by: William E. Duquette
Host: Hello and welcome to Upfront and Legal, the series that helps you make sense of the laws that affect us all in one way or another. Today Bill Duquette of Jacobowitz & Gubits, Walden and Monticello, plots the course that can assist first time home buyers or anyone purchasing a home. We found the place we want to buy and have checked out the neighborhood. Yes, this is the house of someone's dreams. What next, Bill Duquette?
BED: The next step in the process is making a formal written offer. Many of the real estate agencies, forms that they fill in the blanks, and many of them say on there it's a binding contract so the most important thing you want to have on any offer is subject to attorney approval. This will allow your attorney to look over the offer and if for any reason it's not in your best interest to go forward, you have the option of terminating the deal based on your attorney's disapproval of the offer. You also want to, the personal property that's included or excluded from the sale. Is there a ceiling fan you really want or some other thing, you want to make sure that is included in your offer. Most offers are "as is" which means that whatever the condition the property is in, and we'll get to inspections a little later, you want to have those inspections listed in the offer itself. Are you going to do those before or after a formal contract is signed? You want to have a survey done of the property. You want to have it subject to marketable title. Insurable title. What is the down payment amount? Is it subject to financing versus giving a commitment? Most standard contracts are subject to you getting a loan commitment and if for any reason after that you don't get the financing, if you lose your job or something to that affect, then you lose your down payment. If there's anything wrong with the property, does the seller have to repair or if your aware of anything that you want the seller to repair, that should be in your offer. If it's new construction you'll require lien waivers from the contractors.
Host: Let's stop for just a moment and list those steps again. First, there's the offer to be made. Be sure that what you sign is subject to your attorney's approval. Get on paper just what comes with the home your buying. Understand the meaning of "as is". Then there's survey and inspections to do. Insure there's a clean title to the property and agreement on down payment and on who's responsible for any needed repairs. Now that's probably not all. What else?
BED: If there's municipal violations you want them as of the date of closing. Standard contract, that is as of the date of the contracts so that if anything comes up between the date of the contract and the date of closing you would be responsible for those.
Host: And speaking of dates, what about a schedule?
BED: Timing is important. When do you want to close? When do you have to move? You want a realistic closing date in there. You also want to avoid time of the essence. That means you absolutely have to perform on that date and there's no leeway. So, very rarely do we find that in a residential contract. That is something you want to avoid.
Host: What might the seller wish to do in terms of schedule?
BED: You want to avoid the time that the seller has to either accept or reject your offer. One instance, they wanted 30 days to decide whether or not they were actually going to sell the property and you don't want an offer hanging out there that long. You should just give them a matter of 2-3 days to make a decision on that.
Host: You mentioned inspections earlier. Can we talk about that?
BED: Inspections, your going to want to have conducted on your home is a home inspection. There's licensed individuals out there that go through the whole house and they check all the different systems. They'll check the roof, the foundation, the wiring, and things like that. If it's well and septic they will also test that. They'll test the home for radon. They'll test for termites and they'll also test for mold. Mold is a very serious situation. I had a client recently that wasn't going to get a structural home inspection. Had it done and there was almost $10,000.00 worth of mold remediation that had to be done. We also had another person call up that mold was revealed in the report and they disregarded that, bought the house, and then they wanted to sue the seller after the fact for that. So, molds can be a very big problem.
Host: And what about outside the house?
BED: The condition of the roof, it could cost you $5,000.00 to $10,000.00 just to replace an average roof. So your going to want to check on that.
Host: So there's much to consider inside and out. But for the first time buyer or any home buyer there's more than that, right?
BED: To this point we've focused mainly on the structure itself. The house. But what are you really buying? Your buying a piece of property with the structure on it. So you want to know exactly what is that piece of property? You'll need a surveyor to do a metes and bounds description of the property which describes the border of the property. You'll also going to want to know are there any encroachments? Is the neighbor's shed on your property? What about a driveway or fence that's on your property, as opposed to on the neighbor's property? Had one situation where we got to the closing, I was representing the seller, and the buyer's attorney broke out the survey and said "what's this fence running through the middle of the property?" Well, it was the neighbor's fence, so we had a problem that we had to deal with there. Are there easements? Can somebody else use your property? Do they have recorded rights to go over your property? Common driveways can be a problem. As long as you and the other people sharing the driveway are getting along okay, but things happen and you may lose access to your driveway and have to go to court to do that. Is the well on somebody's else property? Do you have a shared well? We had one instance where the county line actually went through the property and it was in 2 different counties. What about access? Is there paper roads that show on the map but don't actually exist? In Ulster county we had one situation where you look at the maps and there's all kinds of roads on the map but none of them actually exist in reality. So the surveyor will have that all on your survey and help you with that.
Host: The deed the buyer is about to purchase is one very important document.
BED: You also want to make sure your going to actually own the property and that's where title insurance comes in. You'll have two different policies. If you have a lender, the lender will have their policy and then you'll have a policy insuring that you own the property. The title insurance will show the easements, restrictions of record. Are there any liens against the seller? Are there judgments? What are the mortgages? It will also do a municipal report for you that will show that there are Certificates of Occupancy for all the improvements on the property. One instance, we found out that it was an illegal twofamily. It was actually only a one-family so that affected that transaction. Think of the tax report. It will let you know if there's any exemptions on the property. They're saying the taxes are $3,000.00 but you don't qualify for that exemption so your taxes are actually going to be $6,000.00. We run into a lot of situations where there was private mortgages, where individuals were loaning money but when the loan was paid off, it wasn't satisfied of record and then you have to track these people down that may have died 10-15 years ago and there's problems with that. Important coverage that title insurance provides is a coverage of the gap. If you close one day its not going to be recorded right away and it covers that gap until the time its recorded. Also the Orange County Clerk's Office, last I checked, was about 3 months behind on their recording, and your title insurance will cover that gap also.
Host: The big moment has arrived at last.
BED: Then we get to finally the closing, when you buy your house and that's when it's over. When you finally get to the closing, that's where you'll get the deed for the property, your going to own the property but you have to remember that it's over. Anything that's said in the contract, unless the contract specifically says is going to be effective after the closing, nothing survives the closing. We had one situation where the purchaser came back after the closing and said "well the air conditioning system is not working properly" and was looking for the seller to contribute towards fixing it. They were out of luck because it was after the closing. It was something that should of been raised before hand and should of turned up in one of the inspections. We also have situations where its generally to be delivered, the property vacant and broom clean, meaning the furniture is gone and its swept. It doesn't have to be spectacular but the final walk through, if there is still a lot of stuff there we have to make arrangements at closing to hold some money back from the seller until they cleaned it out and sometimes the seller doesn't realize they have to be out. I had one client say well, the day before closing, "so when do I have to be out?" Most contracts require it to be delivered vacant and broom clean at closing unless other arrangements have been made for the seller to stay after closing.
Host: What people who are thinking about buying a home might want is some reassurance to go along with all the advice. It's often not that easy for first time home buyers to go to a house closing without at least some anxiety. And what should be a positive, even light event, has a hint of fright instead. What can ease those jitters?
BED: Well, one thing I like to do is remind people that thousands and thousands of people have been through the process, they've successfully bought a home. We've pointed out a lot of pitfalls that you have to be aware of but if you hire the professionals and listen to their
advice, they'll help you get through this process. Just to recapitulate the process, you want to start out counting the costs. Can you really afford to purchase the house? Arrange for your financing in advance. Then you want to find the house, look for the real estate listings, find a good real estate agent to deal with. Decide the type of house of you want, the location of the house you want. We also want to make sure you hire a good attorney that's going to protect your interests when you do get to the contract. Your going to want to make sure the house is properly inspected. You want to get a survey of the property to find out exactly what land your purchasing. You also want to make sure your attorney arranges for title insurance for you and you want to make sure that everything is in writing and settled at the closing.
Host: It's been a long journey to reach the point where a first time home buyer is now a real home owner. Is it worth it?
BED: There's a lot of joys that go with home ownership. There's a lot of work involved. It's going to be probably the biggest investment you ever make but it sure is nice to come home to your own home.
Host: Following this commercial break, the discussion on today's presentation and your opportunity to speak with Bill directly. If you have any questions you would like answered about home buying you can call Bill Duquette directly at 845-778-2121. Just tell the operator you listened to Upfront and Legal and you have a question for Bill.
