Buying With Help From Mom and Dad
By CHRISTINE HAUGHNEY 
March 18, 2007 
LIKE many parents, Madhu and Kishore Agrawal do whatever they can to help their children. For their 25-year-old daughter, Natasha, that help has ranged from sending her through Tufts University to watching her cat, the General, when she traveled to India to visit relatives late last year. Recently, they made the most financially demanding commitment so far: they are putting up most of the money to help her buy a two-bedroom penthouse apartment in Williamsburg, Brooklyn, for $900,000. Space and privacy will be a big change for Ms. Agrawal, who now lives in a sixth-floor walk-up in Chelsea with three roommates, but it does not come without complications. Or, as some might say, strings. In exchange for getting financial help from her parents, there are certain things she knows she cannot do: for instance, she cannot let her boyfriend move in. She accepts that. More contentious is the matter of the couches she bought from a thrift store. Ms. Agrawal says the couches will be moving with her, because they will blend with the deep greens, yellows and oranges that she plans as the color themes for the new apartment. “I’m not ready to give in,” she said while seated in a SoHo cafe during a break from her job, working in the promotions department at an independent music label. “It’s not like me having furniture I like will depreciate the value of the house.” Conflicts like this are becoming more common in New York City real estate as more parents — not all of them wealthy — help their adult children with their first home purchases. A decade ago, younger New Yorkers were able to buy their own apartments. That’s because studios and one-bedrooms cost $150,000 or so. Now, first-time buyers are paying nearly four times that for the same apartments, according to data from the Real Estate Board of New York. Brokers say they see more buyers turning to their parents for help with $100,000 down payments or monthly mortgage payments, or for temporary loans to their bank accounts so that they can pass muster with certain co-op boards. As a result, more parents are remembering how their own parents helped them, looking at their own financial situations and entering into complicated business partnerships with their adult children. In many cases, they are expecting some control over the furniture, the appliances and even how often they can use the apartments for their own visits to New York. “There are a lot of stipulations in these deals,” said Amy Herman, a Halstead Property agent who has represented about three dozen parents helping their adult children buy apartments in the past five years. “They gift with a caveat.” She said that only one of these deals closed smoothly and that many brokers no longer represent parents and adult children. “It’s just very time-consuming,” she said. More buyers are turning to therapists to help them work through how they feel about depending financially on their parents when they have carved out independent careers and lives. Dr. Richard Shadick, a Manhattan psychologist who works mainly with 20- and 30-something New Yorkers, said that “a good portion” of his cases focus on the problems of seeking financial help from parents to pay for housing. Parents who lend money to help their adult children can make demands that include becoming engaged to the person they are living with, he said, or signing prenuptial agreements allowing them to keep the real estate in their names. He finds that no matter how generous parents may be, their children can feel embarrassed that they can’t afford to pay for their own housing. “Even if the parents gift money, there is an emotional connection to the money that’s given,” Dr. Shadick said. “A recipient may feel that they are not able to do it on their own and that they’re less of an adult. Part of the issue is the cultural trend of delaying separation with their children, and the other part is the high cost of real estate in New York.” When these discussions get tough, first-time buyers in New York City can’t opt for extra-large mortgages as buyers can in the rest of the country. According to the National Association of Realtors, 45 percent of first-time buyers nationwide put no money down, but in New York City most condominiums require down payments of 10 percent, and most co-ops require 20 percent. In many cases, parents make loans to their children under the assumption that New York City real estate will continue to rise in value. But because there is no guarantee that it will, Asheesh Advani, a former World Bank consultant who founded CircleLending Inc., a Waltham, Mass., company that organizes all types of loans among relatives, says that adult children should treat loans from their parents like loans from banks. He suggests that they draft a formal document stipulating that they will make monthly payments on their loans, rather than paying their parents back when they sell the apartment. This way the children get an annual tax deduction for the interest paid on the mortgage, and the parents don’t pay all of the taxes that they would if they offered an outright gift. The children’s contract might stipulate that if they sell they apartment, they must pay back their parents, just as they would pay off a mortgage to a bank. The children can keep the profits, if any, but if the apartment has declined in value, they still pay their parents back. In neighborhoods like Williamsburg, some parents are buying apartments outright for their children. Apartments there typically cost $700 or so per square foot, compared with more than $1,000 in the financial district in Manhattan, said Christine Blackburn, a Prudential Douglas Elliman associate broker at the building where the Agrawals bought. Skip to next paragraph Chester Higgins Jr./The New York Times One of the issues that Natasha Agrawal and her parents have yet to work out is whether her two thrift-store couches will be moved to the new apartment they are buying for her in Brooklyn. She added that parents or children with trust funds are buying about 25 percent of the inventory in Williamsburg. In Ms. Agrawal’s new building, parents bought about 10 percent of the 36 units. Ms. Blackburn, too, finds that most of these arrangements carry conditions. “The girls are not allowed to have the boyfriend move in,” she said. “With the sons, they expect them to have roommates.” Dr. Agrawal is a surgeon at Staten Island University Hospital’s South Site, and he and his wife, who live in the southeast Annandale section of the island, have investments in the stock market and in real estate. They said that they wanted to help their three daughters equally. They had already bought their daughter Monisha, 29, an apartment on the Upper West Side, but when she married, she needed a larger place. They have told their third daughter, Pia, 23, that they will help her in the future. For Natasha, they wanted more room to grow. The Agrawals began looking in Williamsburg after a family friend mentioned that he was working as a contractor on a condominium there and talked about the strength of the market. The couple decided that an investment there would be a good way to give Natasha a place to live and to teach her how to build equity. She is contributing about 20 percent of the down payment toward the purchase, which translates into about $18,000, and $1,000 for the monthly mortgage payment plus utilities. The Agrawals also tried to balance their daughter’s requests to buy something understated and environmentally sensitive with what they saw as a potentially profitable investment. “She doesn’t want high-rise,” Mrs. Agrawal said. “She doesn’t want fancy. She doesn’t want amenities. We looked at every loft in Brooklyn.” While the Agrawals are enthusiastic about the apartment that Ms. Agrawal chose, they haven’t figured out all of the decorating and financial arrangements. Mrs. Agrawal offered to resolve the dispute about the thrift-store couches by taking her daughter shopping and buying her new furniture. To make her parents feel more comfortable, Ms. Agrawal countered by proposing to have the couches professionally cleaned before they go to the new place. The Agrawals do not plan to put the financial arrangements in writing. Because Ms. Agrawal is helping with the monthly payments, the deed to the apartment will be in her name and her parents’ names, her mother said. She added that they would give their daughter 20 percent of the profits when they eventually sell. Ms. Agrawal said she did not expect her parents to share the profits with her. As she put it: “It’s extraordinary that they bought me an apartment. But it’s not what I expected. My parents have done enough for me. ” These financial relationships can become far more complicated when the apartment in question is a Manhattan co-op, because boards have come up with rules that limit how much financial help buyers can get from parents. Brian Spence, a 29-year-old event planner in Manhattan at Deloitte, the accounting and consulting firm, discovered this late last year when he decided to live separately from his partner of five years, and he started looking for an apartment. He quickly found that many co-ops stated outright that they didn’t accept buyers who received help from parents. While he had saved about $30,000 to buy a studio, he realized that he would need his parents to match that amount for him to come up with a 20 percent down payment. In December, Mr. Spence found a 300-square-foot studio at 457 West 57th Street for $299,000 and persuaded the seller to accept $265,000. The co-op board required that he get his parents to put in writing that their contribution was a gift and that he did not have to pay it back. So he called his parents in Midville, Ga., explained that he had negotiated a deal, and asked them to give him $26,500 and write a letter saying that this was a gift. They agreed. “I was asking for an equity partner in this,” Mr. Spence said. “I felt like we were going into it together.” His father, Gary Spence, a contractor, said that in 1972, his own father gave him three acres of land to help him build his first house and move his family out of a mobile home. He was sold on his son’s efforts to buy when he found that Manhattan prices had dropped slightly. “I don’t really see anybody losing money up there,” Mr. Spence said. Brian Spence said that there are some implicit assumptions about accepting his parents’ help. Three to four times a year, his mother and her cousins or her friends visit New York and stay with him. He expects that in his new apartment he will continue to play tour guide for his relatives. He also says that as their only child, he would be quick to move back to Midville (population: 457) if they ever needed his help. His broker, Jamie Breitman of Bellmarc Realty, said that the smoothness of Mr. Spence’s deal was highly unusual. But even parents and adult children who work out such financial details smoothly have different attitudes toward the arrangement. Marilyn Kane, who has run Butler Kane Commercial Real Estate in Manhattan with a partner for 17 years, offered to help her 26-year-old son buy a $500,000 one-bedroom co-op in Murray Hill. The son, who has a different last name, asked not to be identified because he did not want his co-workers to know how much his mother had helped him. In preparing to buy the apartment, Ms. Kane said, she encouraged her son to live at home so that he could save some money. After he had accumulated $50,000, she offered to set up a proportional investment agreement with him. He would pay 20 percent of the down payment, 20 percent of the mortgage, 100 percent of the maintenance and 20 percent of any renovations to the apartment. If they were to sell, he would get 20 percent of the profits. Ms. Kane said that she plans to put this agreement in writing before they close on May 1. Ms. Kane, her husband and her son will have their names on the mortgage and apartment documents, but she said she had tried to limit the strings attached to the deal. She and her son shopped for kitchen appliances together and ultimately agreed on all of them. “He has a good sense of taste,” she said. “I probably would have veto power if I thought it was awful because I wouldn’t want my investment to have something uncomely.” Still, Ms. Kane wanted to help because she had not received help from her own parents and could not buy in Manhattan until she was in her 40s. “Truthfully, at times, I really resented it,” she said. “I believe in helping children and being generous, but not necessarily handing them things on a silver platter.”
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Tips for Buying a house in the Winter
Wednesday, Jan 04, 2007
If you've been thinking about buying a new home, winter is the time to start getting serious. Here are a few reasons to brave the cold and go on a house hunt: The winter season has fewer units on the market, and sellers tend to need to move from their property. You can use that to your advantage to get a favorable deal. Winter has fewer buyers in the market. Looking for a home in the winter can be inconvenient, and people are less likely to move.
Families also tend to be on a September to June cycle because they are unwilling to move their children to a new town in the middle of the school year. Fewer buyers means less competition. Lenders also usually have fewer loans to process and less paperwork to deal with (though this can change quickly if rates fluctuate). With lenders less hassled, you can expect a smoother process to get approved for a mortgage. But, as reported in Bank rate.com, there are exceptions to this rule, most notably in warmer parts of the country (especially Florida), ski towns, and in parts of the country where demand is so strong that it will not slacken during the winter months.
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A red single-lane covered bridge in Cornwall, a popular weekend town in northwestern Connecticut.
By C. J. HUGHES Published:
February 9, 2007
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THE way bumper stickers and T-shirts tell it, husbands would rather be fishing. But that doesn’t mean they can’t be house-hunting at the same time. In fact, a second home that sits just steps from a favorite fishing hole may be what all serious anglers dream about. Well, Bruce Whiteford made it happen. In May, he bought a house in Cornwall, a Litchfield County town in northwestern Connecticut whose ragged western border is formed by the Housatonic River, where he has fly-fished for years. His two-story house, built in 1900, has four bedrooms, three baths and 3,400 square feet under its gabled roof, and sits on about half an acre in West Cornwall, one of the town’s three sections (with Cornwall Village and Cornwall Bridge). The house, which cost $500,000, also has a sunny studio where the previous owner used to paint — in Cornwall, creative types, like bass and trout, are plentiful — and that will be put to good use by Mr. Whiteford’s wife, Briggs, who also paints. Both of them, and their two children, are also pleased that their country retreat is just 50 miles from their year-round home in Katonah, N.Y., a hamlet in Westchester County. And much of that drive is on uncrowded and scenic back roads. “Cornwall doesn’t take a lot out of you to get to, and to go home from,” Mr. Whiteford said. “And even though it’s fairly close, it seems very rural and quaint.” Its quaintness sometimes seems to channel Currier & Ives, especially in West Cornwall. There, a 242-foot-long red covered bridge, wide enough for just one car, drops drivers amid a tidy clutch of 19th-century wood-frame buildings. The village is protected on three sides by pine-laced hills. In Cornwall Village, slender rock posts in front of center-hall colonials are topped with metal rings once used by travelers to tie their horses. And in Cornwall Bridge, Greek Revival homes with thick pilasters are squeezed between river rapids and railroad tracks. That historic charm sealed the deal for James Sheffield. Twenty-five years ago, he paid $180,000 for a 2,500-square-foot house in Cornwall that has four bedrooms and three baths and is on five acres down a dirt road. Today, it could fetch $700,000, he said. A devout canoeist and kayaker, Mr. Sheffield, who lives in the Gramercy Park neighborhood of Manhattan, raves about Cornwall’s bodies of water, including the Housatonic, Mohawk Pond and Cream Hill Lake. The town’s charitable spirit also earns his praise. Residents actively support neighbors who need help, said Mr. Sheffield, who once ran an international health agency. Volunteers with the local chapter of Friends in Service of Humanity — FISH in Cornwall — for example, drive elderly residents to doctors. In addition, a local foundation, the Wilbur A. Johnson Fund, can be approached to help pay bills for heating oil. As it is, Cornwall’s skyrocketing house values make living there too expensive for some local residents, Mr. Sheffield said. “But we’ve mobilized ourselves to deal with the challenges,” he added. The Scene With five-acre zoning throughout much of Cornwall, there’s typically a lot of space between homes, allowing for plenty of privacy. During the winter, Mohawk Mountain Ski Area is a draw for those who like to hit the slopes where snowmaking was pioneered back in 1949. Mohawk, in its 60th year, now has 24 trails, half open at night. A lattice of cross-country trails — hiking paths come summer — also graces the town. A fairly flat section of the Appalachian Trail, along the river in Sharon next door, is also a popular place to ski. Writers who call the town home, like Alex Prud’Homme, occasionally stage readings at the four-year-old library in Cornwall Village. The former library, next door, now holds town offices and a community center and was the site of a three-hour contra dance on a Saturday night last month. Restaurants in Cornwall are few and far between, though places like West Cornwall’s Wandering Moose Cafe, which serves three meals a day, pick up some of the slack. The corner table provides a near-perfect view of the covered bridge. There are only a handful of working farms left. But weekenders often lease parts of their land to farmers to grow crops, or even just give them their pasture grass, which becomes cow feed, in exchange for mowing it. Bucolic landscapes are a result. Further solidifying the town’s rural nature is that much of the land is protected state forest. Also, hundreds of acres are permanently off-limits through easements, in which property owners donate future development rights to private conservation groups in exchange for tax benefits. The West Cornwall Market, which sold groceries, closed last December after a three-year run. Although Baird’s General Store in Cornwall Bridge sells locally grown produce, for large grocery purchases, residents must drive to the Super Stop & Shop in North Canaan, 16 miles from the town hall. The Real Estate Market There are just 833 residences in Cornwall, according to a recent tax assessment, and they don’t change hands often, real estate brokers say. And what does sell tends to be expensive. Home values increased by up to 50 percent from 2001 to 2006, with the average house and lot now worth $467,000, according to tax records. Ten houses sold in 2006, according to the Connecticut Multiple Listings Service. They ranged in price from $275,000 to $1.8 million, with the most expensive houses situated in West Cornwall and Cornwall Village. The average price, $686,000, might be for a house whose oldest section dates from the mid-1800s, with three bedrooms, three bathrooms and at least three acres of land, according to Frankie Winter, an agent with Sotheby’s International Realty in Washington Depot. Such a house has probably also had just a few owners, which means that outbuildings may need a lot of work, especially if they’re going to be turned into guest cottages or offices, Ms. Winter said. Cornwall homes are generally listed at about 10 percent less than similar ones in Roxbury and Washington, two weekender-friendly towns to the south, according to current listings. Brand-name cachet could explain the difference, though Cornwall buyers, according to brokers, usually use different criteria. “Cornwall is not so flashy,” Ms. Winter said. “It’s definitely a lower-key spot.” For those fortunate enough to have big plots of land passed down through generations, building can be an option. Adam Van Doren put up his own 3,500-square-foot, two-story shingled home in 2001. It has four bedrooms and three baths, and is on a former farm near West Cornwall that his grandfather bought in the 1920s. Mr. Van Doren, a watercolorist who lives in Manhattan during the week, shares the 200-acre compound with his parents, uncle and cousins, who have their own homes. But the land, said Mr. Van Doren, seems uncrowded and pastoral. “If my grandparents came back,” he said, “they would actually recognize this. ” Lay of the Land POPULATION 1,489, according to a 2005 estimate by the Census Bureau, plus probably at least 1,000 weekenders. SIZE About 46 square miles, including Cornwall Bridge, Cornwall Village and West Cornwall. WHO’S BUYING Painters and fly-fishers, New York City bankers seeking rural retreats and European investors in the market for third homes. GETTING THERE Cornwall is about a two-hour drive from Midtown Manhattan. From the Triborough Bridge, take I-278 to the Hutchinson River Parkway, to I-684, to Route 22, and head north for 20 miles to Wingdale, N.Y. Drive east on Route 55 to Route 7, then north 12 miles to Cornwall Bridge. WHILE YOU’RE LOOKING Until May, off-season rates are available at the Cornwall Inn & Lodge (270 Kent Road, Cornwall Bridge; 800-786-6884; www.cornwallinn.com), where the 13 rooms start at $119 and include breakfast. Thursday through Sunday nights, the inn’s restaurant is open for dinner, and on the first Friday of every month, the adjacent tavern, with the only full bar in town, features local bands playing folk-rock, blues or zydeco. Slightly north, find the Hitching Post Country Motel (45 Kent Road, Cornwall Bridge; 860-672-6219), where 12 rooms, most with king-size beds, cost $65 until April, when warm weather kicks in the higher seasonal rates.

Mortgage Rates Kept In Check By Market Jitters
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Mortgage rates tracked by Freddie Mac in its Primary Mortgage Market Survey for the previous week mostly established new 2007 lows. The 30-year fixed-rate mortgage (FRM) lost four basis points from the previous week, averaging 6.14. This was the lowest rate since the week ended December 21. Fees and points were up from 0.4 to 0.5 point. The same week in March, 2006 the average rate was 6.37 percent. The 15-year FRM averaged 5.86 percent, also a new low for the year. The previous week it averaged 5.92 percent. Points were unchanged at 0.5. One year ago the 15-year averaged 6.0 percent. Five-year Treasury-indexed hybrid adjustable rate mortgages (ARMS) also recorded a new low for the year, averaging 5.90 percent, 3 basis points lower than the week before. Fees and points were 0.5 compared to 0.6 the previous week. This is 13 basis points lower than the 5/1 hybrid rate one year ago and the lowest the product has been since February of last year. Another new low for the year was scored by the Treasury-indexed one-year ARM which averaged 5.47 percent compared to 5.49 percent a week ago. Fees and points were unchanged at 0.6. According to Frank Nothaft, Freddie Mac vice president and chief economist, mortgages rates were down this week as volatility in stock markets elsewhere in the world led to concerns about the U.S. economy. "Uncertainties about the strength of the economy dominated the effects of other indicators, such as January's personal income growth and core inflation rate measured through the personal consumption report. Both increased at rates faster than had been expected, and potentially would have put upward pressure on interest rates. But the flight to quality due to the stock market's fall pushed bond yields down instead." "Looking ahead, as excess business inventories are worked off and the drag from residential investment diminishes, we expect real GDP growth to accelerate in the first half of 2007 to 2.6 percent and average 3 percent for the year. That considered we do not foresee significant movements in mortgage rates, with rates on 30-year fixed-rate mortgages averaging between 6.3 and 6.4 percent for the remainder of the year." Rates reported by the Mortgage Bankers Association (MBA) for the week ended March 9 were more mixed than Freddie Mac's. The average contract interest rate for a 30-year FRM decreased from 6.04 to 6.03 percent with points, including the origination fee, increasing to 1.38 from 1.27. Both the 15-year FRM and the one-year ARM increased for the week. The 15-year was up 5 basis points to 5.78 percent with points up to 1.22 from 1.24 while the one-year ARM was up from 5.79 percent to 5.86 percent with points decreasing to 0.76 from 0.8. All rate quotes are for 80 percent loan to value originations. Mortgage activity was up only slightly, increasing 2.8 percent on a seasonally adjusted basis and 3.2 percent unadjusted. However, there was a strong improvement in the level of mortgage originations since the same week in 2006 with volume increasing 19.1 percent. Refinancing as a share of overall activity increased from 46.1 to 46.2 percent and ARMs held their own, increasing to 21.9 from 21.4 percent of all mortgage applications.

Subprime News + Mortgage Delinquency =
Bad Day On Wall St.
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Lots of chickens came home to roost on Tuesday but they didn't exactly fly in unannounced First the stock market tanked for the second time in two weeks and while the subprime mortgage market got a passing mention the last time around; on Tuesday the blame for the 242.66 drop in the Dow Jones was laid squarely at the feet of the housing market. First the news about the subprime mortgage market got even worse with several major subprime lenders releasing news about their financial condition that could only be described as disquieting. Then Mortgage Bankers Association released delinquency figures for the fourth quarter of 2006 and that sent the market straight over the edge. New Century Financial which had taken heavy hits to its stock price over the last ten days and stopped taking new loan applications last Friday announced early on Tuesday that its warehouse lines had been closed by several major financial institutions making a bankruptcy almost inevitable. Analysts predicted that stockholders would not recover a cent from their holdings of the stock which was, within the last few months, valued at around $20. Later in the day the stock was de-listed from the New York Stock Exchange. Other mortgage companies were scrambling to secure continued funding as major banks eyed their own exposure to the subprime market through warehouse lines. Accredited Home Lenders said it had paid $190 million in margin calls from its creditors thus far in 2007 and is trying to raise fresh capital and renegotiate some of its financial relationships. Even General Motors which was reporting a lot of good news from its automotive business was hit by the mortgage market as mortgage losses at its former financial division, 50 percent of which it has recently sold, dragged down the results that Wall Street had expected. Then there were those delinquency figures. The MBA report is worth a thorough analysis, particularly in light of the many categories they use to present their data and we will attack the complete report later this week. Suffice it to say the headlines alone were enough to bring the stock market the rest of the way to its knees. The overall delinquency rate for one-to-four-unit properties, seasonally adjusted, was up 28 basis points from the third quarter to 4.95 percent. This was 25 points higher than the fourth quarter of 2005. Subprime and FHA loans were, as always, the hardest hit; 13.46 percent of all subprime loans are now delinquent, an increase of 77 basis points since the third quarter and an identical percentage of FHA loans were also not performing, an increase of 66 basis points. Delinquent prime loans increased from 2.44 percent to 2.57 percent and VA loans went from a delinquency rate of 6.58 percent to 6.82 percent. The stock market made a modest recovery on Wednesday with the Dow up nearly 60 points an hour before the closing bell. But where does the fallout end? A pessimist will tell you that many 401Ks hold stocks with subprime lenders or with the banks that own them as subsidiaries. Banks such as Citi and J.P. Morgan have warehouse lines with subprime lenders and with New Century already admitting it can not pay its creditors, can other lenders be far behind in defaulting on theirs? Then there are the builders who are already looking at large inventories of unsold houses that will now be harder to sell with many potential buyers closed out of access to sufficient credit or maybe even any credit. Those builders may pull back from plans to resume full-scale building this spring meaning more layoffs in the construction industry. Carrying it a step or two down the road, lumber mills, appliance manufacturers, and local tradespersons will also be effected as will retail outlets for building materials such as Lowes. As subprime lenders fail or file for bankruptcy, commercial building owners will be confronted with leases that are no longer enforceable although New Century's landlord stated Tuesday it would have no trouble releasing the several hundred square feet occupied by the company and at a higher rate than New Century had been paying. On the other hand, is this a time to panic? 96 percent of mortgagees are making their payments on time. Freddie Mac and Fannie Mae, the big players in the mortgage market claim they have little exposure to subprime loans. And it's not as though this shakeout has come as a surprise - analysts and economists have been expecting it for over a year. A few high risk companies will undoubtedly bite the dust and shareholders are going to wish they had opted for safer investments with a lower return. It is probable that cooler heads will prevail and that they will do so soon. Better managed and more risk adverse companies will purchase portfolios of their bankrupt competitors at a discount and go on to make more money, housing prices will return to more reasonable levels to compensate for tightened credit, a lot of people will get burned a little bit, a few will really suffer. But we probably aren't looking at Armageddon.