New York City Real Estate Blog

February chart appearing in the current issue of Crain’s New York Business

Source: Crain’s New York Business
matrix.millersamuel

Tips for buying a new home

The new housing market rose 4.8 percent in 2006. Sales of new single-family homes finished out the year at a seasonally adjusted annual rate of 1.12 million units, according to figures released in a joint report by the U.S. Census Bureau and Department of Housing and Urban Development. Compared to numbers released by The National Association of Realtors, existing home sales for 2006 finished at a seasonally adjusted annual rate of 6.22 million units -- the third highest year since NAR began tracking home sales in 1968 -- you can see that new home sales accounted for about 15% of all home purchases in 2006.

For those who are buying a new home, here are couple of tips:

• Mortgage Tips for a Soft Real Estate Market
  
• Mortgage Resources
  
• Ways to Find a Real Estate Agent

Buying a New Home From a Builder(HomeBuying)

IF you can't afford the premium that condo's get in NYC, Think Sponsor Sales

Sponsor Unit: Apartments that are held as an investment by the sponsor - the original developer who built the building or converted the the building to a co-op. Sponsor apartments are usually exempt from board approval.

In a co-op, sponsor units are called "unsold shares" and they can be marketed by the sponsor until they are all sold. This process can take many years in a co-op or condo when a converted building has rent-regulated tenants who are not required to vacate.

Typically, in a Sponsor sale there is:

less paperwork required and a no board approval process

minimum down payment needed to finance the deal, even if non-sponsor sales require more

fees passed down to the buyer that are normally paid by the seller; such as transfer taxes, filing fees and legal fees

Sponsor Sales in Your Neighborhood?(UrbanDigs)

A co-op can vote to declare itself as smoke-free environment

Very interesting post by blogger Matrix discusses the prohibiting smoking in the co-ops rule that can affect only new buyers. This is what Matrix has to say about the value of the co-ops:

Its not clear whether this restriction would have an impact of values within the building or not, but I suspect it doesn’t, or if it does, its either nominal or virtually impossible to correlate with empirical evidence. Anytime you add a restriction to the marketability, you risk limiting the buyer pool that would be interested in a purchase. However, because of the health issues are involved, the same argument could be made in the opposite direction because you may actually atract new buyers looking to avoid such an environment which provides an offset to those buyers you may have lost.

http://matrix.millersamuel.com/

New Co-ops Tax Deductions Rule

A RULING by a federal appeals court last month could increase income taxes for thousands of co-op owners, co-op lawyers and accountants say.

The ruling prevents co-op owners from deducting the portion of maintenance charges related to the co-op's property taxes when they calculate their alternative minimum tax.

     

Tom Bloom

    While the decision puts co-op owners on an equal footing with owners of houses and condominiums for purposes of computing the minimum tax, co-op lawyers say that since many co-op owners took the deduction in previous years, they could be required to pay additional taxes - and interest - if those returns are audited.

"Thousands of co-op owners are going to be affected by this decision," said Ira Z. Kevelson, a Manhattan lawyer and tax accountant who represented the co-op owners in the case. "I have several hundred clients in my office alone who have been taking this position for years. And my firm is not unique."

The alternative minimum tax, he said, is a method of computing income taxes that was originally designed to prevent the wealthiest taxpayers from using tax deductions and credits to significantly reduce their tax liability. Over the years, however, increasing numbers of middle-income taxpayers have become subject to the minimum tax, largely because the decades-old rule does not account for inflation.

Under the rules for calculating regular income taxes, Mr. Kevelson said, taxpayers deduct expenses like mortgage interest and property taxes to arrive at their taxable income. Under the minimum-tax rules, however, property taxes - and deductions like state and local income taxes and personal and dependent exemptions - must be added back to arrive at the taxpayer's alternative minimum taxable income. If the tax to be paid using this method is higher than that from the regular computation, the higher amount must be paid.

But accountants like Mr. Kevelson have taken the position that while tax laws clearly allow co-op owners to deduct an amount equal to their proportionate share of property taxes paid by the co-op, the laws for computing the minimum tax, they say, just as clearly do not require them to add back such amounts. That is because, they say, these amounts are not property taxes but are maintenance payments.

That was the position taken by Mr. Kevelson's clients in the case, entitled Ostrow v. Commissioner of Internal Revenue. In that case, he said, the Internal Revenue Service challenged a $10,489 deduction that Lauren Ostrow and her husband, Joseph Teiger, claimed on their 2001 tax return when calculating their alternative minimum taxable income. The amount was the portion of their maintenance charges related to real estate taxes paid by their co-op.

Mr. Kevelson, along with Marc Luxemburg, a Manhattan lawyer who filed a brief in the case on behalf of the Council of New York Cooperatives and Condominiums, maintained that the law does not require co-op taxpayers to add back such amounts, even though house and condo owners are required to restore property-tax deductions.

On Nov. 22, the United States Court of Appeals for the Second Circuit, affirming a lower court ruling, disagreed, saying that since Congress's intent was to treat co-op owners the same as other homeowners for tax purposes, co-op owners should have to add back the deductions.

Joel E. Miller, a Queens tax lawyer, said the ruling could result in affected taxpayers having to pay additional taxes, plus interest, for previous years. He said that under tax laws, the I.R.S. can go back at least three years to recalculate a taxpayer's liability and bill the taxpayer for any deficiency, plus interest. Mr. Kevelson said he plans to appeal.

A Ruling on Co-ops and Tax Deductions

Ownership of a co-op in the NY

According to Mr. McGaughey,  Manhattan co-op lawyer, the laws for co-op are somewhat vague and does not give a clear cut for many situations. For example, if an unmarried shareholder dies and leaves an apartment to a life partner ,possibility to refuse transfer ownership, leaving apartment someone else than wife or child etc are not specifically described and characterized by law.

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Ownership of a co-op, however, is ownership of stock in a corporation - and securities are personal property. In New York, Mr. McGaughey said, a husband and wife could not take title to co-op shares as tenants by the entirety until a state law was passed in January 1996 allowing them to do so.

A married couple who bought a co-op apartment before 1996 took title either as joint tenants with right of survivorship (which is similar to a tenancy by the entirety) or as tenants in common. And, Mr. McGaughey noted, unless the couple specified that they wanted to be joint tenants - and their wishes were reflected on the stock certificate - they would be presumed to be tenants in common.

With tenancy in common, a deceased shareholder's shares pass through his or her estate to heirs or beneficiaries. And while that would not be a problem if the decedent left the shares to the spouse in a will, it is possible that without a will, the shares would be split between the spouse and any surviving children.

http://www.nytimes.com/2005/10/16/realestate/16home.html

PARK SLOPE $585,000

348 12th Street
Prewar three-bedroom, 11/2-bath co-op, 1,050 square feet, with windowed eat-in kitchen with new appliances, living room with wood-burning fireplace, washer/dryer, hardwood floors, renovated bath, window A/C, N/E exposures and private roof deck; building is pet-friendly and features storage in basement. Maintenance $686, 60 percent tax-deductible. Asking price $599,000, on market one week. (Broker: Patricia Neinast, the Corcoran Group)