Disclaimer: Please keep in mind that this is not intended to be a comprehensive discussion of the home purchase process. It is intended to give the reader a general overview of the process, and to allow a prospective purchaser to plan ahead. Information contained herein should not take the place of the expert advice of professional advisors such as an attorney, a real estate agent, an engineer, a mortgage counselor, an accountant, and an insurance agent, all of whom you may have to consult with and rely upon in connection with your home purchase. We've added links to other relevant information at the bottom, as well.
The Initial Home Search Process
Your agent(s) will show you suitable properties based on a discussion of your housing needs, priorities and affordability. Your agent(s) may work with you as a Buyer's Agent, Broker's Agent, or as a Sub-agent of the Seller; be sure to discuss these agency relationships with your agent(s) at your first substantive meeting as you will be required by law to sign an Agency Disclosure Agreement at that time. If financing will be required, it is recommended that you obtain mortgage pre-approval from a qualified lender prior to beginning your home search. A pre-approval letter will give your offer merit in the eyes of a seller, and may allow you to be more flexible if a quick closing is in both parties' best interest. You should also select an attorney at this time. It is recommended that you choose an attorney who is experienced in representing purchasers of real estate. If you don't have an attorney already for this purpose, your agent(s) can usually give you names of several highly regarded real estate attorneys that you can interview.
The Offer Process
Once you have found a home you wish to purchase, your agent will submit an offer on your behalf. Offers and counter-offers may be submitted verbally or in writing. The initial offer is usually submitted in writing (especially in a multiple-offer situation) as an "Offer to Purchase" prepared by your agent; subsequent counter-offers are often presented verbally. When you have reached an agreement with the seller on terms including purchase price, personal property to be included, projected closing date, conditions and contingencies (inspections, financing, etc.), you now have an Acceptable Offer (A.O.). Once an A.O. is reached, a written Memorandum of Agreement is usually drafted by the seller's agent, stating the terms of the agreement; copies are distributed to the seller, the seller's attorney, the buyer, the buyer's attorney, and both real estate agents. No earnest money deposit is exchanged at this time. The typical time frame from agreement to closing is approximately 60 days. Of course, many factors can affect this time frame, including specific needs of the buyer and/or seller.
From Agreement to Contract
After reaching an A.O., you (the buyer) are given a limited time period during which to conduct an engineer's inspection and other desired and/or required inspections (assuming that an inspection contingency is part of the agreed-upon offer). This period is usually 10 days or less. During this period, the seller has only a verbal, non-binding agreement to sell the property to the buyer; the seller, in the meantime, is free to listen to, negotiate, and/or accept other offers. It is, therefore, imperative that you (the buyer) conduct all inspections in good faith and in a timely fashion. A binding contract will generally not be written until after inspections have been completed.
An inspection by an Engineer, Architect or a New York state licensed home inspector is strongly recommended for every home purchase. The purpose of an inspection is to identify the condition of the home and allow the buyer to make informed decisions. Even with newly constructed homes and with condominiums, it is possible that something could have been overlooked or poorly designed. An engineer's inspection will typically take 2-4 hours. If at all possible, you should plan to be there with the inspector during the inspection. This is an opportunity for you to learn a lot about your new home, ask questions of the engineer, and receive suggestions. Subsequent to the inspection, the engineer will provide you with a detailed written report covering his/her findings. Most mortgage lenders require a termite inspection and stipulate that it's to be done by a licensed termite inspector. Your engineer may or may not be licensed to do termite inspections; if not, you will need to hire a termite inspector. Other optional inspections you may wish to perform include a fuel oil tank test (for oil tanks buried in the ground), a radon test, a septic dye test (if applicable), a water potability test and water recovery test (for private wells), asbestos testing, and lead paint tests.
From Contract to Closing
Once inspections are completed and deemed satisfactory, the seller's attorney will draft a contract of sale and deliver it, along with the seller's title insurance policy and copy of any existing survey, to your (the purchaser's) attorney. You should review and discuss the contract with your attorney. If any changes are requested, the seller must agree to these changes. Signed contracts are then returned to the seller's attorney with a 10% contract deposit, also called a "down payment" (this down payment amount can be negotiable but is typically 10%). The contract deposit check is made payable to the seller's attorney who holds it in an escrow account until the closing. Once the contract is signed by the seller, your attorney will receive two fully executed copies of the contract, one of which will be given to you for submission with your mortgage loan application. Your completed mortgage loan application with all supporting documentation should be submitted to your chosen lender promptly upon receipt of the fully signed contracts. Your attorney will also provide you with an estimate of closing costs at this time.
Prior to closing, your attorney will arrange for a title search of the property. The title company will issue a title report certifying clear title, and a title insurance policy to protect the lender (required) and the buyer (optional) in the event a title problem arises in the future. The title company will also perform a property tax search and a violations search (required by the lender), and a survey inspection. If the existing survey is unacceptable, or if no survey exists, it is typically the buyer's responsibility to pay for a new survey.
Once all conditions of the contract have been satisfied, the closing date is scheduled. This involves getting together all parties including the seller, the seller's attorney, the buyer, the buyer's attorney, the lender's attorney, the title company representative, and usually one or both real estate agents. Once the closing is scheduled, calls should be made to confirm with your movers, to contact utility companies to transfer service accounts, to arrange for a homeowners insurance policy (proof of an insurance policy and paid receipt for one year's premium paid in advance must be brought to the closing), and to transfer any funds necessary for closing. Your attorney will advise you in advance as to the amount(s) of any certified checks required at closing. You will also be required to bring a supply of blank personal checks for assorted closing costs, as well as two forms of identification, one of which must be a photo I.D.
A final "walk-through" of the property is performed just prior to closing, usually within a few hours or not sooner than the previous day. This is scheduled with your real estate agent, or the seller's agent. The purpose of the walk-through is threefold: to confirm that no damage has been done to the home since the time of the engineering inspection; to confirm that the major systems and appliances are in working order; and to confirm that the home is "vacant and broom clean", as stipulated in every sales contract.
For additional information or clarification of any information provided herein, please consult one of the professionals identified in the disclaimer.
By Gail Fattizzi, Executive Director of Westchester Real Estate, Inc., Lic. Real Estate Broker