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If You’ve Got It, Flaunt It

Lenders and co-ops are tightening up—but it’s hard to say no to cold, hard cash.

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Illustration by Mark Nerys  

During the boom years, low mortgage rates had buyers borrowing as much as they could and spending as little as possible of their own money. After all, if you could take a loan at 4 percent, then invest your savings to return a reliable 8 percent a year, why not?

Those “reliable” investments are few and far between these days, and a rising number of well-off buyers are taking an opposite approach: forgoing mortgages altogether. One Upper West Side co-op says it has approved three all-cash applications in three months. “We’re not the kind of building that attracts the rich,” says one board member. “This is a dramatically different pattern.”

Of course, if you have the money, a straight cash purchase has always had appeal—it’s hard for a co-op to reject, and you don’t have to show your finances to a lender. All the same, the rich have until now tended to pay cash less often than you’d think. “Being a cash buyer wasn’t as important,” says Century 21’s Wesley Stanton. Whereas now, “not having to deal with the unknown is important [for sellers].”

Klara Madlin, president of the Manhattan MLS, says lenders have “gone from ‘If you can breathe, you get a mortgage’ to making you do somersaults.” They’re reserving their best rates for apartment hunters who put 25 percent down instead of the usual 20 percent. They are insisting on seeing more paperwork and requesting that co-ops buy more insurance. They’re even newly refusing to fund certain buildings altogether. “There’s a gauntlet of underwriting conditions to get through,” says real-estate lawyer Michael Carmody. “In this market, if you get an acceptable price from an all-cash buyer, it’s a done deal.”

Rick, a high-tech entrepreneur, says he’s shopping on the Upper East Side with $2.5 million, in part because “the stock market’s not the best place to park our money.” He’s counting on a big discount—maybe 20 percent—because his offer is likely to close quickly and painlessly. Madlin thinks that’s plausible: Going mortgage-free offers great leverage, she notes, and purchasers can expect at least 5 to 10 percent discounts and possibly more—though real lowballers, who want to pay 40 percent less than market rate, tend not to get anywhere, even with a suitcase full of $100 bills.


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