Buying a Home
If you have found the home of your dreams or at least a home that you would like to own, the first thing you need to do is to come to an oral agreement with the seller concerning the purchase price. If you are working with a real estate agent, the offer should be made through the real estate agent.
Once you and the seller have agreed on the purchase price, it is time for you to retain your lawyer. It is wise not to use an attorney that is recommended by any other party to the sale, including the real estate agent. The proper selection of an attorney is essential. You must be sure that your attorney has only your best interests in mind.
Under no circumstances should you sign anything or pay any money before you have your attorney's approval. If you sign before consulting your attorney, there may be nothing that your attorney can do to protect you if any of the documents that you signed are unfair to you. Your attorney will contact the attorney for the seller of the property.
The seller's attorney will then send the proposed contract to your attorney. You and your attorney will review the contract. If you and your attorney approve of the contract terms, you will sign the contract and hand your attorney a check for the deposit which will be made payable to the seller’s attorney’s escrow account. Your attorney will then send the contract and deposit check to the seller's attorney, who will have the seller sign the contract and return a fully signed contract to your attorney. The seller's attorney will deposit your check in a special escrow account to be held pending the completion of the sale.
You will then take the fully signed contract to your lender to apply for a mortgage. You will also order the termite, and if applicable, the engineering and any other needed inspections. If all goes well, approximately four to eight weeks later, your lender will issue a mortgage commitment. If all does not go well and you do not receive a mortgage commitment, through no fault of your own, your attorney will cancel the contract and get your deposit back. Please note that, to receive a refund of your deposit, it is essential that your lawyer make sure that the contract includes a mortgage contingency and provides for notice of the denial prior to the expiration of that contingency.
Once you receive your mortgage commitment, your lawyer will order the title search and survey from a title company. Approximately a month later, everything should be complete and the closing date will be set.
Within twenty-four hours prior to the closing, you should visit the property and make sure that it is in the same condition as it was when you entered into the contract to buy it. On the day of the closing, you, your lawyer, the seller, the seller's lawyer, and a representative of the title company will meet at the office of the lawyer for your lender.
If you are buying a coop, the coop's attorney and perhaps a representative from the seller's lender will also be present at the closing, and the closing may take place at the office of the coop's attorney. The closing will likely last two to three hours. If all goes well, at the end of the closing, you will be the owner of your new home. Several months after the closing, you should receive the original recorded deed and title policy. Please note that there is no deed and title policy if you purchase a coop.
There are many expenses related to the purchase of a home. If you are getting a mortgage, the expenses related to the mortgage will be the biggest component of your expenses. The lender may charge you points. A point is one percent of the loan amount. Thus, if you are borrowing $100,000, one point will be $1,000. In addition, your lender will charge you such other fees, such as, for example, an application fee, which is typically $500, and the lender's lawyer fee, which is typically $750. At the closing, your lender will also collect money to be held in escrow to pay future real estate taxes and insurance premiums.
You will also have to pay your own lawyer. For a one- or two-family house, condo or coop, the lawyer’s fee is likely to be from $2,000 to $4,000. It is unwise to look for the cheapest lawyer. Look instead for one who comes highly recommended. Remember, this lawyer will be looking out for your interests in perhaps the biggest purchase of your life. This is not the time to cut corners. Our fee is $3,000, with $500 paid upon retaining our office and the balance is paid at the closing.
You will need to purchase a hazard insurance policy, which for a typical condo, one-family or two-family house will cost annually from $1,000 to $2,500. You will also need a title company to search public records to make sure that you get good title to the property. The title company will also issue a title policy to you and your lender. For a typical condo, one-family or two-family house, the fee that you will pay to the title company will be approximately $2,000 to $4,000.
New York State charges a mortgage tax. In New York City, the tax is 2.05% for a mortgage under $500,000. If the purchase is of a residence, the borrower pays only 1.80% and the lender pays .25%. Thus, on a mortgage of $100,000 for a house that will be used as a residence, the borrower will pay $1,800 of the tax paid, and the lender will pay $250. If the sales price of a residence is $500,000 or more, the mortgage tax in New York City is 2.175%, of which the lender will pay .25% of the tax, and the borrower will pay the rest. If the property is in this higher category, the 2.175% applies to the entire amount of the mortgage. The mortgage tax varies from county to county. For more information click here: http://www.tax.ny.gov/pit/mortgage/mtgidx.htm.
If the property is located in New York City, and the purchase price is $1,000,000 or more, there is a tax of 1% that is paid by the buyer. For example, if the purchase price of the house is $2,000,000, the tax would be $20,000. This tax is known as the mansion tax. When it was first established not many homes cost a million dollars, now, in New York City, many homes cost a million dollars.
In addition, if you are buying property in East Hampton, Riverhead, Shelter Island, Southampton or Southold, there is a transfer fee of 2% of the sales price, which is paid by the buyer.
In addition to all of these expenses, there will be other various expenses, such as a fee to record the deed. You should expect to pay several hundred dollars for these fees. Please note that, since the fees and expenses change from time to time, this is meant to give you an idea of what to expect. Consult your own attorney for the latest information.