|
If you have a question that you do not find here, please email me and I will be sure to get you an answer! Click on question to jump directly to details.
1. How do I know if I am ready to buy a home?
2. Do I need a lawyer to buy a home?
3. What is the "assessed value" of a home?
4. What is an appraisal? When do I need one?
5. Who does the real estate agent represent, the buyer or the seller?
6. What is “earnest money”? Is it necessary?
7. What exactly am I buying (or selling)?
8. What does a home inspector do, and how does an inspection
figure in the purchase of a new home?
9. What is a HUD home? Am I eligible to buy one?
10. As a seller, what do I need to disclose about my home?
11. As a buyer, can I rely on the seller’s disclosures?
12. What if I change my mind after I sign the agreement?
13. What is meant by “closing” and “escrow”?
14. What are “closing costs” and title insurance?
15. What are home warranties, and should I consider them?
1. How do I know if I am ready to buy a home?
You can find out by asking yourself some questions:
Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
Do I have a good record of paying my bills?
Do I have few outstanding long-term debts, like car payments?
Do I have money saved for a down payment?
Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer "yes" to these questions, you are probably ready to buy your own home.
2. Do I need a lawyer to buy a home?
Laws vary by state. Some states require a lawyer to assist in several aspects of the home buying process while other states do not, as long as a qualified real estate professional is involved. In NY state it is required to use an attorney. If your state doesn't require one, you may nonetheless want to hire a lawyer to help with the complex paperwork and legal contracts. A lawyer can review contracts, make you aware of special considerations, and assist you with the closing process. Your real estate agent may be able to recommend a lawyer. If not, shop around. Find out what services are provided for what fee, and whether the attorney is experienced at representing homebuyers.
3. What is the "assessed value" of a home?
The assessed value is devised and written by the city or town in which the property is located and is usually used to determine property taxes or "assessments" for that particualr property. Many people confuse 'assessed' value with 'appraised' value, however they are quite different. The 'appraised' value of a home is what will most closely match the true 'market value'.
4. What is an appraisal? When do I need one?
An appraisal is a written opinion of the market value of a property, such as a home or factory, as of a specific date. Prepared by a qualified appraiser, it represents an independent and impartial analysis of all the relevant data. Because market value is not apparent just by inspection, an appraisal is usually required when a property is sold, taxed, insured, or financed. When you apply for a home loan, the lender will in most cases have the home appraised to ensure it is worth the amount you wish to borrow or mortgage.
5. Who does the real estate agent represent, the buyer or the seller?
There are two basic types of agency relationships. In a “single agency” relationship, the agent represents either the buyer or the seller in the transaction, but not both. Sometimes this person is called a “buyer’s agent” or a “seller’s agent.” In a “dual agency” relationship, the agent represents both the seller and buyer in the same transaction. He or she essentially serves as the “middleman” between the seller and the buyer. The responsibilities of an agent vary depending on whether the agent represents the buyer, the seller, or both. In NY, an agent must fully disclose what type of agent he or she is. This disclosure must be made prior to preparing a purchase and sale agreement.
6. What is “earnest money”?
Earnest money is the initial deposit that is put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you.
Remember, however, that the terms of the written agreement will control what happens to the earnest money. In NY, a minimum of $100. must be put down when making an offer. Substantial deposits make offers more attractive. If for example you are purchasing a $100,000 house and your lender requires a 10% downpayment (this means you will mortgage, or they will lend you, only $90,000), it would be wise to include the full $10,000 as your earnest money deposit, as this amount would be due and payable at closing anyway.
7. What exactly am I buying (or selling)?
There are two types of property: real property and personal property. Real property consists of the land and the dwelling structure and personal property consists of everything else, such as appliances, drapes, carpets and furniture. When you enter into a purchase and sale agreement, you are definitely buying and selling the real property. It is also customary for anything that is attached to the home (such as cabinets, a fireplace or window treatments) to be included with the sale and for unattached items (such as a washer or dryer) to be negotiable. However, you should not rely on custom to determine your rights. The written agreement should specify exactly what personal property is being sold. This is particularly important for the buyer, who usually gets possession of the home only after closing.
8. What does a home inspector do, and how does an inspection figure in the purchase of a new home?
An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of any repairs that are needed.
The Inspector does not evaluate whether or not you're getting good value for your money. Generally, an inspector checks (and may give prices for repairs on): the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.
It's a good idea to have an inspection before you sign a written offer since, once the deal is closed, you've bought the house "as is". You may want to include an inspection clause in the offer when negotiating for a home. An inspection clause gives you an 'out' on buying the house if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house. This clause is inherent in NY state contracts.
9. What is a HUD home? Am I eligible to buy one?
A HUD (US Dept. of Housing and Urban Development) home is a single family or any other type of residence which has been deeded back to HUD/FHA by mortgage companies who had foreclosed on FHA-insured mortgages in return for mortgage benefits.
Whenever a lender forecloses on a home insured with a HUD mortgage, HUD first pays the lender the amount owed on the home and then attempts to sell it at auction as soon as possible for no more than market value. The lender gets off the hook and, since the homes are sold at auction, buyers sometimes get them at below appraised market values.
HUD homes are sold on an as-is, non-warranty basis by auction during an "Offer Period". The initial offer period is open to 'owner occupant' bidders only -meaning you must live in the property for which you are making an offer. If the home isn't sold in the initial Offer Period, HUD makes the property available to all bidders - such as investors, and you may submit a bid any business day. If your bid is accepted, your real estate agent will be notified, usually within 48 hours.
Anyone who can qualify for a mortgage or has the cash is eligible to buy a HUD home. A major benefit in buying a HUD home is the money you will save, as most of these homes are sold for well below market value -for a very low price. Ask your real estate agent where to look for a list of HUD homes availabe in your area, or Call me (for Buffalo area) and I will help you look for homes that match your criteria - 716.743.5120.
10. As a seller, what do I need to disclose about my home?
The general rule of “caveat emptor” or “buyer beware” has been modified by court cases. In NY, a seller must disclose all material defects that are known to the seller and which cannot reasonably be discovered by the buyer. If, for example, you are selling your home in the summer and know that the basement floods every winter, you are obligated to bring this fact to the attention of the buyer. It should go without saying that the seller is also not permitted to “hide” defects (for example, by painting over water stains or replacing water-stained carpeting). If, after the sale closes, the buyer discovers a defect that the buyer could not have reasonably discovered on its own and that the seller knew about or reasonably should have known about, the seller may be liable to the buyer for damages. Therefore, if you have any questions about what types of disclosures need to be made, you should consult your attorney. Many of the required seller disclosures are covered in the Property Condition Disclosure Statement that sellers must provide to buyers under NY law. If you are working with a real estate agent, the agent will be able to provide you with a copy of the required Disclosure Statement.
11. As a buyer, can I rely on the seller’s disclosures?
A buyer should not rely solely on the seller’s disclosures. The seller is legally obligated to disclose only defects that are known or reasonably should have been known to the seller. If there was a historical problem that has been fixed, the seller may not be obligated to disclose the problem. Also, there may be latent defects not known to the seller (such as hidden dry rot) that affect the value or usefulness of the home. Therefore, buyers are well-advised to conduct an independent inspection of the property. Most buyers execute a purchase agreement before they have had the opportunity to make a careful inspection of the home. The agreement should therefore state that the sale is contingent on the buyer obtaining a satisfactory inspection within a certain number of days after the agreement is signed.
12. What if I change my mind after I sign the agreement?
There are both good and bad reasons for backing out of a sale. As a buyer, good reasons include inability to obtain financing, dissatisfaction with the results of an inspection and dissatisfaction with the condition of title, but only if these are written into the agreement as express conditions to the sale. As a seller, a good reason includes the buyer’s failure to timely satisfy or waive one of the stated conditions. The agreement should explain what happens if the buyer or seller tries to back out of the deal. The usual remedy for the seller if the buyer backs out of the deal without a good reason is for the seller to keep the earnest money. In some cases, however, the seller may be able to force the buyer to go through with the sale. The buyer usually has a choice of three remedies if the seller backs out of the deal without a good reason: (1) the buyer can get back the earnest money; (2) the buyer can get back the earnest money and any other expenses incurred in connection with the deal (such as inspection or loan fees); (3) the buyer can ask a court to force the seller to sell the home.
13. What is meant by “closing” and “escrow”?
The closing occurs when the buyer pays the purchase price to the seller and the seller conveys title to the seller. The buyer’s funds (including any earnest money deposit, any additional cash down payment and any loan funds) and the title deed are placed in escrow before they are disbursed respectively to the seller and buyer. Most major title insurance companies have escrow departments. Sometimes the role of escrow is assumed by an attorney. In any event, the parties usually open escrow soon after they execute the purchase and sale agreement by providing a copy of the agreement to the escrow agent. Prior to closing, the escrow agent prepares a closing statement, which indicates the division of closing costs between the buyer and seller. The escrow agent is usually also responsible for recording the deed in the real property records of the county. The escrow agent determines that all conditions to closing have been satisfied before disbursing the funds to seller and recording the title deed.
14a. What are “closing costs”?
Closing costs are any taxes, fees for services, or other charges incurred by the buyer or seller in connection with the purchase transaction. The purchase and sale agreement should state which costs are payable by buyer and which costs are payable by seller. Closing costs for which the buyer is usually responsible include points, fees and costs payable to lenders, the insurance premium for the lender’s title insurance policy, one half of the escrow fee, fees for recording the title and any security documents required by your lender (a deed of trust or mortgage), document preparation fees, prepaid interest and pro-rated property taxes. Closing costs for which the seller is usually responsible include the insurance premium for the buyer’s title insurance policy, one half of the escrow fee, fees for recording any documents necessary to clear title to the property and the real estate excise tax. In addition, the buyer or seller may owe a real estate commission to one or more agents. If you are closing the purchase through an escrow agent, the closing costs will be itemized on a settlement statement before the deal closes. You should review the statement carefully to make sure you understand and agree with all the costs being charged to you. The buyer must deposit sufficient funds in escrow to cover the purchase price of the property plus its share of the closing costs. The seller’s closing costs are deducted from the proceeds of sale.
14b. What is title insurance?
There are two types of title insurance: buyer’s insurance and lender’s insurance. Buyer’s insurance protects the buyer’s interest in the property (that the property is worth what the buyer paid for it). Lender’s insurance protects the lender’s interest in the property (that the property is worth at least as much as the amount of the lender’s loan). If a buyer is financing his or her purchase, the lender will require a lender’s title insurance policy. Similarly, every buyer should require the seller to provide a buyer’s title insurance policy.
15. What are home warranties, and should I consider them?
Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, such as unexpected repairs on appliances or home systems, which are not covered by homeowner's insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home. In securing a home warranty, you not only give peace of mind to potential buyers, you also add value to your home.
|
