Thursday, September 14, 2006

Down payment? Charge it.

From the WSJ Real Estate Journal:

AmEx Makes Room on Its Cards For Down Payments on Condos

Coming up with the money for a down payment on a new condominium may soon be as easy as charging it: American Express Co. is expected to announce today that it will allow some customers to use its cards to make condominium down payments.

For now, the service appears to be limited to a select few: luxury-condo buyers in Manhattan. American Express is rolling out the program with New York real-estate firm Moinian Group, for one of its properties currently under construction -- the Atelier condominium in Midtown Manhattan. Both companies say they plan to expand the service to other properties and partners.

For condo buyers, the deal will allow them to earn reward points or frequent-flier miles on big transactions, while extending the amount of time they have to meet the down-payment requirements and eliminating the hassle of getting certified checks. Buyers will earn one point for every dollar charged.
...
Bill Glenn, American Express's head of merchant business, says the move is part of the company's efforts to expand the ways its clients can use its cards. The companies didn't disclose the terms of the agreement, although Moinian will pay American Express a fee on each transaction. The condo buyer won't be charged an additional fee.
...
Siva Tayi, a potential Manhattan condo buyer from Houston, plans to charge the 10% down payment on a $1.2 million two-bedroom unit in Moinian's Atelier condo on his Platinum card. "I thought it was a good idea to use the [card] and gain the points," says Mr. Tayi, who runs an information-technology staffing and outsourcing company. Not only does it eliminate the hassle of writing a check or having to wire money, he says, but with the 120,000 points he expects to get -- combined with the 300,000 points he has already accumulated -- "I can probably make a trip to India."

39 Comments:

Anonymous Anonymous said...

That is how we bought our first Place in JC.. Cash advance on a credit card 8 years ago.. Too funny

9/14/2006 03:19:00 PM  
Anonymous sarah said...

Hopefully the Senate hearings on the loan industry next week will nip this bad baby in the bud.

9/14/2006 03:23:00 PM  
Anonymous Anonymous said...

this is a bad...bad idea.

Man, people have really lost all common sense. Too much of the boob tube I guess.

bad, bad, bad idea.

SAS

9/14/2006 03:32:00 PM  
Anonymous Anonymous said...

I wanna be named in a story about how stupid I am....charging a down payment...yeah...great....oh and FYI...IT staffing is SO 1998.

9/14/2006 03:54:00 PM  
Anonymous Anonymous said...

When we did ot the Apt we were buying was $98K.. We borrowed 10K on the creditcard to buy it. We had no money and we were first starting out... And we were 1 month shy of getting married.. We paid it off 2 months later with the wedding money no honeymoon.It was a 0%. So in some cases it is fine

9/14/2006 04:09:00 PM  
Anonymous Anonymous said...

Anon downpmt charger.

Would you do the same thing today?


Pat

9/14/2006 04:39:00 PM  
Anonymous Anonymous said...

Wait about a year. You will be able to charge a whole condo in Jersey City.

9/14/2006 05:01:00 PM  
Blogger mred1 said...

This is a bad idea, which will continue to accelerate the demise of real estate by continuing to overextend credit. We are in a hypercredit fueled decline that most people are still not able to acknowledge, just like the 2000 stock market. Just wail till next year!

9/14/2006 05:27:00 PM  
Anonymous Anonymous said...

Pretty soon your frequent flyers miles will buy a condo.

BC Bob

9/14/2006 05:29:00 PM  
Anonymous Anonymous said...

I'm sure the people that do this plan to pay off the balance right away anyway. The RE company is probably the one absorbing the cost of it. It winds up to being a fairly simple promo - "Buy a condo from us and we'll give you 120,000 flyer miles".

9/14/2006 05:29:00 PM  
Blogger njresident286 said...

I am thinking of buy a car, and I want to put it on my Amex card. I have the cash to buy it, so I might as well earn the points. If you have the cash, put it on the CC that way you get the benefits of the points. That is free money. it is another story if you carry a balance..

9/14/2006 05:37:00 PM  
Anonymous Anonymous said...

Another stupid gimmick to suck in a few idiots again!

9/14/2006 05:44:00 PM  
Anonymous Anonymous said...

Why are people so desperate to buy a condo or a house? I really don't get it. I've been sitting on the sidelines for several years, watching my pile of cash grow and waiting for a good moment to buy. Why aren't more people this patient? Sometimes I think most Americans are spoiled children who want what they want, when they want it, and won't settle for anything less.

9/14/2006 06:45:00 PM  
Anonymous Anonymous said...

"Sometimes I think most Americans are spoiled children who want what they want, when they want it, and won't settle for anything less"

Yup, you got that right. That is why, if you travel around the blobe, not many people like Americans because they think just like this.

SAS

9/14/2006 06:55:00 PM  
Anonymous Anonymous said...

"Why are people so desperate to buy a condo or a house?"

It beats the hell out of me. Many of them are like hamsters, running on a spinning wheel as fast as they can, trying to keep up with Harry and Sally. Unfortunately, many of them have spun themselves out of control. Keep watching your pile of cash grow. You're patience will be rewarded.

BC Bob

9/14/2006 06:57:00 PM  
Anonymous Anonymous said...

good article
http://www.howestreet.com/articles/index.php/daily?article_id=3034
explains how the fed is only doing 1/2 the job

9/14/2006 07:14:00 PM  
Anonymous Anonymous said...

sorry the article doesnt start till 1/2 way down the page

9/14/2006 07:16:00 PM  
Anonymous Anonymous said...

from the housing bubble blog
"The Central Valley Business Times. “A softening home market is not by itself to blame for the jump in California home foreclosures says a San Diego attorney who specializes in helping those faced with losing their homes. ‘I’ve had a number of people in this last month, this is completely unbelievable and so foreign, their mortgage payments are more than their income,’ Mr. Brady says.”

talk about loose lending standards. hope next weeks commity sees this

9/14/2006 07:21:00 PM  
Anonymous Anonymous said...

People like to buy houses and condos because they like the feeling of ownership, and the relative freedom they have in tailoring their own place in accordance with their own taste. You generally can't remodel the kitchen in an apt you don't own. They also like stability, meaning, that as long as the mortgage is paid they don't have to leave. A landlord can decide to sell out from under you at any time, forcing you to move. The government believes home ownership promotes societal stability, hence the mortgage deduction. Property purchasers also have the chance to build equity in their abode, impossible when renting. Granted you are not guaranteed appreciation but you always have a chance. Ownership is not without its risks and hassles, but having been a renter and an owner of the course of the years, I have always preferred ownership to renting. After all the person you are renting from is an owner, were they foolish to buy?

9/14/2006 07:35:00 PM  
Anonymous Anonymous said...

If you had cash in the bank for the downpayment and had the choice of earning points or no points, any savvy consumer would use the card, pay the balance immediately and gather the points.

Amex is not going to offer this option to uncredit worthy customers, nor will other banks start making these types of loans to anyone other than those with the highest credit score.

9/14/2006 07:38:00 PM  
Anonymous Anonymous said...

"I have always preferred ownership to renting. After all the person you are renting from is an owner, were they foolish to buy?"

Its not foolish to buy a house... I totally agree, that is why I have 3 ;)

These days it cheaper to rent than own, do not be deceived.
Are you familiar with the word Arbitrageur? If not, check it out under the wikipedia.

Market timing is everything. Now is not the time, nor was it in the past 3-4 years. Because what we have here is a huge bubble were so called equity will go up in smoke. Leaving many people wondering what hit them because they thought "hey, I thought RE was only suppose to go up, its never foolish to buy a house".

Get the drift my fellow blogger..

SAS

9/14/2006 07:50:00 PM  
Anonymous Anonymous said...

"People like to buy houses and condos because they like the feeling of ownership, and the relative freedom they have in tailoring their own place in accordance with their own taste. You generally can't remodel the kitchen in an apt you don't own. They also like stability, meaning, that as long as the mortgage is paid they don't have to leave. A landlord can decide to sell out from under you at any time, forcing you to move. The government believes home ownership promotes societal stability, hence the mortgage deduction. Property purchasers also have the chance to build equity in their abode, impossible when renting. Granted you are not guaranteed appreciation but you always have a chance. Ownership is not without its risks and hassles, but having been a renter and an owner of the course of the years, I have always preferred ownership to renting. After all the person you are renting from is an owner, were they foolish to buy?"

Yes, I understand all of that, and I want to buy for many of those same reasons. But what I don't understand is the compulsion to buy even when the prices are high. You'd think that there were no more houses being built and people had only one chance to buy and that was it. It's ridiculous.

9/14/2006 07:57:00 PM  
Anonymous Anonymous said...

One more point blogger

"They also like stability, meaning, that as long as the mortgage is paid they don't have to leave"

How many people keep the same job as long as they keep a house?
Times have changed. Those days of one job and one house over the long haul are gone.

Yes, you may want to stay put in your cute house in your cute town, but your job and the oversea competition might say otherwise...

SAS

9/14/2006 08:05:00 PM  
Anonymous Anonymous said...

"Granted you are not guaranteed appreciation but you always have a chance."
9/14/2006 08:35:12 PM

We have had the most speculative run up in the history of this market,do I sign a mortgage committment with a lending institution for a ton of $ for a chance???????? Isn't AC readily available for a chance????
Yeah, you're correct that I can't remodel my kitchen, I would rather put the 100k in an investment that grows. What happens if your professional/personal situation changes?? What happens if your neighborhood declines??. You won't then give a shit about your cute window flower box. Yes,you can build equity,what happens if prices decline 20-40%. In my case my principal is safe and is earning interest. I keep on saying this (sorry if you read this), I rent a place to live. The I/O/ARM holder is renting $. My 3% rent increase is much more tolerable than their upcoming adjustment. Believe me, I have owned properties over the past 20 years, now rent. This is not the time to take a chance!!!!!!

BC Bob

9/14/2006 08:29:00 PM  
Anonymous UnRealtor said...

"After all the person you are renting from is an owner, were they foolish to buy?"


Depends. Last summer there were several recently-bought houses for rent where the rent would be thousands less than the mortgage payment each month. I'll pass on that "ownership."

9/14/2006 09:13:00 PM  
Anonymous Anonymous said...

"After all the person you are renting from is an owner, were they foolish to buy?"


Go ask the hundreds in Florida that have recently signed up for a crash course on how to be a landlord. Not by choice, they can't sell. Are these renters of money cash flow positive or upside down??

BC Bob

9/14/2006 09:21:00 PM  
Blogger Richard said...

anon 8:35 makes some points. y'all can rage against the machine all you want. the system was built around home ownership via the incentives to write off mortgage interest and property deduction. now i'm not saying right now is the time to buy, but you must look at your individual circumstances and the locale in which you're buying. to expect 10-20% declines over the next 12 months in all locales to me is just a pipe dream. i'm not saying it won't happen, but the odds are slim. you must look to your individual needs and wants and where you want to live. no one, and i mean no one can predict the future. if we were all so sure we'd put our money where our mouth is. for those that knew 3 years ago that prices were out of whack you're already behind the 8 ball in terms of how much prices have run up amd your entry point. my point is judge each situation uniquely given your own circumstances and make an informed choice. if you plan on staying 10 years you might have little to lose once taking principal payoff in comparison to renting, tax writeoffs, etc. there's too much definitive assuredy on this board and frankly your 'guess' on future events is just that.

9/14/2006 09:53:00 PM  
Blogger grim said...

Big day tomorrow.. CPI due out at 8:30.

jb

9/14/2006 10:05:00 PM  
Blogger chicagofinance said...

geeeeeek

9/14/2006 10:24:00 PM  
Blogger thatbigwindow said...

ugh..I get so confused when I read all of your comments. My fiancee and I both have our 20% for our down payment and no debt. I am hoping sometime in December - March we will be able to find a decent house below $350k in Bergen County. We aren't too picky either. All we want is an older colonial style house with a garage, basement, some kind of yard, and doesn't need major repairs. So far, the houses we have seen lately all need either major work, or are far over-priced. Case example: A house in Carlstadt we looked at had a burst pipe and water damage all over. Including mold growth and walls were destroyed as a result. The sellers want 399k for that house. Even if the house didn't have water damage, it still needed some updating. Who is going to buy that house for that price??? You probably have to put another 50k to make it livable. 450k for a house in Carlstadt?? give me a break. I never knew Carlstadt was the next Ridgewood or Wyckoff.

9/15/2006 06:11:00 AM  
Anonymous Anonymous said...

Richard, in many ways, I agree with you.

Sometimes I have a tough time knowing just who the herd is now.

For example, if many folks think that a housing downturn will impact both the local economy and nationally, they're betting on recession.

Therefore, the purchaser who has a 401(k) - maybe one with mostly equity funds and a couple of stinky bond funds - would seriously consider risking a loan to buy a home, even if the home will decline in value before recovering. This would have some risk, because of an implied increased risk of job loss/k-loan default (creating a tax issue if not repaid), but could be a good ten-year hedge if the risk of job loss seems less.

So really examining your own beliefs is important in what you do. Some folks on contrarian issues (sometimes me included)come out negative on everything - housing is going down, stock market is going to dive, bond market will be dead, put your $$$ in a 5% acct. and hope you don't lose too much to inflation over the next few years.

That's not really believing in anything, is it? Or at least, it's not acting on beliefs.

Maybe some don't really know the balancing equation to their beliefs, because of a simple lack of knowledge of each financial tool.

Grim, do you think it would be educational to have a thread here, or on your new site, that explains each "belief" and it's accompanying financial corollary, so that folks understand that if they believe A they need to act on B?

Pat

9/15/2006 06:18:00 AM  
Anonymous Anonymous said...

Note -- this isn't as bad as it sounds. The full article indicates that this would be most useful to someone using an Amex "Charge Card", not one of their "Credit Card" products, since there isn't a set credit limit on those cards.

Which means your condo down payment you just charged is coming due in about 30 days or so. To be paid in full.

Of course, they will offer extended payment terms, if necessary -- found that out then I recently put a very large bill from my plumber on my Amex card (for the points).

9/15/2006 07:45:00 AM  
Anonymous Anonymous said...

" if we were all so sure we'd put our money where our mouth is."

Richard,

Done that.

BC Bob

9/15/2006 08:11:00 AM  
Anonymous Anonymous said...

Pat,

To answer your question. We did it again to buy our last home after we sold the place in JC.. But both times we paid the balance off in 2-3 months and the CC was 0% and not over $10K.. I would rather have done that then roll our Closing Costs into the loan with our broker suggested or tap us out completely.. We like to have a 20K cushion in our bank accounts. .

9/15/2006 08:30:00 AM  
Blogger delford said...

richard: As Roanld Regan used to say, there you go again. you make the statement that 10 to 20% declines in 12 months is a pipe dream and I will say to you what i have said to so many others, and it is simply this.

If prices can rise 20 to 25% a year fro the past 5 years, they can drop just as quickly, and as such a 10 to 20% drop in 12 months is certainly not out of the question.

Prices sticky on the way down, maybe if prices had been rising 5 to 10% a year for 5 years, but not so when they were rising 20 to 25 % a year for 5 years.

And prices are falling already in my so called desirebale BC town close to NYC, good schools and all the rest. Asking prices in Sept of 2006 are now 5% less then closed prices in August of 2005, and remember I said asking prices, and these prices on houses that have been sitting months.

9/15/2006 08:49:00 AM  
Anonymous UnRealtor said...

"anon 8:35 makes some points."


More like some straw men.

Most here aren't anti-ownerhsip, they're anti-insane home prices.

9/15/2006 09:04:00 AM  
Anonymous Anonymous said...

This is flat out freaking insane. What's the APR, on average, on your credit card, 20% ???

9/15/2006 10:49:00 AM  
Anonymous Anonymous said...

Almost 2 or 3 years ago there was TONS of credit card companies offering 0 percet APR for 12 to 24 months.. I know people who just transfer their CC balances from Year to year to different % cards.. until they pay them off entirely.. Its not a way of life.. Not a standard practice but.We bought our car for 16,000 we were short 2K we did not have the money and probably wouldn't until the end of the year we paid it off after the year (we needed the car because of a kid the Old Jeep w/no seatbelts and a plastic cover wouldn't do) we had the 2K on a 0%.. Same theory.. Somepeople abuse it.. but it was better than taking out a loan with interest..

9/15/2006 11:02:00 AM  
Anonymous Anonymous said...

If you have the money in the bank to pay the bill at month-end, there is absolutely nothing wrong with charging whatever a seller and your credit card limit will allow. Why not get the miles? I bought a new car in 2002; charged the first $5,000 and paid the rest in cash. Had the money in the bank to pay my bill at end of month and got FF miles at the same time. I picked up one of those 0% for 6 month cards after graduating from business school. I was short on cash and needed a few grand to set up shop in the town I moved to for my new job. Paid it off in full a month before the rate was going to kick in. If someone is willing to loan me money at 0% and I know I can pay it off when it comes due, why not?

The obvious danger is to the less informed person who doesn't think ahead about how they will pay off the bill before they charge the money. My Dad taught me never to charge anything that you didn't already have the money in the bank for. It has served me well.

9/15/2006 12:26:00 PM  

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