(Prepared
by Doug Hayman of Century 21 Rustic Realty)
The following are the chronological steps that a buyer
typically takes when purchasing a home.
For further real estate information, visit my real estate website at http://www.expss.com/realestate.htm.
Step Number |
Action |
|
1 |
Negotiate on the price of a home. Once buyers/sellers have a mutual price,
the buyers sign a Sales Agreement (also known as a binder), which stipulates
the purchase price, the amount of money down on contract, the amount of cash
on closing, and the mortgage amount.
The binder should stipulate the accepted offer conditional on an
Engineer’s Inspection. After the
Engineer Inspection, sometimes prices are re-negotiated. Also, note that buyers typically furnish
the sellers with a pre-qualification letter from a financial institution,
which stipulates their ability to qualify for the stipulated mortgage amount. A pre-qualification letter is usually
provided free to perspective buyers, from their financial institution. |
|
2 |
Perform Engineer’s Inspection from a qualified licensed
person. A report should be furnished
to the buyers, subsequent to the Inspection. |
|
3 |
After the Engineer’s Inspection, if deal is still intact,
the sellers’ attorney will draft contracts and send to the buyers’ attorney. |
|
4 |
The buyers’ attorney reviews contract for any omissions or issues, and makes
any necessary changes to it. This may
result in a couple of passes between attorneys, until both are satisfied with
its content. |
|
5 |
The buyers sign the contract and provide a check for down
payment, as per the sales agreement. |
|
6 |
After the
buyers sign the contract and provide down payment check, the sellers
need to sign off on the contract. At
this point, the down payment money will go into the sellers’ attorney's
escrow bank account, which is a non-interest bearing account. It is not
refundable at this point, unless the
buyers do not qualify for the mortgage. |
|
7 |
Once the
down payment check is cashed and clears, you are at that
point considered to be in Full Contract, and you are
safeguarded. If the buyers or
the sellers renege on the deal after this point (and this rarely happens),
the reneging party would be considered to be in breach of contract, and a lawsuit
by the hurt party can result. Keep in mind that until you are in Full
Contract on this house, the seller can accept any other
offers on this house, and legally doesn't even have to tell you about it. However, in the case where this happens, customarily the
selling agent will inform the effected buyer, to see if they would like to make a
"final best offer", in an attempt to retain the house. |
|
8 |
A Termite
Inspection (if not performed already during the Engineering Inspection), will
be ordered by the buyers’ attorney. This typically costs about $ 85,
and the onus is on the buyers to pay it. If termites are found, it is
usually incumbent on the seller to pay for a termite treatment (usually costs
somewhere in the $ 1,000 - $ 1,500 range). The selling real estate
agent is typically informed of when the Termite Inspection happens, and
is usually present for it. Buyers
never need to go to this. |
|
9 |
The
buyers need to take signed copy of the contract to their mortgage company to initiate the process of
procuring a mortgage. This may incur certain application fees, and will
require the buyers to provide necessary financial documentation to the bank, unless they apply for a
no-income check loan
(which usually costs more in terms of interest rate points, than a
conventional loan). |
|
10 |
As part
of the loan application, the bank will order an Appraisal, using their
appraiser. The selling real estate agent is usually notified of this when it happens, and will be
present for it. There is no need for the buyer to be present for this,
since an on-the-spot appraisal value is never provided. Typically, you will only hear feedback
from this appraisal, if there is a valuation issue. |
|
11 |
Once the
appraisal passes, and the bank's underwriting department does all
necessary work on their end, the buyers will be approved for their
mortgage. If buyers are not
approved for their mortgage, the deal typically dies at that point, and all
contract money is refunded to the buyers. |
|
12 |
Next, the
buyers’ attorney will order a Title Insurance report to be done on the
home. In essence, The purpose behind this is to make sure that nobody
has a lien (i.e., can stake a claim) against the property. This needs
to be done legally, and can cost roughly on the order of 0.5 % - 1.0 % of the
mortgage amount (prices will vary). |
|
13 |
The
mortgage institution or Title Company may require a new Survey (or an update
to the existing
one) to be ordered, should the need arise (a lot depends on how valid the
existing survey is, and if the seller can furnish one). The buyers will
usually brunt the cost of this, unless the seller has made some changes to
their home (for C.O.’s, for example).
In that instance, the seller typically bears the brunt of the
cost. Surveys vary in price anywhere
from $ 100 - $ 750, typically. |
|
14 |
When
Title comes back clean, the buyers’ attorney, the sellers’ attorney, and the
bank attorney will arrange for a Closing Date, that meets all parties needs. If the
contract stipulates a close date, the seller and the buyer can legally
push that date out as much as 30 days. |
|
15 |
The
selling real estate agent will need to schedule a "walk-through"
of the house prior to the close date. It behooves the buyer to schedule it as
close to the closing date as possible, even the morning of the close.
The purpose behind it is to make sure that the house is in the same shape as
when it was initially inspected. If there are any walk-through issues,
they are resolved at the closing table (usually what happens is that the
sellers either pays a concession or put money in an escrow account, which
becomes the buyers, if the seller doesn't rectify whatever the problem is).
Also, the buyers/sellers need to estimate the amount of oil that is left in
the oil tank, and the buyers will pay the pro-rated amount at closing
(assuming that oil is involved). |
|
16 |
The
buyers’ attorney will ask the buyers to bring him a certified check covering
all the amounts mentioned above, including the "cash at closing"
portion of the deal. He may ask for it from the buyers, prior to
closing. It is a much more efficient process than it used to be years
ago - you write one check, as opposed to 10. The check will cover, but is not limited to,
the following elements:
a) Cash On Close amount
b) Title Insurance
c) Pro-rated real estate taxes for the year
d) Some nominal Suffolk County recording taxes e)
Buyers’ Attorney Fee
f) Pro-rated amount of oil in oil tank, based on current market rate
g) Termite inspection, if not paid for already h)
N.Y. State Mortgage Tax ($0.75 for each $ 100 of the mortgage)
i) Points on the mortgage, if applicable
j) Survey cost, if necessary As is
customary, the buyers’ attorney will ask the buyers to "tip" the
Title Insurance agent at the closing table (all attorneys ask you to do
this), probably somewhere in the $ 150 range. I'm not sure, to this day, why this gets
done, but it is customary. If the
sellers signed a waiver of the Property Disclosure Statement (most
do), then the buyers will receive a $ 500 rebate from the owner at
closing. If the owner did not, then the buyers will receive a 7 page document
filled out by the
owner, describing details of the house, and its condition. Since most sellers don't want the onus of
being sued down the road for falsely representing information on this document, most
just concede the $ 500. |
|
17 |
If you
get to this step, you have gotten the keys to the house, and you can head over
and call the house your very own home !!!!! |
Douglas R. Hayman
Licensed Real Estate Agent
Century 21 Rustic Realty
765 Route 25A
Miller Place, NY 11764
Business Phone: (631) 744-5300 x213
Business Fax: (631) 744-5403
Cell Phone: (631) 902-1478
Email: DHayman@optonline.net
Website: www.expss.com/RealEstate.htm