If you plan on buying a house in NYC for the first time, you’ll need to know the process and pay close attention to detail. What are the steps and requirements to buy a house in NY? Whether you’re wanting to know how to buy a condo in NYC, how to buy an apartment in NYC, or buying a house in NYC, this articles address these steps as the buyer.
Step 1: Making an Offer
What do you need to buy a house in NY? If you are buying a house in NYC for the first time and want to know how to buy a house in NYC, the first step is to make an initial offer on the house. When you make an offer on the house, you basically start the home-buying process.
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When you make your offer, the seller can either
- Accept the offer,
- Decline the offer or
- Make a Counter-offer, in which the seller then offers you different terms.
If the seller counter-offers, you can then accept, counter, or decline as well. You can negotiate back and forth as many times as you like until you reach an agreement or someone decides to walk away.
In determining your offer, something to consider in your offer are contingencies. Contingencies are things you expect to happen between the signing of the purchase agreement and closing that could change or end your contract. Standard contingencies include mortgage and appraisal contingencies. These protect you by allowing you to walk away if you are denied a mortgage or the appraised value of the home returns lower than expected.
You can also include non-financial things to help with your offer. If you know the seller is in a rush to move, you could offer to close quickly. If you know they are house hunting themselves, you could offer to rent the home to them after you close so they can take their time moving out.
Step 2: Performing the Inspection of the Home to Evaluate the Structure and Condition of the Property
When it comes to buying property in NYC, as part of your offer, you’ll definitely want to include a provision stating that the home inspection must pass before entering into contract.
A home inspection is an assessment of a home’s condition. Home inspectors not only identify problems with houses, they can give buyers information that will help them with the upkeep. In fact, if you ask any realtor or attorney, a home inspection is one of the most important requirements to buy a house in NY.
In performing a home inspection, the first thing you need to do is research the home inspector you’ll be using. In addition to hiring a home inspector that is certified, you’ll want to ask the inspector
- How long have you been inspecting homes?
- How many inspections have you done?
- What are your qualifications, certifications and training?
- What was your job before you were a home inspector? (Ideally, your pro was in contracting or building.)
Another good tip when it comes to home inspection is to be personally present at the inspection. Simply reading the inspection report isn’t enough to give most homeowners the full picture. If you don’t see the problem and be present for the inspector to physically show it to you, you most likely won’t comprehend the full scale of the problem with the home.
Finally, upon inspection, you’ll want to actually read and understand the inspection report. Just glancing at the inspection isn’t enough. You’ll want to read the entire report and you’ll want an inspector who uses clear and concise language so that you’ll be able to understand it fully.
Step 3: Contract Process
How to buy a house in New York? When it comes to buying a house in NYC, once your offer has been accepted by the seller, the seller will draw up a contract by using their own attorney. That attorney will then submit the contract to you and you will then want to contact an experienced and knowledgeable NY real estate attorney of your own for review.
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Your attorney will review the contract and make the necessary changes to reflect that the contract is most favorable to you, the buyer.
In reviewing the contract, there may be a provision reflecting the seller’s real estate listing. There are different types of real estate listing agreements. These aren’t necessarily relevant to you, as the buyer, but you should be aware of them in case a listing agreement is listed in the contract when you are buying property in NYC. These include:
- Exclusive right to sell listing: In this agreement, the agent gets paid no matter who sells the property, regardless of whether it’s the agent or the seller.
- Exclusive agency listing: Agents get paid in this type of agreement only if they sell the property. No fee is earned if the owner alone sells the property.
- Open listing: In this type of agreement, sellers have the right to use as many brokers as they want. However, the seller isn’t obligated to pay any of them if he or she sells the property without the broker’s help.
- Net listing: The agent gets to keep everything he can get that’s more than the sale price the owner wants. This is illegal in NY.
- FSBO Listings NYC. This is where the seller has no agent.
When it comes to buying a home in NYC, if the contract is acceptable the buyer signs it and submits a check for the percentage of the contract price as a deposit for the seller’s attorney who also arranges for the seller’s signature.
Step 4: Getting a Mortgage
The next step in buying a house in NYC is to secure a mortgage for the purchase. In obtaining a mortgage, you’ll want to discuss your situation with a knowledgeable and reputable lender. In fact, even before you start searching for homes, you’ll want to discuss your financial condition with a lender and obtain a loan pre-approval.Prospective buyers need to immediately start with the lender in order to see what you can afford and see what your hurdles are going to be. Such hurdles may include student loans, significant recent cash deposits, and the manner in which self-employed income is reported.
In determining your mortgage, you’ll also want to focus on your debt-to-income ratio, which will help establish how big a loan you can afford. The debt-to-income ratio calculated by your lender will help identify what you can and cannot afford. You’ll also have to worry about your credit score and review the different interest rates for the type of loan you’re wanting.
The NY real estate disclosure form is required by sellers in NY to be completed or provide a $500 in lieu of doing so. This form must be filled out by the seller in which they must disclose any and all defects to the house based on their actual knowledge. Furthermore, if a seller makes a knowingly false or incomplete statement on the form, you, as the buyer, may be able to make a claim against the seller even after the transfer of title. Accordingly, when buying a house in NYC, you’ll want to discuss the NY real estate disclosure form with an experienced and knowledgeable ny real estate attorney to determine just what defects are being disclosed, review the answers, and see if any follow-up questions to the buyer must be given.
As stated above, under the New York Property Condition Disclosure Act or PCDA, the seller is required to make these disclosures to the buyer or else pay a $500.00 penalty to the buyer at closing. While the PCDA requires you to complete a standardized disclosure statement and deliver it to the buyer before the buyer signs the final purchase contract, in practice, most home sellers in New York opt not to complete the statement and instead pay the credit. However, if there is a known defect that is not disclosed by the seller, the seller may still be liable to the buyer for any loss sustained as a result of that non-disclosure.
The PCDA addresses the following areas:
- General Information: age, ownership, utility surcharges and possession of the property
- Environmental: whether the property is located within a flood plain, wetlands, or agricultural district, near a landfill; whether the property contains asbestos, lead pipes, or fuel storage tanks; whether a radon test has been performed on the property; or whether petroleum products or hazardous or toxic substances are known to have been spilled, leaked, or otherwise released on or from the property
- Structural: water, fire, smoke, or insect damage and the condition of the roof, and
- Mechanical systems and services: utilities, water source and quality, sewers, drainage, flooding.
In obtaining a mortgage, the buyer will generally incur certain costs including an application fee, appraisal fee, and the bank’s legal fees amongst others.
Step 5: Obtaining Title Insurance
As part of the process of buying a home in NYC, you’ll want to order a real property title search. The title report will help to determine if there are any liens or encumbrances on the property. Although the seller may tell you that the property is free and clear of any problems, in reality, there may be liens or unknown defects on the property. Accordingly, when buying a house in NYC, you’ll want to obtain a thorough title search.
Once you’ve performed your title search, you’ll want to secure title insurance. Title Insurance protects the buyer property and the mortgage lender against future claims for any unknown defects in the title to the property at the time of sale.
There are two kinds of policies:
- Owner’s title insurance – protects the buyer
- Lender’s title insurance – protects the lender
An owner’s policy provides coverage equal to the amount you are paying for the property. It protects the owner if a problem is discovered after the search is completed. The insurance company provides legal assistance and pays any valid claims. Paid at closing, this type of policy provides protection for as long as you own the home.
Step 6: Closing
The final step when it comes to buying a house in NYC is the real estate closing. After a buyer has been approved for a mortgage, the title is determined to be free and clear, and, in the case of a co-op, has received approval from the board, the closing will take place.
During the real estate closing, you’ll want to bring the following:
Photo ID: The closing agent has to verify that you are who you say you are. A driver’s license or current passport will do.
Cashier’s or certified check: This is to cover any down payment and closing costs you owe. Do not bring personal check or cash. You’ll know exactly how much to get the check made out for because federal law requires that you be told the amount you need to bring to closing at least one day before settlement. The closing agent will tell you whether you need one check or two and to whom they should be payable. If you want to wire the funds instead of getting a certified check, make sure you do it a couple of days in advance, to protect against any glitches at the bank that could delay your closing.
Proof of insurance: The closing agent needs to see proof that you have the insurance in effect on closing day and a receipt showing you’ve paid the policy for a year. They may have already collected that but it doesn’t hurt to bring your own copy just to ensure things go smoothly.
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Final purchase and sales contract: Just in case you need to double-check a detail against closing costs.
As a buyer, you’ll also need to tell the closing agent how you wish to take title of the home. You will likely decide between these three common selections:
Sole owner: An unmarried person buying a house alone has the easiest task. Title is taken as a sole owner in the individual’s name.
Joint tenancy: When a married or unmarried couple buy a house together, things get more complicated. If they choose to take title with joint tenancy, each has the right of survivorship. If the spouse or partner dies, full ownership goes to the survivor. There are tax advantages for the survivor as well, regardless of marital status.
Tenants-in-common: When two or more individuals buy a home together as tenants-in-common, they are partners who may own unequal shares and who can sell their shares of ownership independently.
You’ll want to decide before you attend the closing how you wish to take title to the property. Again, you’ll want to consult with your own real estate attorney to decide the advantages and disadvantages of each type of ownership.
At Law Office of Yuriy Moshes, we are experienced and knowledgeable and are one of the top real estate law firms NYC because we keep up-to-date with the NY real estate law blog, NY real estate commission law, and NY real estate law. We represent sellers in the greater New York City area including all its boroughs, including Manhattan, Brooklyn, Queens, the Bronx, and Staten Island) as well as Northern New Jersey, Long Island, and Upstate New York. If you’re purchasing your home, you need to consult with the best real estate law firms NYC.