Contact Us

House Buying Guide Part 3

Section One (House-Buying-Guide) discusses Steps 1, 2, and 3.

Section Two (House-Buying-Guide-Part-2) discusses Steps 4, 5, and 6.

Section Three - This Section (House-Buying-Guide-Part-3) discusses Steps 7 and 8.

STEP 7 - Removing Contingencies.

There are several contingencies or things that a purchase and sale offer, once signed, have to be removed in order for the contract to become binding on the parties. These provide you, the buyer, with a way out of a contract if whatever the contract has been subject to doesn't take place. These include:

• Attorney’s Approval

  In most areas of the country real estate attorneys assist sellers and buyers of real estate with their transactions. In such situations the offer should have been made subject to the seller and buyer attorneys' approvals.

  To what degree an attorney can "kill a contract" will vary by judiciary area. For example, in some areas of New York State, an attorney can't just disapprove of a contract, but rather, must have a specific legal reason to do so. In other areas of New York State, an attorney can disapprove of a contract on any basis or none at all.

  To some degree this attorney approval clause can be abused by both buyers and sellers. For example. the seller may want to approve a new contract from another buyer for a higher price or the buyer might get cold feet or find another home they like better and want to get out of the deal.

  The best advice is to not get your hopes up until the attorney review and disapproval period has expired and neither attorney has canceled the contract. This should be discussed in more detail with a real estate attorney, if attorneys are involved in real estate transactions in your area.

  Caution: If attorneys are used in your area for real estate transactions, make sure you use an attorney whose major specialization is residential real estate. Do not use an attorney who specializes in estates, litigation, divorces, or bankruptcies. Real estate is a specialty and these other attorneys will be over their head. There will be plenty of good real estate specialist attorneys in your area. Get a referral from your buyer agent.

  
  

• Property Condition Disclosures

  Generally, property condition disclosures should be received before the purchase offer is made. However, it is possible that some negative property condition is discovered after the offer is made or is received after the offer is made.

  Sometimes, a mandatory disclosure can be waived as in New York State. If the seller fails to provide a property condition disclosure in NY State, they have to pay the buyer $500 at closing. As a result, some attorneys recommend that their seller clients pay the $500 and not provide the disclosure as they feel the disclosure exposes their seller client to liability if they fail to disclose something or fill out the form inaccurately.

  
  

• Property Inspections
  
  
  Once the property inspections are completed the buyer has the option generally to ask the seller to make certain repairs at the seller's expense or to receive a repair credit at closing for the dollar value of the repairs.

  Some areas limit the ability for a buyer to get out of a deal for minor repair needs. For example, only repairs above $1,500 per repair can be a basis for a repair request.

  In other areas it is specified upfront how much a seller is responsible for maximum based on the inspection reports and repair needs listed.

  
  

• Mortgage Approval

  Even though you might be pre-approved for a mortgage the offer should have been subject to you getting a mortgage commitment by a certain time. It is important that if the mortgage commitment is delayed that the time specified in the contract is extended to a more reasonable time in which to allow for the mortgage approval process.

  
  

• Mortgage Commitment Contingencies

  A mortgage commitment often is issued with contingencies. They could be repair contingencies that have to be completed before closing and reinspected and approved before a closing can be set.

  They may be document requirements. Some may be due before a closing can be set and some can be handled at closing. Work with your mortgage professional on meeting any requirements of the mortgage commitment.

  
  

• Good and Marketable Title

  This is more of a legal matter handled by your attorney or the closing agent. However, it is good for you to know and understand the concepts.

  The seller usually is guaranteeing the title to the property to be free and clear of all liens and encumbrances except for certain easements and rights of way of record. So your buying the property is subject to the seller giving you a "good and marketable title".

  Sometimes there may be a "cloud" on the title, or in other words, something that makes the title to the property less than the "good and marketable" standard. In such situations, the attorneys work to clear the "title defect" so the closing can continue. If that isn't possible, often title insurance can be purchased to guarantee the title.

  A bank will always require title insurance to cover their mortgage. The buyer may also buy a policy (fee title insurance) to protect their interest as well. It is highly recommended that you purchase the fee title insurance at closing. There is a discount for the fee policy when purchased at the same time as the bank policy. It is a one time fee that protects you against title defects as long as you own the property. Discuss this with your attorney or the closing agent prior to closing so they can include it in your closing costs.

Top of Page

STEP 8 - Closing (Also known as Settlement or Transfer).

Here we discuss the steps involved in the closing process at various stages or phases:

Phase One - After Contingencies are removed:

• Give Notice to Current Landlord

  Trying to coordinate moving out of an apartment and ending a lease with closing on and moving into a new home is tricky. Some leases and landlords require a 60 day notice of vacating. Others, for example "month-to-month" leases, require a 30 day notice prior to the end of the month.

  Either way, make sure you understand the requirements of your lease and the proper time frames for giving your vacate and moving out notice. You should have reviewed or had your attorney review your lease early in the process to make sure you have no legal problems moving out.

• Start planning your move (People & Equipment)

  Now that closing is just around the corner you are much closer to knowing the exact day of closing and thus able to make specific moving plans, including lining up movers and/or renting a truck. You can't finalize the details yet as you don't know the exact closing date.

• Get Fire/Liability Insurance Binder and Receipt for One Year's Premium Paid in Advance & fax it to your attorney.

  Actually, this is an important step as a bank won't allow the closing to be set until they receive an insurance binder. To complicate things, the insurance company won't issue a binder until they have a specific closing date.

  The way around this dilemma is to tell the insurance company that closing is on such and such a date. The date you give them is the earliest possible date that the closing might take place. Ask your attorney or the closing agent when that date might be.

  Then thee insurance company will issue the binder effective for that date. Then the bank can set the closing. The closing might take place beyond the date of the insurance binder but the only down side is that you paid for a few days worth of insurance when the insurance coverage wasn't actually in effect.

Phase Two - After a firm closing date is agreed to:

• Call Utilities - Gas, Electric, Water, Sewer, Telephone, Cable, Internet Access

  The utility companies need to be called for transfer of service from your old residence to your new residence effective the day of closing. If you don't call to put the utilities into your name they may get shut off, assuming the seller called to cancel them. This may cause some complications if you go to move in and you have no power or lights or heat.

  Set up appointments to have the meters read. In some areas you may be able to read the meters yourself and call in the reads. But, probably, the utilities will come and read them for you.

  With respect to propane and fuel oil, generally the tanks will be topped off and the buyer reimburses the seller for a full tank of fuel at closing. Other times the amount of fuel in the tank is estimated and the reimbursed amount is based on the last bill.

• Arrange for refuse pickup

• Finalize your moving plans

• Re-inspect property 24 hours before closing

  This is an important consideration. Your purchase offer should have had a clause giving you the right to reinspect the property within 48 hours of closing. A home purchase takes time. The seller has moved out. You need to reinspect the property to make sure no damage has occurred and that items that were included such as appliances are as they should be, that is the ones you agreed to buy and that they are there and haven't been removed by the seller.

• Contact your Attorney or the Closing Agent

  You need to know what cash is needed for closing. You will probably be instructed to bring a cashiers check to closing for the amount you need.

  You also need to review the preliminary closing statement and compare it to the GFE, Good Faith Estimate, you received at the time of applying for your mortgage. Make sure there are no large differences. If so, contact your mortgage professional immediately to discuss with them. Don't wait until closing as it will be too late.

• Arrange for keys to be at closing

  Make sure someone is bringing a set of keys to the property to the closing. I've seen buyers at closing with their worldly possessions sitting on a moving truck and no keys for them at closing. Ask the real estate agents and your attorney or the closing agent who will be bringing keys to the closing.

Phase Three - At Closing:

• Bring Cashiers Check to closing as per Your Attorney's or the Closing Agent's Instructions.

• Bring the Original Insurance Binder/Policy & One Year Paid Receipt in Case the Bank Needs the Original.

• Bring Your Mortgage Commitment Papers to Verify Terms if Necessary.

• Bring Photo ID (Driver’s Lic./Passport) so the Bank Can Verify Who You Are. This is required now under Home Land Security rules and regulations.

• Be Prepared to Sign Lots of Documents.

• Get Keys to the Property and Copies of Closing Documents.

Phase Four - After the Closing:

• Check on your new home as soon as possible after the closing to make sure it is O.K. and nothing has changed since your re-inspection - If it has, call your Attorney immediately. Your Attorney may be able to hold up the recording of the sale in order to put pressure on the seller to correct any problems.

• Change the locks on your new home at your earliest convenience. There is no telling who might have a duplicate key - real estate agents, the neighbor, some distant relative, a former boyfriend or girlfriend of the seller. Play it safe and change the locks.

• Follow-up with Utilities to be sure meters are read and billing is proper.

• Finalize your move and previous rental arrangement.

• Move-in and Enjoy

CONGRATULATIONS......YOU MADE IT!!!

Top of Page

Click here to return from the "House Buying Guide Part 3" page to the main "House Buying Guide" page.