Most buyers need to take out a mortgage, and therefore, most
contracts contain a mortgage contingency. That means that if
the buyer can’t get a mortgage, the deal is canceled and the
buyer gets his down payment back. However, most sellers, in
order to protect themselves, limit this contingency, so buyers
should try to pre-qualify for a mortgage.
Lenders will not lend on collateral that doesn’t support their risk.
Therefore, lenders always appraise the property against which
they are going to lend, to make sure that the property is worth
at least the amount in the contract of sale, and therefore, more
than the amount of the mortgage loan.
When you find that perfect house, you will have to agree on the
purchase price, a closing date, the amount of the mortgage that is acceptable to the seller, what appliances, etc. are included in the purchase, and what, if any, repairs or remediations need to be performed by the seller prior to closing. All this will have to go into the contract, and your realtor will communicate these terms to your attorney in a memorandum of agreement.
In New York, the buyer is expected to perform “due diligence”, to inspect the premises and the title, or suffer the consequences.
Most buyers have an engineer inspect the house immediately after an offer is accepted. The engineer will make an on-site inspection with you present, and will give you a good idea of what work needs to be done to put or keep the house in good repair. You can then decide whether or not the agreed purchase price is still the bargain you thought it was. This is also a good time to test for the radon, termites and mold, check for asbestos and ask about a buried underground oil tank.
Now you’ve done all your tests, put your deal together and asked your lawyer to include all of the additional terms in the contract that the engineer brought to your attention.
When you buy a condo, you are buying the unit and an undivided interest in the common elements (common driveway, stairwells, roof, etc.). You may wish to have your home inspection engineer check some of these, especially the roof and boiler, since you will have to chip in with the other condo owners by way of a special assessment when the common elements need to be repaired and/or replaced.
A co-op is not real estate, but shares in a cooperative corporation that correspond to a proprietary lease or occupancy agreement for a particular unit. Some people feel that an inspection is not necessary because of the form of ownership, but an engineer’s inspection of the unit and common areas can still be important, in the same way that such an inspection is important for a condo.
In addition to inspecting the structure, a buyer is also expected to check out the title. For houses and condos, this means a title search. For co-ops, this means a lien search. Your attorney will order the appropriate search and review the title, addressing any problems before you close.
Condos and co-ops also have (almost always) offering plans and financial reports. The offering plan, and amendments, will show the building history and construction, sometimes the building regulations, and often any special risks that are presented by the offer of sale, as well as other pertinent data. The financials show how the entire building, or buildings, are run, including expenses, income, reserve fund, assets, etc.
Both condos and co-ops have boards of managers, usually comprised of other unit owners. Buyers frequently review board minutes, to see what has been going in the building(s) and what, if anything, is planned.
Buyers or their attorneys, and/or financial advisors review the forgoing materials prior to signing the contract.
You are also going to have some closing costs, and your mortgage loan officer will probably be able to give you a good estimate of what these will be, as far as the lender and title fees go. Ask your lawyer what his or her fee will be, or an estimate of that fee. You will need to be prepared to pay these closing costs at the closing, so it’s a good idea to start calculating them early in the game.
Clear to Close
After your title report has been read and approved, and you have satisfied your lender’s requirements, your lawyer is ready to set a closing date. What? You thought the closing date in the contract was the closing date? Generally speaking, the contract recites an “on or about” date, and the closing rarely takes place on the date in the contract. Your lawyer is responsible for coordinating the closing between the bank attorney, the seller’s attorney, the title company, and you. If that seems like a lot to do, it is. Don’t worry – it all gets done.
Once the date is set, your lawyer will tell you how much money to bring, whether or not it needs to be in a bank or certified check (that is usually the case), and to whom to make the check(s) payable. Plan to bring your checkbook, just in case.
On the morning of the closing, or perhaps the night before, your realtor will take you for a “walk through” of the house. This is a final inspection before the closing. If there are any issues relative to the condition of the house or its contents, this is the time to make your objection. For most issues, the closing terminates the seller’s responsibility, so after that, it’s too late to complain.
Now the big event. You come the closing, with checkbook in hand and two forms of ID. Your lender has supplied at least a thousand papers to sign, most of which seem to be copies of each other. Sure, you can read them all word for word, but that will take you to next Tuesday. Your lawyer, who has done this many times, will explain the documents to you, and yes, you will sign them. You will write a few checks, the seller will slide the keys across the table, and welcome to homeownership!