Platinum Drive Realty’s Homebuyers Handbook

Jennifer Y. Ross
Published on January 12, 2017

Platinum Drive Realty’s Homebuyers Handbook

Jennifer Y. Ross

Hi, I’m Jennifer Y. Ross, a licensed real estate salesperson and your Westchester County NY real estate community and home expert.  I grew up here.  I live here. I work here.  To learn more about how I help my clients check out my bio video – video link.

Just like you I was considering a move to Westchester County not too long ago.  I was very likely in your shoes – living in NYC and starting to outgrow my current living situation.

If you are ready to start exploring Westchester Communities and Homes, your first stop should be a Platinum Drive Realty Luxury Tour – link to learn more.

Contact me to schedule your suburban safari today! – link to schedule tour.

Areas of Expertise:

Larchmont Real Estate, Mamaroneck Real Estate, Scarsdale Real EstateRye Real Estate, Rye Neck Real Estate, Purchase Real Estate, Harrison Real Estate, New Rochelle Real Estate, Pelham Real Estate and Bronxville Real Estate, Rye Brook Real Estate

Follow the Links below to begin your online home search:

Larchmont Homes For Sale Mamaroneck Home For SaleScarsdale Homes For Sale – Rye Homes For SaleRye Neck Homes For SalePurchase Homes For Sale – Harrison Homes For SaleNew Rochelle Homes For SalePelham Homes For Sale – Bronxville Homes For Sale, Rye Brook Homes For Sale

 

Buyers Guide: Guide to the Home Purchasing Process

OUR GOAL IS TO HELP FIND YOUR DREAM HOME

That Means:

  • With the most favorable terms
  • In the optimal period of time
  • With the least inconvenience
  • And for the most money the market will bear

Welcome to Platinum Drive Realty’s Homebuyer’s Handbook

The New York metropolitan area and its many suburbs are great places to live. As Realtors and residents, we take pride in our communities and welcome the opportunity to introduce prospective homebuyers to the wonderful neighborhoods, schools and services that we’ve grown to know and appreciate.

The home buying process can be quite complex, and especially daunting for the novice purchaser or those unfamiliar with practices customary to this area. We hope this handbook will serve to guide you through the intricacies of purchasing a home, and answer many of your questions on the processes, practices and procedures you will encounter. Along with this general information, we do strongly encourage you to consult with professionals throughout the home buying process, including attorneys, home inspectors, mortgage professionals, and other service providers who can give you crucial guidance in their areas of expertise.

Fair Housing:

Platinum Drive Realty is pledged to the letter and spirit of national, state and local laws and policies for the achievement of equal housing opportunity. We encourage and support an affirmative advertising and marketing program in which there are no barriers to obtaining housing because of race, color, religion, sex, handicap, familial status or national origin.

A Buyer’s Guide to the home Purchasing Process * Disclaimer: Please keep in mind that this is not intended to be a comprehensive discussion of the home purchase process. It is intended to give the reader a general overview of the process, and to allow a prospective purchaser to plan ahead. Information contained herein should not take the place of the expert advice of professional advisors such as an attorney, a real estate agent, an engineer, a mortgage counselor, an accountant, and an insurance agent, all of whom you may have to consult with and rely upon in connection with your home purchase.

The Initial Home Search Process

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Your agent(s) will show you suitable properties based on a discussion of your housing needs, priorities and affordability. Your agent(s) may work with you as a Buyer’s Agent or as a Sub-agent of the Seller; be sure to discuss these agency relationships with your agent(s) at your first substantive meeting as you will be required by law to sign an Agency Disclosure Agreement at that time. If financing will be required, it is recommended that you obtain mortgage preapproval from a qualified lender prior to beginning your home search. A preapproval letter will give your offer merit in the eyes of a seller, and may allow you to be more flexible if a quick closing is in both parties’ best interest. You should also select an attorney at this time. It is recommended that you choose an attorney who is experienced in representing purchasers of real estate. If you don’t have an attorney already for this purpose, your agent(s) can usually give you names of several highly regarded real estate attorneys that you can interview.

 

 

The Offer Process

Once you have found a home you wish to purchase, your agent will submit an offer on your behalf. Offers and counter-offers may be submitted verbally or in writing. The initial offer is usually submitted in writing (especially in a multiple-offer situation) as an “Offer to Purchase” prepared by your agent; subsequent counter- offers are often presented verbally. When you have reached an agreement with the seller on terms including purchase price, personal property to be included, projected closing date, conditions and contingencies (inspections, financing, etc.), you now have an Acceptable Offer (A.O.). Once an A.O. is reached, a written Memorandum of Agreement is usually drafted by the seller’s agent, stating the terms of the agreement; copies are distributed to the seller, the seller’s attorney, the buyer, the buyer’s attorney, and both real estate agents. No earnest money deposit is exchanged at this time. The typical time frame from agreement to closing is approximately 60-90 days. Of course, many factors can affect this time frame, including specific needs of the buyer and/or seller.

From Agreement to Contract

After reaching an A.O., you (the buyer) are given a limited time period during which to conduct an engineer’s inspection and other desired and/or required inspections (assuming that an inspection contingency is part of the agreed-upon offer). This period is usually 10 days or less. During this period, the seller has only a verbal, non-binding agreement to sell the property to the buyer; the seller, in the meantime, is free to listen to, negotiate, and/or accept other offers. It is, therefore, imperative that you (the buyer) conduct all inspections in good faith and in a timely fashion. A binding contract will generally not be written until after inspections have been completed.

Inspections

An engineer’s inspection is very strongly recommended for every home purchase. The purpose of an inspection is to identify the condition of the home and allow the buyer to make informed decisions. Even with newly constructed homes and with condominiums, it is possible that something could have been overlooked or poorly designed. An engineer’s inspection will typically take 2-4 hours. If at all possible, you should plan to be there with the engineer during the inspection. This is an opportunity for you to learn a lot about your new home, ask questions of the engineer, and receive suggestions. Subsequent to the inspection, the engineer will provide you with a detailed written report covering his/her findings. Most mortgage lenders require a termite inspection and stipulate that it’s to be done by a licensed termite inspector. Your engineer may or may not be licensed to do termite inspections; if not, you will need to hire a termite inspector. Other optional inspections you may wish to perform include a fuel oil tank test (for oil tanks buried in the ground), a radon test, a septic dye test (if applicable), a water potability test and water recovery test (for private wells), asbestos testing, and mold and lead paint tests.

From Contract to Closing

Once inspections are completed and deemed satisfactory, the seller’s attorney will draft a contract of sale and deliver it, along with the seller’s title insurance policy and copy of any existing survey, to your (the purchaser’s) attorney. You should review and discuss the contract with your attorney. If any changes are requested, the seller must agree to these changes. Signed contracts are then returned to the seller’s attorney with a 10% contract deposit, also called a “down payment” (this down payment amount can be negotiable but is typically 10%). The contract deposit check is made payable to the seller’s attorney who holds it in an escrow account until the closing. Once the contract is signed by the seller, your attorney will receive two fully executed copies of the contract, one of which will be given to you for submission with your mortgage loan application. Your completed mortgage loan application with all supporting documentation should be submitted to your chosen lender promptly upon receipt of the fully signed contracts. Your attorney will also provide you with an estimate of closing costs at this time. Prior to closing, your attorney will arrange for a title search of the property. The title company will issue a title report certifying clear title, and a title insurance policy to protect the lender (required) and the buyer (optional) in the event a title problem arises in the future. The title company will also perform a property tax search and a violations search (required by the lender), and a survey inspection. If the existing survey is unacceptable, or if no survey exists, it is typically the buyer’s responsibility to pay for a new survey.

Closing

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Once all conditions of the contract have been satisfied, the closing date is scheduled. This involves getting together all parties including the seller, the seller’s attorney, the buyer, the buyer’s attorney, the lender’s attorney, the title company representative, and usually one or both real estate agents. Once the closing is scheduled, calls should be made to confirm with your movers, to contact utility companies to transfer service accounts, to arrange for a homeowners insurance policy (proof of an insurance policy and paid receipt for one year’s premium paid in advance must be brought to the closing), and to transfer any funds necessary for closing. Your attorney will advise you in advance as to the amount(s) of any certified checks required at closing. You will also be required to bring a supply of blank personal checks for assorted closing costs, as well as two forms of identification, one of which must be a photo I.D. A final “walk-through” of the property is performed just prior to closing, usually within a few hours or not sooner than the previous day. This is scheduled with your real estate agent, or the seller’s agent. The purpose of the walk-through is threefold: to confirm that no damage has been done to the home since the time of the engineering inspection; to confirm that the major systems and appliances are in working order; and to confirm that the home is “vacant and broom clean”, as stipulated in every sales contract.

 

Questions

For additional information or clarification of any information provided herein, please consult one of the professionals identified in the disclaimer.

 

Standard Forms Encountered During a Real Estate Transaction in New York State

New York State Disclosure Regarding Real Estate Agency Relationships This form is required by NY State to be executed by all parties to a real estate transaction, including buyers, sellers, tenants and landlords. The document describes the various types of agency relationships. Your agent should discuss these relationships with you in detail at your first substantive meeting so that you can agree on the type of agency representation you will receive. If your agent will represent you as a buyer’s agent, then the circumstance of “dual agency” should be discussed at this time.

Dual and Designated Agency Agreements

If you are represented by a buyer’s agent, you will have discussed “dual agency” during your initial agency discussion. Should a situation of “dual agency” arise, in all likelihood, this will lend itself to resolution with a “designated agency” agreement. At the time a dual agency arises, both parties to the transaction will be required to acknowledge the dual agency in writing, and also to acknowledge a designated agency agreement at the same time, designating different agents within the same brokerage to represent each of the parties.

Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards

All purchasers or lessees of housing built before 1978 must be presented with the pamphlet “Protect Your Family from Lead in Your Home”. In addition, they must be provided with a disclosure form from the seller or lessor stating any knowledge of the existence of lead-based paint in the home. Should a buyer or lessee wish to conduct inspections for lead-based paint hazards in the home, they will be allowed a 10-day period in which to conduct those inspections, unless otherwise agreed to or waived.

Property Condition Disclosure Statement

As of March 1, 2002, New York State implemented a Property Condition Disclosure Act. This law requires that a completed property condition disclosure statement be provided to the buyer before the buyer is bound by a contract of sale, and this statement must then be attached to the contract. Failure to provide the completed statement as prescribed by the law will result in a $500 credit to the buyer at closing. This law applies to residential property with one to four units, but not to unimproved real property, new construction, condos, cooperative apartments, or property in a homeowner’s association that is not owned in fee simple. Other exclusions exist in various situations of foreclosures, estates, transfer between co- owners, and more (consult legal counsel for the details of these various exclusions).

Offer to Purchase

A written Offer to Purchase is commonly used to submit an initial offer on a property. This document is not a standardized form, but should contain the terms of the offer, including offering price, conditions (financing, inspections), inclusions of the sale, proposed closing date, and any other negotiable issues. It should be prepared by the agent working with the buyer, and should be carefully reviewed by the buyer for accuracy prior to submission; the agent may or may not request that the buyer sign the offer.

Contract of Sale

The legal contract of sale is typically prepared by the seller’s attorney after an agreement has been negotiated, and after completion of any agreed upon inspections. The contract will be sent from the seller’s attorney to the buyer’s attorney for review and signing by the buyer(s), then returned to the seller’s attorney along with the down payment (typically 10% of the purchase price) for signature from the seller(s). While many attorneys use a standard basic contract, the exact language and terms of each contract will vary considerably and should be reviewed thoroughly before signing.

 

Other Issues and Considerations

Carbon Monoxide Detectors

New York State law requires that all one- and two-family homes, condominiums and cooperative apartments have at least one operable carbon monoxide alarm at the time of sale. This law went into effect on March 6, 2003. During your initial home inspection, and/or at the final walk-through prior to closing, make sure that there is at least one alarm installed and that it is in working condition.

Homeowner’s Insurance It will be necessary to have a homeowner’s insurance policy in place, pre-paid for one year, at the time of closing. The insurance industry now relies heavily on C.L.U.E. (Comprehensive Loss Underwriting Exchange) Property Loss History reports, a database relating to insurance claims on private property. A property’s claim history for the past seven years, including inquiries that did not result in claims, is contained in the report. In addition to considering the property’s claim history, insurance companies will also consider the claim history of the purchaser when deciding whether to issue an insurance policy. A property or purchaser with an extensive or checkered claim history may find it difficult, expensive, or impossible to obtain homeowner’s insurance. Only the current property owner may order a C.L.U.E. report; you can ask them to obtain one and share it with you, or ask them to give you written details of their past claims on the property. These days, it is important to investigate the cost and availability of homeowner’s insurance early in the process, rather than waiting until just prior to closing.

Understanding Agency

It’s important to understand what legal responsibilities your real estate salesperson has to you and to other parties in the transaction. Ask your salesperson to explain what type of agency relationship you have with him or her and with the brokerage company.

1. Seller’s representative (also known as a listing agent or seller’s agent)

A seller’s agent is hired by and represents the seller. All fiduciary duties are owed to the seller. The agency relationship usually is created by a listing contract.

2. Subagent

A subagent owes the same fiduciary duties to the agent’s principal as the agent does. Subagency usually arises when a cooperating sales associate from another brokerage, who is not representing the buyer as a buyer’s representative or operating in a nonagency relationship, shows property to a buyer. In such a case, the subagent works with the buyer as a customer but owes fiduciary duties to the listing broker and the seller. Although a subagent cannot assist the buyer in any way that would be detrimental to the seller, a buyer-customer can expect to be treated honestly by the subagent. It is important that subagents fully explain their duties to buyers.

3. Buyer’s representative (also known as a buyer’s agent)

A real estate licensee who is hired by prospective buyers to represent them in a real estate transaction. The buyer’s rep works in the buyer’s best interest throughout the transaction and owes fiduciary duties to the buyer. The buyer can pay the licensee directly through a negotiated fee, or the buyer’s rep may be paid by the seller or by a commission split with the listing broker.

4. Disclosed dual agent

Dual agency is a relationship in which the brokerage firm represents both the buyer and the seller in the same real estate transaction. Dual agency relationships do not carry with them all of the traditional fiduciary duties to the clients. Instead, dual agents owe limited fiduciary duties. Because of the potential for conflicts of interest in a dual-agency relationship, it’s vital that all parties give their informed consent. In many states (including NY), this consent must be in writing. Disclosed dual agency, in which both the buyer and the seller are told that the agent is representing both of them, is legal in most states.

5. Designated agent (also called, among other things, appointed agency)

This is a brokerage practice that allows the managing broker to designate which licensees in the brokerage will act as an agent of the seller and which will act as an agent of the buyer. Designated agency avoids the problem of creating a dualagency relationship for licensees at the brokerage. The designated agents give their clients full representation, with all of the attendant fiduciary duties. The broker still has the responsibility of supervising both groups of licensees.

6. Nonagency relationship (called, among other things, a transaction broker or facilitator)

Some states permit a real estate licensee to have a type of nonagency relationship with a consumer (NY does not allow this). These relationships vary considerably from state to state, both as to the duties owed to the consumer and the name used to describe them. Very generally, the duties owed to the consumer in a nonagency relationship are less than the complete, traditional fiduciary duties of an agency relationship.

Reprinted from REALTOR Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS. Copyright 2003. All rights reserved.

Defining Condominiums and Cooperatives Condominium Ownership

The owner of a condominium has a fee simple title (the same as for a single family home) and deed to the individual condo unit as well as an undivided interest in the common elements of the property such as the land, walls, hallways, roof, pool, clubhouse, etc. A prospectus or offering plan defines the common elements and describes the individual units. The condominium bylaws define the operating rules and establish procedures for an elected Board of Managers to oversee operation of the condominium. A monthly association fee is paid by the condo owners to cover the expenses of maintaining and operating the common elements (not tax deductible). Real estate taxes on the unit are assessed to and paid directly by the unit owner (tax deductible). Mortgage interest on any purchase loan is also paid directly by the unit owner (tax deductible). Generally, a condominium owner may sell or rent their unit as they wish. Condominium units exist in a variety of architectural styles, including buildings, attached, semi-attached and detached simplexes and duplexes.

Cooperative Ownership

In cooperative homeownership, the title to the land, building(s) and common elements is held by an apartment corporation. Unit owners purchase shares of stock in the corporation and obtain a proprietary lease for the unit and a stock certificate representing the number of shares owned (it is technically the purchase of “personal property” rather than “real property”). As stockholders, unit owners elect a Board of Directors to oversee administration of the building. The by-laws of a co-op typically give the Directors the right to approve/disapprove of prospective purchasers, in accordance with antidiscrimination laws, since all owners are financially vulnerable if other owners default. The by-laws may also limit a shareholder’s ability to rent their unit because higher rental ratios can affect the tax status of the entire property (this can result in higher owner occupancy rates than condos). Unit owners pay monthly fees that cover maintenance and management costs, as well as the corporation’s property taxes and the underlying mortgage on the building (the portion of the monthly fee that represents the property taxes and underlying mortgage interest is tax deductible for the unit owner). Even though co-ops are considered personal property, for income tax purposes, the IRS allows co-op owners to also deduct the interest on a co-op purchase loan. Values per square foot for co-ops are generally less than for condos and settlement costs are often lower. However, the purchase of a co-op often requires a higher down payment (as established by the co-op’s by-laws or the lender) and the pool of potential lenders for a co-op loan may be smaller than for a condominium mortgage.

 

Mortgage Financing

Types of Lenders

You will likely have heard the terms “mortgage broker”, “mortgage banker” and “lender” used interchangeably. However, there are distinct differences. The “lender” is the entity that provides the money to the borrower at the closing, in exchange for a note evidencing the borrower’s debt and obligation to repay, as well as a lien on the subject property. A “mortgage broker” is not a lender, but rather a company or individual who offers the loan products of many lenders. A mortgage broker can counsel a borrower, take applications and process the loan, but cannot provide a commitment or approval of the loan; that must be provided by the actual bank or investor who is funding the loan. “Mortgage bankers”, on the other hand, are actual lenders. They can offer a wide range of mortgage programs that they usually fund on a short-term basis before selling them in the secondary mortgage market. A mortgage banker can originate, process, fund and occasionally service mortgage loans. Mortgage banks currently dominate the U.S. mortgage market by a large margin. Institutional banks, or “portfolio lenders”, also fund mortgage loans, but are limited to offering only their own mortgage products, since they keep these loans in their own portfolio, rather than selling them in the secondary market. It is important to understand with whom you are dealing, and what products and services they can offer, as well as comparing costs and loan rates.

The benefits of obtaining a Loan Commitment in the home buying process Listed below is an explanation of the three basic types of approvals that most lenders provide. As you will see, a Loan Commitment is the most attractive form of approval for you to provide to a seller. Although there is a small fee, obtaining a Loan Commitment puts you in the best position to successfully bid on the purchase of your new home.

A “Pre-Qualification” means that you have spoken with a loan officer and the loan officer has qualified you, in writing, for a specified loan amount based on the verbal information you have provided regarding your income, assets and credit history. A credit history check is typically not completed. This is the “weakest” form of approval. Most real estate agents and sellers will not accept this form of qualification. Most lenders do not charge for a Pre-Qualification.

A “Loan Approval” is a written form of approval for a specified loan amount. In this case, the lender has taken a complete application and has completed a credit check and debt calculation. In most cases, the lender has utilized an automated approval system for your approval. This form of approval is more complete and acceptable to real estate agents and sellers because it is not simply a loan officer’s opinion. However, a Loan Approval is based on verbal information and a credit check only. The approval is still subject to review and verification of income and/or assets.

A “Loan Commitment” is a written promise from a lender to provide a loan, up to a specified amount. The commitment means that a lender has completed your credit check as well as income and asset verification. In most cases, the commitment is only subject to an appraisal on the property and the review of a purchase contract. A Loan Commitment is typically valid for several months and can be extended.

Certificates of Occupancy

What is the Purpose of the Certificate of Occupancy? A Certificate of Occupancy represents the municipality’s assurance that a home is legally occupied and conforms to zoning and minimum repair and maintenance standards as of the date the Certificate of Occupancy was issued. It normally ensures that:

a) plans were properly filed with the building department before construction occurred, or if construction was first undertaken, that the property owner satisfied the building department that the addition to the residence was performed in compliance with the law;

b) architectural drawings were filed and the building department determined whether there is compliance with setback requirements;

c) if additional bedrooms or baths were added to a home with a septic system rather than a municipal waste system, Health Department approvals were obtained for the expansion of the premises and the septic system in its present design is adequate to serve the expanded needs of the premises;

d) the plumbing and electrical inspectors have examined the premises to determine that all improvements were made in compliance with the Building Code regulations at the time of the inspection;

e) the Building Department certifies that the addition has been completed in accordance with all codes, rules and regulations and has been properly inspected. Based upon the issuance of a Certificate of Occupancy, notification is given to the Office of the Assessor in the municipality in which the property is located to advise the Assessor that improvements have been made to the premises. These improvements could result in a change in assessed valuation and, therefore, a change in the tax levies that are imposed upon the premises.

What is the Effect of Not Having A Certificate of Occupancy?

A purchaser of property which does not have a Certificate of Occupancy for all improvements may find:

1) the improvements do not comply with setback requirements and need to be moved or be made the subject of applications to the Zoning Board of Appeals for Variances;

2) the improvements may not have been made in accordance with the Building Code and may need to be upgraded;

3) the improvements may never be the subject of a Certificate of Occupancy without the expansion of septic fields which may or may not be able to be improved or expanded upon;

4) the property has been under-assessed based upon its actual improvements and upon compliance with all of the rules with respect to obtaining Certificates of Occupancy, therefore there is likely to be a substantial increase in real property taxes.

What Does the Real Property Contract Form State About Certificates of Occupancy?

Paragraph 16 of the contract commonly used in the New York Metropolitan Area addresses Certificate of Occupancy. The contract is made subject to and the purchaser’s obligations are conditioned upon the fulfillment by the seller of certain conditions under Paragraph 16. These include: Paragraph 16(b) The Delivery by Seller to Purchaser of a valid and subsisting Certificate of Occupancy or other required certificate of compliance, or evidence that none was required, covering the building(s) and all of the other improvements located on the property authorizing their use as a single family dwelling at the date of Closing. If the bank attorney does her or his job efficiently, the bank will insist upon a Certificate of Occupancy for all improvements.

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Hi, I’m Jennifer Y. Ross, a licensed real estate salesperson and your Westchester County NY real estate community and home expert.  I grew up here.  I live here. I work here.  To learn more about how I help my clients check out my bio video – video link.

Just like you I was considering a move to Westchester County not too long ago.  I was very likely in your shoes – living in NYC and starting to outgrow my current living situation.

If you are ready to start exploring Westchester Communities and Homes, your first stop should be a Platinum Drive Realty Luxury Tour – link to learn more.

Contact me to schedule your suburban safari today! – link to schedule tour.

Areas of Expertise:

Larchmont Real Estate, Mamaroneck Real Estate, Rye Real Estate, Rye Neck Real Estate, Purchase Real Estate, Harrison Real Estate, New Rochelle Real Estate, Pelham Real Estate and Bronxville Real Estate.

 

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