Sunday, May 18, 2014

8 in 10 Manhattan home sales all cash? Nope. Not even close.

Recently the Washington Post ran an article that offered some very discouraging information for buyers of Manhattan real estate. (8 in 10 Manhattan home sales are all-cash)

Fortunately, it's far from the truth.

Only 36% of Manhattan co-op sales (co-ops represent 60% of all sales) are all cash, as per Jonathan Miller, president and CEO of Miller Samuel Real Estate Appraisers and Consultants.

A full 64% of Manhattan co-op sales are financed.

The overall figure for all-cash sales in Manhattan is 45%, Miller says.   

This is still a high proportion compared to the way things used to be.  Sometime back before the flood, when I was in real estate school getting my salesperson’s license, our teacher told us that 99% of our deals would involve financing.

No more.

When the market’s tight and there is competition among buyers, the buyer who can pay all cash is the one who gets the property.  And mega-wealthy foreign investors are often looking for a place in the US to park their cash, as it may be safer here than elsewhere. 

This does not, however, mean that financing does not occur frequently.  

Let me repeat: a full 64% of co-op sales are financed. 

So you’re by no means automatically shut out of the game if you must finance. 

Just be sure you talk to a reliable bank or mortgage broker before you start looking for your new home so you have a good idea of what kind of financing you can get.  

And of course, remember that the qualifications of the building you want to buy in also have to be strong.  Not every bank will lend in every building.  There are a number of factors that can make a building unattractive to a bank.

Also, while the strongest offers are indeed all cash and the next strongest involve financing (the less the better) but are not contingent on it, do not ever make an offer that’s not contingent on financing unless you are absolutely sure either that you’re going to get it or that you can close without it.  

A good lawyer can write a rider to a contract that protects you in case the building doesn't measure up or the bank changes its mind at the last minute.  (That's why they get the big bucks.)

Yes, it does occasionally happen that buyers must default because of lack of funding, and no, sellers do not return their 10% deposits when this happens.

But can you still finance a new home?  Yes, of course. Just be careful.

As for the Washington Post?  They should have called Miller before they ran the article.

Any questions?  E-mail or call me,, 917-991-9549, and I’ll either know the answers or will get them for you.

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