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Anatomy of a Real Estate Sale

Please note that the photo above isn’t directly related to the story below, but is only meant to show some of the Astoria & Queens housing stock.

A house sale can be more than meets the eye.

2 family Brick
Strong points : Located just blocks from Astoria Park and in the highly desirable P.S. 122 school district, this 2 family home features a  2 bedroom apartment over a large 2 room studio.  The property had no basement.  There was a garage and driveway and a spacious backyard.
The challenges : In recent years, the property had fallen in to disrepair.  There were no kitchens on either floor (to obtain conventional bank financing, there must be 2 functional kitchens).
After multiple showings, we secured a qualified buyer and negotiated an agreeable price between the buyers and sellers.
An inspection was done and certain repairs had to be negotiated.
Once the buyer put in their formal loan application, the bank sends out an appraiser to assess the value of the house.
We provided current comparable sales to help the bank justify the price.
The appraiser hit the proper value and the buyers’ got their loan.  Or did they?
After issuing the commitment, we were informed that the bank wanted repairs done to the property before closing to make it habitable.
And now the challenges that were created by this situation :
1.)The seller didn’t want to fix the house and fund completion of the work.
2.)The buyers’ end goal was to purchase the house and gut renovate it so they felt these repairs were unnecessary and personally didn’t care about the present condition.
3.)The bank being the majority shareholder in this transaction wanted theses repairs done or they weren’t lending.
The Solution :
The challenges were explained to all parties : buyers, sellers and their respective attorneys.
We were able to get the attorneys to release a small portion of the escrow deposit before closing and have the work done.
The work was done, the bank re-inspected the house and a closing date was set.
And did I mention that this had to be done in a very timely manner so that the purchasers’ did not lose their rate lock.  Losing their rate lock could have forced  them to pay a higher monthly payment and possible have their file underwritten again to make sure that they still qualify.
The property closed for $990,000.00

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The Case of the Zoning Tax Class & C of O

Please note that the photo above isn’t directly related to the story below, but is only meant to show some of the Astoria & Queens housing stock.

I was approached in reference to selling someone’s parents’ home.

They informed me that it was a 2 family brick, semi-attached on a block close to the subway and wanted to know what my opinion of the value was.

I mentioned that for a more accurate assessment, I would need to take a quick look at the property to see its condition and then compare it to similar properties that were recently sold.

Before doing that I looked up the house on various websites that I subscribe to, and obtained information about the house size, property zoning, any possible violations, current real estate taxes etc.

Upon further investigation, I noticed the tax class for the property (B3- a 2 family converted from a 1 family). From prior experience I have learned that the tax class and the certificate of occupancy (C of O) , the document that states what your property is, do not always coincide.

After inspecting the property , I noticed that there were 2 electric meters and 1 gas meter. I contacted a company that does certificate of occupancy searches and after further investigation, the house came back as a 1 family, not a 2 family.

THE CHALLENGES THAT WOULD HAVE BEEN CREATED BY NOT DISCOVERING THIS INFORMATION

  1.  The appraised value of a 1 family and 2 family can differ.
  2. The buyers’ thought they were buying a 2 family and then would have found they were getting a 1 family.
  3. The method that a buyer qualifies for either property differs. On a legal 2 family, a portion of the rental income can be used to help the buyer qualify for a higher loan amount.
  4. The title search ( a search performed by a title company to check certificate of occupancy, any violations, etc). would have revealed that the house was a 1 family but this comes 2 to 3 months from going to contract.

Inevitably, if I hadn’t done the prior research, and wasn’t familiar with the zoning / legal / financial technicalities, discovering and identifying these obstacles at the beginning, the transaction could have easily fallen apart, and the house would have had to be placed back on the market, and the whole sales process started all over again.

Putting a property back on the market can impact its price.

 

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