Homeownership in New York, whether via a single family house, condominium, cooperative or townhouse, can provide you with many benefits. A home is usually a long term investment and will provide you with significant tax advantages. However, it is also a major financial commitment, thus it is imperative that you perform your due diligence to avoid costly pitfalls that can strain your budget and patience.
II. Attorney’s Role
Hiring a qualified attorney will take the mystery out of your purchase as well as ensure that all of your rights are protected. Albert Maimone & Associates will utilize its best efforts to make certain that the purchase of your home is exactly as you anticipated and reflects your understanding of the transaction. As your attorney’s we will perform the following functions:
- Review and explain the contract of sale to you
- Negotiate the contract of sale with seller’s attorney
- Assist you in monitoring and complying with all terms and conditions of contract; ie: deadlines, notice requirements, etc.
- Answer any mortgage related questions
- Order and Review the Abstract of Title
- Coordinate the Closing of Title
- Prepare of Closing Statement
III. Home Buying Process
As a Purchaser you are sure to encounter many of below listed terms. As a courtesy to you, we have defined and provided a brief commentary explaining many of these terms and procedures.
The Binder: A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Commentary: You will probably be asked to sign this document when making an offer on a home. This is usually presented to the Seller along with a nominal deposit of $250.00 to $1,000.00. This document usually lists the Purchase Price, Financing Terms and so forth. If the Seller accepts the deposit, it will be considered a legal agreement, thus, if you change your mind you might loose your deposit. If you have already retained an attorney, have this document reviewed prior to signing it. As your attorney’s we would review this document and try to negotiate the binder as an “agreement to agree” which be subject to the execution of a mutually agreeable contract of sale. We would also ask that the binder be contingent upon a satisfactory home inspection conducted by a licensed engineer.
The Inspection: Professional inspection of a home to evaluate the home’s overall quality, safety, and soundness as well as the potential for future problems. Home inspection fees are typically paid by the home buyer.
Commentary: We strongly recommend you have a licensed engineer inspect the home prior to deciding on whether or not to purchase. A home inspection will go beyond the basics and assess any and all present and future problems.
The Contract of Sale: A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Commentary: The contract of sale will state the responsibilities of the Purchaser and the Seller. It is imperative that your attorney review this document with you in its entirety prior to signing. You should also ask any and all questions about the purchase at this time as failing to comply with the terms and conditions of this agreement may result in losing your down payment which is usually about 10%. The contract of sale usually contains contingencies for Marketable Title, Mortgage Commitment Contingency, Termites, Certificate of Occupancy, and Violations, which are all explained in greater detail below
Marketable Title: Title to real property which has no encumbrances (mortgage, deed of trust, lien, or claim) and which is free of any reasonable objection (excluding minor mistakes in the description or typographical errors).
Mortgage Commitment Contingency: A “mortgage commitment contingency clause” is a provision in the home purchase contract that allows the prospective buyer if he/she can’t get a mortgage commitment within a fixed period of time to call the whole deal off, and get their down payment back. In other words, the agreement is conditional on the buyer being able to obtain a mortgage commitment on the property.
Termites: An inspection to determine whether a property has termite infestation or termite damage.
Certificate of Occupancy: C of O is a document issued by a local government agency or building department certifying a building’s compliance with applicable building-codes and other laws, and indicating it to be in a condition suitable for occupancy.
Violations: Definition: A notice that a property does not comply with applicable provisions of law
Commentary on Marketable Title, Mortgage Commitment Contingency, Termites, Certificate of Occupancy, and Violations:
- As your attorney’s, prior to signing the contract of sale, we negotiate protocols to follow just in case an occurrence adversely affecting the property arises. If an occurrence does occur the remedies will vary, including but not limited to; (1) the right to cancel the contract or (2) to receiving a monetary credit to resolve the issue.
- Once Contracts are signed, as your attorney’s we order an abstract of title to ensure that the Seller is able to convey the property with “Marketable Title”, “No Violations” and with a “Certificate of Occupancy”. If Seller is not able to we follow the negotiated protocols that were negotiated prior to signing the contract. Finally at closing, to further protect you may purchase title insurance which ensure the accuracy of the title search and protects against potential errors.
The Closing: The final steps in the transfer of property ownership. The closing typically occurs at a formal meeting between the buyer, seller, their respective attorneys, title company agent, and bank attorney. At the closing, the buyer signs the mortgage and mortgage note, the seller receives payment for the property, and the buyer and/or seller pay closing costs. Once accomplished, seller signs the deed and title is transferred from the seller to the buyer.
Commentary: Congratulations, you are officially the owner of your new home. Post closing your attorney will send you a Closing Statement which will outline all the financial aspects of the closing and photocopies of the documents you signed at the closing.
Bank Related Expenses: These are expenses incurred to acquire a loan to complete your purchase
Points: Points are charged by the lender at closing, and are a one – time cost of obtaining the mortgage funds. One point is equal to 1 percent of the amount of a mortgage loan. Points are sometimes paid at closing as a way to lower the monthly payment interest rate. The number of points and who pays the points are negotiable terms of a property sale.
Commentary: We recommend that you shop a few lenders prior to committing to one specific bank. When shopping around ask for a GOOD FAITH ESTIMATE (“GFE”) as this document will itemize all the costs that you will incur to acquire the loan. In comparing, keep in mind that interest rates change everyday. Furthermore, it is imperative that you compare apples to apples, as interest rates can easily be manipulated if you are paying points. Thus, if you are shopping a loan with Zero points make certain that all your GFE’s reflect Zero points.
Mortgage Bank’s Attorney: The lender’s representative Commentary: This attorney works for the bankand comes to the closing with all the loan documents and the money to close. The cost of the bank attorney is passed on to the Purchaser. Mortgage bank attorney fees range from $700.00 to $1,500.00 depending on the bank.
Escrows: Escrows are a fund held by the lender and used to pay property taxes and hazard insurance.
Commentary: Many lenders, as a condition to their loan will require that you escrow for real estate taxes and home owner’s insurance. They take an upfront payment at closing of approximately 50% of the annual tax bill and collect 1/12 of the bill monthly, and pay your real estate taxes and insurance with that money. This is not always the case and sometimes lenders will forego their escrow requirements allowing you to pay the real estate taxes and insurance directly.
Private Mortgage Insurance: Insurance purchased by the buyer to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment. Mortgage insurance is usually maintained until the outstanding amount of the loan is less than 80 percent of the value of the house, or for a set period of time (7 years is common). Mortgage insurance may be available through a government agency, such as the Federal Housing Administration (FHA) or the Veterans Administration (VA), or through commercial companies (referred to as private mortgage insurance or PMI). (1)
Homeowners / Hazard Insurance: Insurance that protects the homeowner’s property against liability and damage, such as that from fire, storms, and other hazards. Most lenders require insurance. Commentary: We strongly recommend that before you close on your home that you acquire this type of policy. Most banks will require that you maintain this type of policy and have your annual premium paid in full for the closing.
Other Fees: Banks also charge a variety of other fees including but not limited to origination fees, applications fees, appraisal fees, processing fee, underwriting fees, credit report fees, document preparation fess and so forth. Prior to committing to any bank it is key to get a GFE which will itemize all of their fees to avoid any surprises.
Title Related Expenses
Title Insurance: An insurance policy that guarantees the accuracy of the title search and protects against potential errors. Most lenders require the buyer to purchase a title insurance policy protecting the lender against loss in the event of a title defect. This charge is included in the closing costs. A policy that protects the buyer from title defects, known as an owner’s policy, requires an additional charge. (1)
Departmental Searches: A search conducted by the title company of the municipals records to ensure that the property is in compliance with local ordinances affecting the real property
Survey: Surveys are conducted by a licensed surveyor and are usually required by the lender in order to confirm that the property boundaries and features such as buildings, improvements, and easements are as detailed in the legal description of the property in the deed. Usually a surveyor will prepare a plat or map of the property that details all features. (1)
Mortgage Recording Tax: A New York State Tax to record a mortgage. This tax is usually paid by the borrower and varies by county. In New York City the fee is approximately 1.75%.
Mansion Tax: A New York State Tax on the sale of a residence over $1,000,000.00. This tax is usually paid by the borrower and is 1%
Recording Fees: A fee to that is charged by the county clerk to record a deed. The above outline sets forth the majority of the costs that a purchaser will incur with exception to the attorney’s fee. Like most other things, attorney’s fees will vary depending on the attorney’s skill, experience and type of work product that will be provided. The purchase of your home is probably one of the biggest investments that you will be making and we therefore recommend that you interview and hire an attorney that is qualified to represent and protect your interests throughout this entire process. Hiring a well qualified real estate attorney is always a wise investment.
**Please be reminded that all transactions are unique and the above commentary may or may not apply to your situation. It is imperative that you consult with an attorney to get legal advice as it relates specifically to your matter.