Welcome to Front Porch LLC

Front Porch is a real estate company that wants you to know stuff. Really.

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I’m interested in buying into an affordable building, where do I start?

You’re aiming for a low-income co-op, otherwise known as a Housing Development Fund Corporation building.

The place to start is actually the Urban Assistance Homesteading Board.

Posted 11 years, 4 months ago at 12:02 pm.

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We work two jobs, one freelance, and expect to make $240K next year. Is that enough to support a $550K mortgage?

It should be. My rule of thumb is that you can borrow 2 to 3 times your income as your loan amount, so you should be able to handle from $480K to $720K.

Be aware, however, that not everyone likes borrowing up to their full capacity. If you have kids and/or student loans, you’ll feel more comfortable in the $480K to $600K range.

Posted 11 years, 4 months ago at 10:45 am.

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Is it bad if a co-op with 20 units has no reserve fund?

This one’s from Streeteasy where a first-time buyer was trying to figure out if “no reserve” should act as a red-flag to prevent them from buying.

Here’s my answer:

1 day ago

It’s really just a style of governance that you have to be comfortable with. As Kylewest has pointed out, a co-op with no reserves is running on a “pay-as-you-go” basis, so everything big that comes up will require a special assessment. (Make sure, as part of that tradeoff, that your maintenance is lower than in a comparable building with a reserve fund.)

The usual suspects for special assessments will be a new roof, heating/boilers, and compliance with Local Law 11 — which requires regular facade maintenance.

You should be able to find out from the co-op when each of these things were last done, and that will help you a little. You should, however, have $10K tucked under the mattress after you buy no matter what, because leaks always come when you least expect them.

Posted 11 years, 4 months ago at 11:06 am.

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We are selling a $4 million apartment in New York City, and have two family friends who are realtors. How do we pick which one to work with?

Are you buying, too? If you are obligated for reasons of family politics to involve them both, the “easiest” thing to do is to have them both pitch you for the sales listing, and to use the one you don’t pick as your buyer’s broker.

Since you then will be working with a buyer’s broker who has never pitched you as a buyer’s broker, you will need to sit down and have a  conversation that you are bringing him on the deal because of family ties, but you expect x, y, and z. This conversation will be slightly uncomfortable to have, but it’s waaay easier than trying to get brokers from different firms to market a co-exclusive.

Posted 11 years, 5 months ago at 10:45 am.

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How do I enter a housing lottery?

Information about New York City-subsidized apartments is here: http://www.nyc.gov/html/hpd/html/apartment/lotteries.shtml

TIP: You will be given priority if you live in the neighborhood you are trying to win the lottery in, so if you want to win a lottery in the part of Harlem that’s Community Board 10, start renting in Community Board 10. There’s still no guarantee that you will win, but it will up your chances.

Posted 11 years, 6 months ago at 7:35 pm.

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I’m going to need my parents’ help to buy an apartment in NYC. How does a co-purchase work?

Nice question from Trulia Voices.

The hope that the questioner had was that the parents could get a mortgage, and then just give him the tax deductions — but unfortunately, in New York apartments, it’s a little more complicated than that.
There are lots of co-purchase situations in NYC, but if you’re buying into an apartment building, it depends on what building you’re buying into, so you need to be working with a buyer’s agent. Some co-op/condo boards are flat out not going to allow a co-purchase. Some (most condos) don’t care if you put the Easter Bunny on the mortgage. But there are many co-ops that fall in between, and depending on the area you’re looking in, you don’t want to rule those out.

There are typically two structures. 1) Child has job, so parents gift down payment, and child gets mortgage in his/her name and makes future payments. I did a deal like this in the Financial District, and the child got a “stated” (no-income requirement mortgage) at about 8%. The problem here is, what if the child still can’t pass the board on income alone?

If the kid is a lawyer and just needs a little down payment help, great — but in the case of this deal, the child could not have passed the board on income alone. So we had to structure a housing allowance from a family trust so that the board felt comfortable with the child’s income. Complicated, but it worked.

2) Parents co-purchase with child. This is generally what you have to do when the child does not have a job — let’s say he/she is in medical school. This means that there’s one mortgage that is taken out on the strength of the family (i.e. parental) income. The mortgage will then be at the best available interest rate. This is a more typical situation, and one that many buildings will feel comfortable with.

Its disadvantages are that you have to do three board packages, which means you’ll need references and financial qualification info for your parents even if they’ll never set foot in the apartment. They’ll also have to fly in from wherever to go through the board interview, and they’ll be forever fiscally responsible for that apartment — which some parents are just not into.

Posted 11 years, 6 months ago at 6:41 am.

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Are there new mortgage limits in the Bush stimulus package?

Theoretically, yes.

The focus of all the writing about H.R. 5140, the Economic Stimulus Act of 2008 which President Bush signed Wednesday, has been the tax rebates.

But for those of us in the real estate world, the mortgage provisions are waaay more interesting. A section of the Act, Title II, will raise the limits that loans can hit (”conforming loan limits”) to be bought by Fannie Mae and Freddie Mac.

In other words, the line where a mortgage crosses from jumbo to conforming gets hiked.

In other, other words, that $500,000 mortgage that you were going to pay 6.75% for will probably only cost you 6.25%.

That’s $1,800 a year, a lot of money to a first-time homebuyer.

How this is all going to shake out is kind of technical, because the limit move will be capped at 125% of the average price in your region, and only the government knows how they want to define those regions.

But in New York, San Francisco and Chicago — places where prices are high and first-time buyers need the help — the limit could come up as high as $729,750.

The rate savings is going to be hard to predict too - I used sample rates that may seem a little on the high side, to balance out a quarter-point to half-point penalty that New Yorkers might suffer for buying a co-op. Your savings could be as high as full percentage point, which nicely balances out the quarter-point that rates have moved up recently.

Check with your lender, especially if you’re looking for a loan in the $417K to mid-$600K range and have a credit score above 700 or so. It’s worth exploring because sometimes mortgage lenders forget to give you that last quarter point of savings unless you ask for it.
For the geeks, a great article from Inman News here and one more from Mortgage News Daily here

Posted 11 years, 7 months ago at 10:11 am.

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Is being a first-time buyer going to hurt my negotiating position?

Thanks to Annie of Trulia Voices for this one. The short answer is, of course it is. If the seller finds out you are a novice buyer, they will likely try to put one over on you.

Even if they don’t find out, as a rookie, you probably can’t move very quickly, so you’ve lost one weapon — speed — that it would be nice to have in your arsenal.

However, don’t fret over what you can’t change.

Since that sounds kinda grim, let me give you the #1 negotiating tip for any buyer:

Fall in love with TWO homes.

Why? because if negotiations are going to be easy, they’re going to be easy. If they’re going to be difficult . . . well, you’ve fixed things up a little bit.

If you love just ONE house, you are stuck with a psychologically loaded choice - “I buy house A on the seller’s terms and become a homeowner, or I stick to my guns and don’t buy it. But then I’ve FAILED to become a homeowner.”

If they turn out to be difficult, and you followed Front Porch advice and love TWO houses, your choice becomes “I buy house A on the seller’s terms and become the homeowner of house A, or I could stroll off and buy house B over here .. .”

See how much better that is?

Posted 11 years, 7 months ago at 8:31 am.

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I’m a first-time buyer, how do I know when is the right time to buy?

We’re seeing a lot of first-time buyer nervousness both in New York (in anticipation of a possible price drop) and nationally (in anticipation of a price drop that isn’t just possible, but likely).

The old-fashioned Realtor response — because we really do want to sell you homes, but we don’t want to sell you homes that you’ll have to give back to the bank twelve months later — is to try to move when you’re emotionally and financially ready.

This is especially good advice for younger buyers — buyers in their twenties and thirties — because they can’t necessarily hold property for a long enough time period to make sure it’s a good investment. Typically, in the U.S., property has been a good investment if you hold it for ten or fifteen years — but for a younger buyer, that can be hard to do, since a new job or a new baby might force a move before then.

So the trick is to be sure you want to “settle down” — and to be financially ready. I recommend that you have a 3% to 5% down payment ready to go before you consider buying your first home.

Posted 11 years, 8 months ago at 1:29 pm.

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What should the buyer’s lawyer be doing?

This came from a Linked In questioner who was obviously hacked off (I changed the wording a little to protect her privacy).

Here’s my answer:

Communication in a real estate transaction in New York City (where I am licensed) involves multiple parties — often a buyer’s agent, a seller’s agent, and a buyer’s and seller’s lawyer.

Agency and fiduciary duties are different. The buyer’s lawyer is an agent and a fiduciary of the buyer. The buyer’s agent is a fiduciary of both buyer and seller, but an agent of the seller.

This generally creates a situation where the buyer’s agent is suspicious of the buyer’s attorney. The buyer’s agent might think the buyer’s attorney isn’t detail-oriented enough, and doesn’t work hard enough — “just a paper pusher.”

It also generally creates a situation where the buyer’s attorney is suspicious of the buyer’s agent. The buyer’s attorney might think the buyer’s agent — with her ultimate allegiance to closing the deal at almost any cost — is, oh “a slimy weasel.”

In reality, as the buyer, what you need to do is to inform BOTH members of your team what you want at all times. This actually has a way of working out.

Let’s see how this works in practice. Let’s say the contract is being negotiated, and the buyer wants something put in the contract, which is being drawn up by the seller.

1) Buyer calls both her agent and her attorney, and says, “I want the dining room chandelier.”

2) Buyer’s attorney calls seller’s attorney, and is allowed to operate with latitude to achieve buyer’s end. So the buyer’s attorney says, however his/her style works, “hey, we want the chandelier in the contract.”

3) Seller’s attorney agrees.

4) Seller’s attorney forgets to tell his paralegal.

5) Contract is issued from seller, without clause that buyer wants.

6) Meanwhile, buyer’s agent gets her credit card bill, and decides to get religion and do some work. Buyer’s agent calls seller’s agent, says, “hey, where’s our contract, have you sent it yet? Is your seller okay with throwing in the chandelier?”

7) Seller’s agent calls seller’s attorney (seller’s agent first needs permission from seller to speak directly with the attorney, but will usually get it) and  says “did the contract go over? Did you put the chandelier clause in?”

8) Seller’s attorney strikes forehead with palm of hand.

9) Seller’s attorney calls buyer’s attorney, asks him to write in chandelier.

10) Contract is presented to buyer for signing. Buyer sees that change on chandelier has been handwritten in, and is not initialed by seller’s side. Buyer wonders why she is spending (FILL IN AMOUNT HERE _____ dollars) to work with a team of idiots. Swears never to move again.

11) Buyer calls her team on the carpet; asks questions about apartment-buying process on LinkedIn.

12) Buyer’s attorney kisses buyer’s butt, calms her down, gets her to sign contract.

13) Buyer’s attorney sends signed contract goes back to seller’s attorney, explains buyer was temperamental about chandelier. Seller’s attorney has seller initial chandelier change, everything works out fine.

I know that this was the long way around the bases, dear readers, but I hope it made you laugh, and I hope it drove home the point that it’s the strength of your team that will ensure a successful closing.

Posted 11 years, 9 months ago at 5:40 pm.

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