Foreclosures in Manhattan tend to be rare even in bad times. The main reason for this is that New York is largely protected from defaults by the co-op form of ownership where prospective buyers must demonstrate financial wherewithal before being allowed to purchase. But the huge boom in condo construction in Manhattan is changing this to a large degree. Many developers have unsold inventory that banks and lenders are forcing them to unload.
This spring a number of New York City developers of new condominiums will be forced to sell large blocks of new apartments in bank sponsored auctions. The process was discussed in a recent New York Times front page article that showed how banks and other lenders are pressuring developers to unload unsold units in a timely manner. These kinds of auctions have not been seen since the last recession in 1991. Back then a number of investors bought large blocks of condo apartments and rented them out for about six or seven years before the market turned high enough for them to put them back on the market. The same process will occur this time, although it may take 9-10 years for the same turnaround. Capital deployed in these auctions will have to truly be long-term. There is a wealth of info and resources on the net regarding how to participate in foreclosure and distress auctions in other markets, but surprisingly little information regarding New York City. New York and Manhattan are much more closed to amateurs and difficult to navigate. We suspect most of the players here will be vulture funds and banks using the process as a turnaround strategy to repair their books and writedown their bad loans in as fast and clean a manner as possible. Bidders in these auctions will need to arrive with enough for a deposit and then typically have 30 days to arrange financing -- which will be tricky in the current climate. Most will be partnerships where the capital has been set up prior to the auction. Good luck.
