Recently, there was a great article on Moolonamy, about this topic.  The article entitled, “Is It Better to Buy or Rent?“, gives some excellent facts and figures.  There is an wonderful chart outlining the costs and benefits of renting vs. owning a home.

In this economy, with the uncertainty that comes with your job and your financial stability, buying a home is a big decision and renting may be a better option.

Some points to remember when choosing your Realtor:

1. Make sure you like them

Like I said above, you are going to spend a lot of time with them. If you are buying a home, you are going to go with them to open houses and showings. You are most likely going to be in a car with them driving between homes and then with them at the homes. You have to like them and trust them. If you are not happy with your Realtor, find another one. There are plenty to choose from.

2. Ask Questions

You should feel comfortable enough with them to ask any and all questions you have. If you are selling your home, you should ask them questions such as “Will my home be listed on the Multiple Listing Service?” and “How long will my house be listed with you?” If you are buying a home, you should always ask whether the Realtor is working for you or the seller. Many times the Realtor is the Listing Agent and is working on behalf of the seller to help them sell the house. Any questions you have you should get an answer that is clear and concise. You should not be left wondering what is going on.

3. Referrals

If you ask your Realtor for a referral, remember that it is just a referral. You are in no way obligated to use the attorney, appraiser, or mortgage broker that they recommend. You are always free to choose whomever you wish to represent your interests. However, Realtor’s can usually give you a referral to someone in the area and most likely, they have a relationship with them.

Remember that buying or selling a home is a lengthy, complicated process that requires you to be involved in every step. Make sure that you are choosing someone that you are comfortable with to have a relationship with for a few months.

Standard Fees

These fees apply to everyone regardless of where you purchase real estate. These fees include what are known as title fees which include, recording deeds and mortgages, searches run against the premises and people involved, and a one time insurance policy purchase to insure the buyer that they have the most superior to claim to ownership. Title insurance also insures the lender that they are in the first lien position.

Jurisdictional Fees

In New York, there is a tax placed on mortgages. Throughout the state, New York charges a a tax of .8% of the mortgage amount in taxes. In NYC, the City adds an additional tax of 1% of the mortgage amount. Additionally, New York State charges a processing fee of $125.00 to process some of their transfer documents and tax returns that are required.

Bank Fees

If you are using financing from a lender, there will be bank fees involved. Bank fees depend entirely upon the lender, your credit score, income, risk assessment and program you qualify for or choose. Therefore, there is no hard and fast rule as to lenders fees. However, there are some fees that are relatively standard; appraisal fee, credit fee, flood certification fee, tax assessment fee, document preperation fee, establishment of an escrow account, short term interest and a point ot two. If you are obtaining an FHA loan, there is also the addition of MIP (Mortgage Insurance Premium), which equals about 2% of the loan amount.

Attorney and Miscellaneous Fees

In addition to all of the fees above, there is the business of paying your attorney and other miscellaneouse fees such as adjustments for city, school, village and other taxes, transfers of warranties, water and sewer, etc… these fees are not standard. Therefore, they can be difficult to estimate which is why you should hire an experienced Real Estate Attorney who can help you determine these amounts.

Summary

As a general rule, we always tell our buyers to estimate that they will need 5-6% of the purchase price for closing costs. As long as they are prepared to have that amount of money available for the closing, if the amount is a little lower, it will be a pleasant surprise.

Attorney

If you have not already found a Real Estate Attorney, now is the time to find one, and rather quickly. We suggest getting a reference and really doing your homework here. Your attorney plays a tremendous part in just how smoothly your closing will go. In this area of law, like every other, not all attorneys are created equal. The best personal injury or family law  attorney most likely has no idea about title issues, bank costs and fees, zoning regulations and I would be willing be to bet can’t read a schedule “A” description or survey. Simply because Real Estate Transactional Law is typically non-adversarial does not mean that anyone is able to do it. The typical fee for representation in a typical residential real estate transaction can range from $1000.00 to $2,000.00 barring any extreme circumstances. Most attorneys fees for real estate transactions are a flat fee and not calculated on an hourly basis. Many people look at these fees and get a little sticker shock but put into perspective, this is normally less than one half of one percent of your purchase price. If the house you are purchasing is bank owned or a short sale, the fee is a little higher because of all the additional work that it entails, if the premises are sold for more than $1M then the fee is higher due to the additional liabilities.

An experienced Real Estate Attorney will have his/her fingers on the pulse of the Real Estate and Mortgage markets and will know if your mortgage is a “good deal” or if you are being taken for a ride. He/She will know the current available mortgage loans and the requirements to obtain those loans, the general interest rates for each type of loan, your estimated payments, and what reasonable fees are for the lender for each loan program. He/She will have relationships with mortgage lenders, title companies, appraisers, surveyors and the like to help get things done quickly and smoothly. Your Real Estate Attorney should be able to help you not only through the actual purchase of the property but also through the financing, post closing issues, tax exemptions and the like, knowledge that is gained through repeated closings and not generally available to the entire legal community. We generally advise purchasers, especially inexperienced purchasers to avoid using the attorney pushed on them by those people (brokers) involved in the transaction. There exists the possibility that the attorney, although representing you, may have loyalties to the broker as well as you.

Contract

The Seller’s attorney (in New York) will prepare the Contract Of Sale and forward it to your Attorney. You and your attorney will review the contract and make sure that the entire agreement you negotiated with the seller is contained in the contract itself. If there is a term of the deal that is not contained in the Contract of Sale, that term will no longer exist as the contract specifically states that it contains the entire bargain. Make sure the purchase price, down payment, and mortgage contingencies are correct. Make sure that the seller’s concession is correct, repairs to be done are listed, and adjustments or credits are listed or at a minimum referenced as many adjustments cannot be made until the date of closing is set.

Closing

On the prescribed date, you and your attorney, the seller and the seller’s attorney, the bank and their attorney and the title company will meet up. A host of documents will be set forth for you to sign. You attorney will review them with you, make sure the interest rate, term of the loan, and costs are accurate and are what you were told they would be. Read the loan application (known as a 1003) and make sure the information contained therein is correct including, occupation, monthly pay, yearly pay, liabilities, and the like. If you ever default and the 1003 is incorrect you could be accused of fraud. The moist importanf document, the Deed, will be executed by the seller placing you in title as the owner of the property. Make sure that your attorney explains to you all the different ways available to you to own the premises and the ramifications of each type of ownership.

After you have signed all the documents, the attorneys will divide up all that money. Most likely the money will be spent as follows, payoff seller’s mortgage, pay title company, pay attorneys, pay title closer, remainder to seller.

This is most likely the largest expenditure you will make in quite some time so enjoy it, it is not everyday you write a check for a few hundred thousand dollars. Once everyone is paid, the keys will be passed over, the title company will send the deed for recording at the County Clerk’s Office and you are the proud owner of a home, Congratulations!

Related Posts:

1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Your Credit

3. 7 Days To Owning A Home: Day 2 – Financials

4. 7 Days To Owning A Home: Day 3 – Where To Live?

5. 7 Days To Owning A Home: Day 4 – Where Do I Find My Dream Home?

6. 7 Days To Owning A Home: Day 5 – Brokers

7.  7 Days To Owning A Home: Day 6 – Found It

Before the offer

Before you make an offer to purchase the house of your dreams you need to make yourself look like a good buyer to the seller. In many instances, a seller will take less money for a fast closing with a secure buyer. If you don’t need a mortgage, all the better and the offer will be what is called an “All Cash” offer. If you, like most of the population, require mortgage financing, then the offer will be subject to you obtaining a mortgage in a certain amount. The less money you need from the bank the better as far as the seller is concerned.

Preapproval

Prior to making the offer on the house, make sure you have preapproval from a reputable lender. A preapproval is simply a letter from a lender that says, so long as everything you told us is true, we will offer you financing up to X amount. Having this document makes you look like a serious buyer who has done his/her homework and is ready to go forward. A preapproval is not a commitment and is based wholly on verbal communications with the lender. You should not need to allow them to run your credit or provide them any real documentation of obtain this.

Earnest Money

Part of the offer will include how much money you are willing to put in escrow on contract, also called a down payment. The terms of the contract of sale which you will execute with your attorney after the offer is accepted by the seller, allow for a return of these funds in most instances if the deal falls apart. It is something of a security blanket for the seller.  The larger the down payment, the better as far as the seller is concerned but the smaller the down payment the better as far as the purchaser is concerned. The old way of putting 10% on contract is no longer the way as the prices of houses have increased since that time. An acceptable down payment is about $10,000.00.

Offer

The Seller knows that what he is asking for is not what he is going to get; however, you do not want to seem as though you are not putting in a serious offer. Prior to the collapse of the real estate market, an offer withing 10 to 15 percent of the purchase price was considered a reasonable offer and would typically be considered by the seller. Times have changed and we are now in a buyers market. A reasonable offer in the current climate is 10 to 20 percent below asking price.

Counter-Offer

Be prepared for the seller to propose a counteroffer. In some cases, this negotiation process can be made up of multiple counteroffers and can take some time. Remember that the purchase price is not the only negotiation tool available to you. You may be willing to pay more if the seller agrees to paint, leave some furniture, update the kitchen, etc… in many instances this is the time to think a little outside the box. Many sellers have difficulty assigning value to their home as memories and sentimentality’s, add fictitious value to the house. Sellers are often times willing to do work to the house or provide other incentives that may even be more costly.

Acceptance

Once the seller agrees to your offer, you will sign the binder to the contract and now is the time to call your Real Estate Attorney. Your next step will be signing the Contracts with your attorney.

Related Posts:

1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Your Credit

3. 7 Days To Owning A Home: Day 2 – Financials

4. 7 Days To Owning A Home: Day 3 – Where To Live?

5. 7 Days To Owning A Home: Day 4 – Where Do I Find My Dream Home?

6. 7 Days To Owning A Home: Day 5 – Brokers

Real Estate Brokers have a rather strange job and their entire job is an exercise in conflicts of interest. Brokers almost always represent the Seller and it is very rare that a buyer’s broker is used except in very limited circumstances. Brokers are obligated to get the best price for a home that they possible can since they work for the seller. They are rewarded for this because their pay is directly related to the purchase price. In order for a broker to make money they must sell homes,which means they must also keep buyers happy and negotiate on their behalf as well. Brokers also have their own listings where they will not have to split the fee with anyone else and many will attempt to steer you in that direction. Be wary as there may be many more homes and some may be better suited to your desires than what you are being shown.

If you determine that you need to use a broker to find your home , there a few tips that will help you get the best results possible:

1. Don’t sign anything. Brokers will sometimes attempt to get you to sign an exclusive contract whereby you are bound to use only that broker.

2. Use multiple brokers as each broker has their own area where they are prevalent. A broker experienced in one town may have little or no knowledge in another town, even if they are geographically close.

3. See houses in day trips. Always see a house in the day time, not at dusk or night as it is too easy to miss things that way. Also see multiple houses at a time. If you are going to see a house with a broker, there is no reason not to see three, four or ten houses on the same excursion.

4. Don’t be bullied. If you want a house with at least three bedrooms, then do not allow the broker to take you to see houses with two bedrooms.  If your budget is $300,000, then there is no reason to be looking at houses in the $400,000 dollar range. A little more is ok, as price is always negotiable, but there is no reason to be looking way out of your price range. These little things turns into a waste of time and become very frustrating.

Related Posts:

1. 7 Days To Owning A Home: Day 1 – Your Credit

2. 7 Days To Owning A Home: Day 2 – Financials

3. 7 Days To Owning A Home: Day 3 – Where To Live?

4. 7 Days To Owning A Home: Day 4 – Where Do I Find My Dream Home?

There are a ton of available outlets to help you find your home.

1. Realtor Websites

The first place to begin looking for a home is the Internet. Websites upon website offer houses for sale in every community across the globe and any house available for purchase will be there. All sites are not created equal however, and there are certain things you should be wary of when beginning your search especially if you are not familiar with real estate purchases. Many websites that are created specifically for a certain realtor such as Century 21, Prudential Real Estate, Re-Max, Coach, and all the others will list their exclusive listings before general listings. These listings are exclusive to the specific realtor. That means that the realtor will not have to split their commission with another realtor and therefore make more money on the sale of these homes. So obviously, they want to sell them first. Many listing agreements have an exclusivity clause in them whereby the realtor gets to list them exclusively for a short time before they are obligated to get other Realtors and general listings involved. The use of these websites is an invaluable tool but be mindful that what you are seeing are listings new to the market and not yet price reduced.

2. MLS (Multiple Listing Service)

Almost every region has a multiple listing service where a realtor can list a home for other realtors and the general public. In lower NY State, you should use MLSli.com, which stands for Multiple Listing Service Long Island. Although the title seems to limit the service to Long Island, many listings are in New York City and the surrounding areas. MLS services are a great resource as you can see listings from every realtor and from many for sale by owner listings as well. This side by side view of the market in a current area will help you to see where the good deals are and the average value assigned to properties of different types in certain areas. You will also be able to contact realtors directly to schedule viewings and open houses are listed. The MLS website has additional tools on it that can be very helpful such as mortgage calculators, income calculators, and tools to search houses that were recently sold in the area to give you an idea of an acceptable price. Remember asking price for a house is rarely what is paid, everything is negotiable, especially in the current housing market.

3. Open Houses

Set aside a few weekend days and travel to the places you think you want to live. This is supposed to be fun, but remember what you are there for. While it is exciting to look at a potential new home you must do so with a critical eye. Remember the house was prepared for you and in many instances even staged by a professional designer to give off a certain aura. Use a critical eye and think about those possessions you have and don’t want to discard, ask yourself, “Will my couch fit here?”, “Will my TV look right there?”, and “Will our bed fit in this room?”. Remember once you buy it, it is yours and if it is not right you may not be happy.

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1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Credit

3. 7 Days To Owning A Home: Day 2 – Financials

4. 7 Days To Owning A Home: Day 3 – Where To Live?

There are a number of factors to consider when choosing where you want to live:

1. School District

To many home buyers this is the single most important aspect of their where new home will be located. The school district must be one of the best! This is true if you have or are planning to have children. If you are single or simply not planning to be parents, then school district loses its appeal. However, you must realize that school district adds tremedous value to your home should you choose to sell. Full day kindergarden is a tremedous seller for a home and adds value. It is a consideration often overlooked by both buyers and sellers but it is very important. If you live on Long Island or in the Five Boroughs of New York City, check out the school district information on Multiple Listing Service for Long Island (mlsli.com).

2. Town and community

Depending on your social, gender, religious and racial makeup some places may be more appealing than others. You may wish to be in an area with a high Jewish, Catholic, Gay, Indian, Italian or African American population. You may like the artsy and whimsy style of small towns. Whatever your style and preference, remeber that your choices now will affect the value of the home later when it comes time to sell. Check out the Neighborhood Info section of mlsli.com.  You can find information about all of the communities on Long Island by entering in the zip code. 

3. Proximity to shopping, highways, parks, other towns, etc.

Make sure that you have access to those things that are important to you within a reasonable driving distance. Although the social makeup of a particular small town may be exactly what you are looking for, if it takes forty five minutes to get to the nearest supermarket or the beach is too far away, you may be miserable. You may love living in a city, but taking your child to the park is not an option. 

4. Work or family.

For some people, a shorter commute to work is more important than a shorter commute to see their families. Determine which is more important to you and look at homes in those areas.

Remember that determining where you are going to live is a personal decision and you need to do your research. Only you can decide what matters most to you.

Related Posts:

1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Your Credit

3. 7 Days To Owning A Home: Day 2  - Financials