Real Estate FAQs - Buyer
Should I perform a Home Inspection?
Answer: Yes. A Home Inspection should be done immediately after your offer is accepted. The modest payment for an inspection is a good investment. If there are any important issues raised, you should discuss them with your Real Estate Agent.
Should I attend the Home Inspection?
Answer: Yes. It will give you an opportunity to ask questions about the home. It will also allow you to put the Inspector's comments into perspective. Once you go to Contract, you generally take the Property "as is", so you should be thorough. Remember to look behind furniture and under movable rugs.
What else should I investigate?
Answer: At the beginning, a Buyer should investigate/confirm:
- Property Taxes- Contact the Town's Receiver of Taxes to confirm that the Property Tax figures provided to you are accurate. Sometimes the information initially provided is old or incorrect.
- Town Approvals- Contact the Town's Building Dept. to confirm that Town Approvals are in place for all improvements to the Property. The Title Search will eventually contain some of this information, however a preliminary investigation will help save time (It can take time for the Seller to get needed approvals) and assure thoroughness (Title Searches don't always address all improvements,especially for interior improvements, and there may be improvements that the Town is unaware of)
- Condominiums- If you are buying a Condominium, you should contact the Management Company to see if there are new assessments or restrictions (i.e. rules regarding pets, age of children to use facilities, vehicle parking and mandatory memberships). You should also make sure that you have seen the Offering Plan, By-Laws and Financials for the Condominium. You should also have your financial advisor review the Financials.
I have reached an agreement with the Seller. What is my next step?
- Receipt of Contracts- The Seller's Attorney sends a Contract to your Attorney. At this time, you should tell your Attorney about any repairs that have been agreed to.
- Contract Signing & Downpayment Provided- Once the Attorneys finish negotiating the legal aspects of the Contracts, you will sign and provide a check for your Downpayment (Deposit).
- Contracts Sent to Seller- The Contract (signed by you) with the Downpayment Check will then be sent to the Seller's Attorney.
- Contracts Signed by Seller- The Seller will sign the Contracts and return a fully signed copy of the Contracts to your Attorney.
What is the Downpayment?
Answer: The deposit that you provide when you sign the Contracts. Your Downpayment Check will be cashed when the Contracts are fully signed, and the money will be held by the Seller's Attorney. A personal check for the Downpayment is preferable (although bank checks will be needed at the Closing).
When do I provide the Downpayment?
Answer: When you sign the Contracts.
How much is the customary Downpayment?
Answer: Typically 5%-10% of the sales price. However the parties can agree to less. The amount of the Downpayment is not necessarily tied into the Mortgage amount, since it is just the security/deposit that the Seller collects to make sure that you do not default under the Contract.
What is the most common reason for losing a Downpayment?
Answer: Buyers can get into trouble if they do not apply for a Mortgage promptly, lie on the Mortgage Application, or are not ready to close according to the terms of the Contract.
When is the Contract "Locked in"?
Answer: Once the Seller has signed the Contract and returned it back to your Attorney- At that time all parties are fully bound to the terms of the Contract.
What is a typical Closing Date?
Answer: Typically ~60-90 days from when Contracts are fully signed. However it can vary depending on both parties' needs.
Are Closing Dates in Contracts firm?
Answer: No. Normally it is an approximate "On or About" date. Often (but not always) closings are usually within ~15-30 days of the "approximate" date stated in the Contract. However, everyone usually works together to close on a convenient date. Avoid making firm plans with movers, etc. until the Title and Mortgage are both fully clear. If you are unsure, you should speak with your Attorney.
When should I apply for a Mortgage?
Answer: As soon as you decide to start looking for a home. Many Sellers will not accept your offer if you are not "pre-approved" (see below).
What is the difference between "Pre-Qualified" and "Pre-Approved"?
- "Pre-Qualified" -The Lender has determined the maximum loan that it will approve based solely on the information provided to it verbally by the Buyer. It is without verification.
- "Pre-Approved"- The Lender has made the same determination, but with verification, based on written documentation (including a credit report). Since this requires more research by the Lender, it is more reliable and carries more weight.
When should I "Lock In" my rate with the Lender?
Answer: After Contracts are fully signed and you have consulted with your Attorney. Typically the Seller will often cooperate in closing before your rate expires. However there is no guarantee that the Seller can or will. An ideal rate lock expiration date will be at least 15-30 days.
What is a "Mortgage Contingency Date"?
Answer: A specific amount of time for you to procure a Mortgage Commitment Letter. You must send your Attorney a copy of your Mortgage Commitment Letter when you have accepted it.
What if I receive a Mortgage Commitment Letter but later the Bank does not fund my loan?
Answer: Most Contracts state that you are bound to the Contract even if the Bank does not fund the loan. This can happen if there is a condition in the Mortgage Commitment Letter that you cannot comply with, the Bank goes out of business or terminates that loan program, or if an event occurs that causes you to lose your Mortgage Commitment (i.e. change in credit or loss of job). You can help prevent this by:
- Using a reputable Lender which focuses primarily on the area that you are buying in and one that your Attorney is familiar with;
- Making sure that your Lender does not issue a Mortgage Commitment Letter with conditions that are outside of your control; and
- Notifying your Attorney before Contracts are signed if there is an event that could potentially cause you could lose your Mortgage Commitment (i.e. credit issues or employment problems).
What is an Lender Escrow Account?
Answer: A reserve account that is set up by the Lender. It is used to pay your real estate taxes and hazard insurance when they are due.
My Lender says that its Bank Attorney is not local, but will travel to the closing. Is this okay?
Answer: This should be avoided. The Lender should select someone located in the area that you are buying in. There are a few potential problems with a traveling Bank Attorney:
- It will be harder to schedule the closing since the Bank Attorney will have to account for travel time;
- If there are any problems, that Bank Attorney might not have access to get new documents;
- The Closing might be adjourned if the Bank Attorney does not get the Bank documents on time, gets lost or stuck in traffic; and
- If the wire arrives late (which is common), the Bank Attorney might not have access to its bank to get certified funds.
If I cannot get a Mortgage because I have to Sell my House, can I get out of the Contract?
Answer: Only if there is a "Sale Contingency". Most Contracts do not have a "Sale Contingency" and contain a provision which states that a Buyer is bound to the Contract even if the Buyer's Mortgage Commitment Letter requires the sale of the Buyer's Home. The only way to guarantee that you can get out of the Contract would be if there was a "Sale Contingency" in the Contract. This would have to be negotiated with the Seller.
What is a Title Search?
Answer: A search to make sure that there are no issues affecting clear Title to the premises. This would include researching easements/rights of way, liens or other issues. The search also contains copies of all Town Approvals and a copy of a Survey if available.
What is Title Insurance?
Answer: A type of insurance that protects the Buyer from Title defects. These defects could result from undetectable issues such as improperly performed court actions, improperly filed or unrecorded papers and fraud. These issues do not just relate to the present Seller but also to any prior owner. Further, many defects that come up in a Title Search cannot be cleared by the Seller but can be cleared by their original Title Company.
- It is a one time payment- Not annual.
- It does not cover Building Department Violations- The Title Company provides a copy of the relevant Building Department papers but does not guarantee that there are no violations. The Buyer should always investigate this issue as well.
What is a Survey?
Answer: A Survey is a drawing of the property showing the property line boundaries, the location of the house and exterior improvements.
Will I have to get a Survey?
- The Seller provides one as a courtesy if the Seller has a copy. You should immediately ask if the Seller has one. This will also expedite the closing since you will not need to wait for one to be found.
- If the Seller does not have a Survey, you may be able to find one in the Town's Building Department. The Title Company will try to get one from the previous Title Company, but it might be a while until they get an answer.
- If a Survey cannot be found, then the Title Company might not be able to properly guarantee the Property's boundary lines. However, it may be advisable to get a new Survey even if one can be found. If there were any improvements (including fences) made by the owner or its neighbors after the creation of the survey, it is likely that the Buyer will be unable to tell if they cross over the boundary lines. If any of these new improvements block access to a portion of the subject premises (like a fence or wall), it might create a boundary line issue which will create difficulty when you sell the property.
- You will not need a Survey if you are buying a Condominium
Who pays for the Title Search, Title Insurance and Survey?
Answer: The Buyer. However, the Buyer may not need to get a new Survey if one is available (see above)
When should I initiate Homeowners/Hazard Insurance?
Answer: You should start your Homeowners/Hazard Insurance paperwork after the contracts are signed. You will then finish when you know the closing date. Once the Closing Date is set, you will need to send your Homeowners/Hazard Insurance binder and paid receipt to your Attorney. Your Lender will want its name stated in a particular way in the insurance binder as instructed in your Mortgage Commitment Letter.
When should I initiate liquidating and transferring assets into our checking account?
Answer: You should speak to your lending institutions regarding the time frame. It may takemuch more time than anticipated to get funds into your checking account or for checks to clear.
What is a Closing?
Answer: The day when you receive the Deed and the keys to the Property.
When can I schedule a Closing?
Answer: A Closing can typically be set within 1 week (depending on availability) of the following being in place:
- Title is fully clear;
- Bank is "Clear to Close"- The Bank must notify you that it is "clear for closing" (this is different than receiving a commitment letter); and
- The Parties are ready to close.
What is an "on or about" Closing date?
Answer: Usually, Real Estate Contracts in New York provides for an approximate closing date. This is different than a target date. Typically, the parties must close within a "reasonable" period of time after the date stated in the Contracts. Usually there can be up to a 30 day window, but that is not guaranteed and should not be counted on. Often, additional considerations can lead to an earlier or later time frame.
Where will the Closing take place?
Answer: Typically at the Bank's Attorney's office in the county where the Property is located. Make sure your Bank chooses a local Bank Attorney. If the closing does not occur in the county where the Property is located, you could incur additional fees and/or have difficulty closing on your desired date.
When can I move in and take possession?
Answer: When the closing is completed.
Can I see the House before I close?
Answer: Yes. You should do a "walk through" the day before the closing. If you wait until the morning of the closing, you may not provide the Seller enough time to fix a problem, or you may not have enough time to investigate it further.
How much will my closing costs be?
Answer: The answer depends on your loan program, taxes and other factors. Typically a Lender will provide an estimate of costs. However, that estimate might not address costs that are not directly related to them (i.e. fuel, reimbursing the Seller for Property Taxes already paid for and your Attorney fee. For a more precise figure, take the Lender's estimated closing costs and
- Change the amount of the Real Estate Tax escrows to an amount equal to 1 year of Real Estate Taxes; and
- Add all other costs that you know of that are not shown (i.e. your attorney, estimate fuel, etc.).
Who pays for the Real Estate Agent?
Answer: Typically the Seller.
What is usually not included in my Attorney's fee?
Answer: The fee generally does not include disbursements or uncustomary work. This would include items such as leases, powers of attorney, previous deals and non-local closings. It also does not include disbursements or the Lender's Settlement/Attorney's fee.
When will I know what Bank Checks I will need to bring to Closing?
Answer: Typically 1 business day before your Closing. That is when your Bank will probably notify your Attorney how much the Bank is actually giving you at the closing (they will be subtracting their fees, escrows, etc.).