Mortgage Matters

I asked Adam Turkewitz of Wells Fargo to comment on one of the challenges buyers trying to get a mortgage are likely to face as a result of the new lending environment we're in today:

What is Fidelity Bond Insurance? A fidelity bond is a form of protection that covers policyholders (in the case of a cooperative apartment - the shareholders) for losses that they incur as a result of fraudulent acts by specified individuals (in the case of a cooperative apartment - members of the board and managing agent). Fidelity Bond Insurance is synonymous with Employee Dishonesty Policy.

What type of coverage is sufficient? The amount that needs to be evidenced as fidelity bond insurance is constantly evolving depending on the amount of maintenance the building collects for the year. When we look at the audited financials for a building, we are looking at the maintenance that the building took in. The insurance should be for 3 months worth of maintenance for the entire project. As an example, if the maintenance collected in 2008 was $1,200,000 the building would need to have $300,000 worth of Fidelity Bond Insurance. Furthermore, we require that the managing agent rider be apart of the fidelity bond insurance.

How did I come up with that amount for coverage? Simple...

$1,200,000 / 12 (months) = $100,000 * 3 (months) = $300,000

Do all buildings need this? No. Any buildings with less than 20 units are exempt from carrying fidelity bond insurance. Any building 20 units and over are required by Fannie Mae to have this type of coverage.

Adam W. Turkewitz, CMPS
Private Mortgage Banker
Wells Fargo Home Mortgage
N2652-151
530 Fifth Avenue, 15th Floor
New York, NY 10036
(212) 805 1172 Office
(516) 456-3687 Mobile
(646) 253-7788 Fax
adam.turkewitz@wellsfargo.com
https://www.wfhm.com/loans/adam-turkewitz/index.page

Showings On Saturday?

Even in this slower paced market there are still quite a few listing agents who avoid showing their exclusives on Saturday. What can be learned about a seller with a position like this?

1) The seller's agent is serious about selling but also doesn't want to send a message of weakness to buyers. The thinking goes something like "...if the buyer is serious he will make time in his schedule to see this apartment during normal showing hours...". There may actually be some merit here. I've shown buyers apartments at 8am and 9pm and in my experience this 'tactic' is counter-productive and sends the wrong message.

2) The seller's agent is not serious about getting the most for his client - a very unfortunate turn.

I believe that within reason all agents should show their listings on Saturdays during conventional showing hours - 11am-7pm or so - depending of course on their owners availability. We have to remember how inconvenient it can be for owners to be out during showings but also understand how important ease of access is to the final result. If a buyer can't see an apartment the chances are increased he'll buy someone else's.

State Of The Market

This market is one of the most fascinating I've seen since I started in 2001:

* A very small percentage of apartments are closing significantly below peak values - more like 2004 prices.

* An even smaller % are closing above peak values - levels higher than 2006/2007.

* There's a healthy chunk of closing prices also off peak but more like 2005-2006 - about 15% of the number closed.

The volume of closings is definitely way up during the summer because it's compared to virually none in the previous 5 months. In some categories there's a backing up of inventory reducing it's price now. These owners have watched their neighbors close at what may be the new norms and understand conditions right now are better but are not guaranteed to stay that way.

Advertising Review

In this segment of "Inside New York Real Estate" we show some of the more interesting aspects of ads. What does and does not work and why?



I really like the presentation of this new one bedroom Condop in the Village, particularly the picture of the living room. I don't know if they added that rug just to sell the apartment or not but it works extremely well. The room has some interest because of the shadows and bookcase but the addition of this rug adds texture and depth in ways not usually seen - a master stroke. Their ask price is $825K (and maint $1,234) - now the lowest asking one bedroom in the building probably because of the lower floor. They reference "West Exposure" and "Full skyline view..." but my only questions are 1) why not show a picture of the view if it's so great? and 2) why not show photos of the lobby and more critically of one of the best roof decks in the city?

"...By preparing studies and reports the realtor educates...himself."