both negative and positive. Both lenders and brokers are better equipped to assist you if they know the full story beforehand.

It is important to keep in mind too that the pace at which your transaction is processed will depend on your efficiency in responding to requests made, so respond quickly and truthfully, and keep your financial advisors in the loop at all times because in this market, setbacks can be very costly. Interest rates are constantly changing…so are the criteria for obtaining some measure of financing. For example, many lenders are now requiring higher credits scores in order to qualify for over 80% financing. Chase and Citibank, for example have set their minimum score at 660 when in previous years, 620 was okay. They are also becoming more and more conservative on the subject of debt-to-income ratio. The fact that the market is volatile and unpredictable, shifting daily by significant amounts—doesn’t help either, so it is important to move carefully and with a sense of urgency.

The bottom line is, in this economy, it doesn’t hurt to have a nest egg of some sort and if you have chosen to obtain this added security via refinancing, it is best to increase the possibility of its success by doing your due diligence, employing a good loan officer, and keeping in mind the steps previously outlined.

Leisa Premdas
Industry News
Market Conditions

Market conditions are still somewhat gloomy. Credit availability for buyers has slowed transactions in the marketplace. Lenders are requiring a larger down payment especially from first-time home buyers without established credit histories. 30-year conventional loans are available at or about 7%, but the expectancy is that it may rise still higher. Other relevant factors include the failing health of investment and brokerage houses evidenced by layoffs from prominent New York City firms, as well as the unemployment rate, reported at 4.5% in May 2008—1 percentage point higher than May 2007—and steadily increasing, which serves to discourage potential home buyers. Per Kenneth Diaz, Prudential real estate broker, the combined economic factors do not radiate wellness even if some of them are not actually sickly. “It is going to take good economic news on several fronts to reenergize this real estate market,” he states.

Red Hook Transfer Tax

As a reminder, The Town of Red Hook in Dutchess County has adopted a transfer tax pursuant to Local Law #1 of 2007. This Local Law imposes a transfer tax of two percent (2.0%) plus a $5.00 filing fee payable by the GRANTEE to the Dutchess County Clerk on the conveyance of real property, or an interest therein. The tax is applicable to all conveyances in the Town of Red Hook which occur on or after August 1, 2007, unless there is a binding written contract entered into prior to August 1st and "provided that the date of execution of such contract is confirmed by independent evidence such as the recording of the contract, payment of a deposit, or other facts and circumstances as determined by the County Treasurer." A transfer tax form similar to the NY State TP-584, is necessary for recording.
Top Deals

$2.5M purchase of a Bronx apartment building

$2.0M purchase of a manhattan condo

$1.8M purchase of a Nassau residence

Tip of the Month

A religious corporation cannot sell, mortgage or lease for a term exceeding five years, any of its real property without applying for and obtaining leave of the Court. A court order is also necessary for mortgages with terms less than five years. Religious entities are subject to the same Not-for-Profit laws as not-for-profit corporations so in addition to court approval, the consent of two-thirds of the directors to the sale must be obtained. Strict compliance with the order approving the transaction is required, so if there is an amendment to the terms of the mortgage, the court order must also be amended. Since not-for-profit corporations are exempt from paying a transfer tax, the purchasers of said properties may have to pay the transfer tax by default.

Noteable News

State’s Adverse Possession Law Revised Governor David Paterson recently signed a new law to clarify adverse possession in the state of New York. Gone are the days of simply mowing your neighbor’s lawn for the statutory period of 10 years in order to solidify a claim of right to your neighbor’s land. The revision now requires encroachment “sufficiently open to put a reasonably diligent owner on notice” or a “substantial enclosure.” Even so, Assemblywoman Teresa Sayward says that the revised law requires having “a claim of right” or reasonable basis for the belief” that the property belongs to you even to take adverse possession. Structures leading to adverse possession could be along the lines of a garage or a house addition that went unchallenged for more than 10 years.

Madison Abstractions | August 2008