This article is designed to make it easier for you to buy a home in Columbia County, New York, by answering the most frequently asked questions about how real estate transactions are actually carried out here. This article accomplishes this by taking you through the process of purchasing a home step by step. My hope, whether this is your first occasion to consider buying a home, or whether you have bought and sold real estate many times, is that this information will be a helpful guide to you.
When you've found a home you want to buy, the first step is to make an offer. Depending on the broker you are working with, this offer can initially be transmitted orally to the seller, or it can be transmitted in writing by filling out a binder. In either case, a binder, a written offer to purchase the property, will usually be signed when there has been an agreement about the terms of the sale and the transaction is going to go forward.
The binder memorializes the details of the agreement between the buyer and the seller. It specifies the price of the home, and it also usually lists various contingencies on which completion of the deal depends. Usually, the binder is accompanied by a check for 1% of the purchase price. This 1% deposit will initially be held in escrow by the broker, as earnest money. If the deal for any reason fails to go forward, this money is ordinarily returned to the buyer.
The contingencies in the binder, the items that must be satisfactorily met before the purchase will be completed, routinely include the following six contingencies:
- A Mortgage Contingency. If your buying the home depends on your getting a mortgage, the binder will state that the deal depends on that. If it turns out that you cannot get a mortgage in the time allotted to do so, and you communicate that to the seller, any down payment will be returned to you and the deal will be completely called off.
- A Structural Inspection Contingency. When you buy a home, you want to be sure that its systems work and that it is structurally sound. Since you yourself probably don't know a lot about home construction, you will want to hire an engineer to inspect the home and make a report about it. That way, you will know whether the home needs expensive repairs or is in good shape. Brokers and lawyers can recommend inspectors for you. Fees for such inspections vary.
- A Termite and Pest Inspection. You will want to be sure that insects capable of undermining the structure of the home, termites, carpenter ants and the like, have not damaged the home and are not now active. And you will want to be sure they are eliminated if there is evidence of them. Various extermination and pest control companies, which can be recommended by a broker, conduct these inspections.
- A Water Potability and Flow Contingency. Because most homes in Columbia County are not connected to municipal water sources, but have wells instead, you will want to be sure that the well is producing healthy water and that there is enough water to meet your household's needs. A water potability test is conducted by sending a water sample to a laboratory for analysis. A flow test is conducted by running the water over time. Brokers will facilitate your obtaining potability results; home inspectors usually test the flow.
- A Radon Contingency. A few homes in Columbia Count have been reported to have dangerous levels of radon. Particularly if you are considering a second home, which may be closed and locked up for long periods of time and will, therefore, trap radon gas if is present, you will want to be sure that radon levels are acceptable. If high radon levels are detected, steps can be taken to abate the problem. These steps usually involve nothing more than providing appropriate ventilation. Radon tests are usually performed by home inspectors. Estimates for abatement, if required, can be obtained through contractors who are recommended by brokers.
- Septic Contingency. Because there are few public sewage systems in Columbia County, most homes have septic systems. You may want to be sure that this system operates properly before you purchase a home; the costof repairing a septic system may be high. Brokers can recommend companies that will test the system.
There may be other contingencies you would like included in your contract. These should be discussed when you make your offer and, if they are to be a part of the transaction, should be written into the binder.
Once you've written a 1% check and a binder containing the various contingencies has been signed by both the buyer and the seller, the next step is for the seller's lawyer to propose a contract. At this point, if you did not do so earlier, you will want to hire a lawyer representing your interests to read the proposed contract, to explain the terms of it, and to make sure that the terms of the contract are ones you can smoothly complete. You will want the lawyer to assist you in the event that the various inspections you undertake raise issues, and you will want the lawyer to take care of any title or other issues that may arise, and to attend the closing with you. Think of your lawyer as an ally in completing this transaction while looking after and protecting your interests.
Lawyers in Columbia County have traditionally charged between ½% and 1% of the purchase price to represent purchasers. Although you may be able to find representation that costs less, there is always the possibility that unanticipated problems may arise in the transaction. It is most important that you select a lawyer you believe can handle such unexpected issues and bring them to a smooth resolution. It is, therefore, a good idea to talk to lawyers before you retain anyone, and to get an impression of their abilities before you hire one. Brokers frequently recommend lawyers; and you might wish to ask friends for recommendations also.
The seller's lawyer typically sends the proposed contract to the buyer's lawyer. The buyer then reviews the contract with the buyer's lawyer. As part of this review, the buyer's lawyer makes sure that all of the contingencies are incorporated in the contract and that there is time to complete any inspections that are required, makes sure there is enough time to get a mortgage, if one is needed, and generally makes sure that the contract reflects the agreement between the seller and the buyer. The buyer's lawyer also proposes any changes that might be desired. At the time of the signing of the contract, buyers in Columbia County typically write a down payment check which will bring to 10% the amount held in escrow (the broker is already usually holding 1%). This escrow is usually held by the seller's lawyer, and the terms under which it is held are spelled out in the contract.
In Columbia County, the overwhelming bulk of real estate transactions use title insurance. This has occurred because banks loaning mortgage money require title insurance, and because everyone would rather have a large title insurance company with enormous assets insure a title than the individual lawyer or law firm who conducted a title search. Your lawyer will order title insurance for you; title insurance has a one time only premium that is set by New York State.
The contract, once it is signed by the purchasers, is sent with the down payment check to the seller's lawyer, who has the seller sign the contract and who then deposits the escrow check in the bank. At this point, the purchasers, if they have not done so already, need to complete the application for a mortgage and to complete the various inspections called for in the contract. If the inspection reports are satisfactory, the transaction goes ahead. If the inspection reports are not satisfactory, the purchasers need to decide what they would like to do. Their options probably include renegotiating the price or terms of the transaction, asking for the seller to make repairs, accepting the premises as they are now known to be, or, in the event of serious and expensive problems, withdrawing from the transaction. If a serious problem arises, the buyer needs to discuss all the available options with the buyer's lawyer.
Once the contingency periods have expired or satisfactory reports have been received, a mortgage commitment has been received, and a title insurance commitment that reveals no title problems have to be cleared, there can be a closing.
At the closing, various adjustments in taxes are made. County and Town Taxes in Columbia County are usually paid for a year beginning in January. School Taxes are usually billed in September for a year beginning on the previous July 1. Village Taxes (if the home is in a village) are usually billed in June for a year beginning in June. Once a closing date has been selected, the lawyers compute and agree on the pro rata adjustments to be made in the taxes and they agree on the apportionment for fuel that may be in the tank. These apportionments are made so that both parties pay only for what they consumed or will use.
Once the buyer's lawyer has these figures, the lawyer determines how much of the mortgage proceeds will be available at the closing, after the bank deducts its fees and pays various costs from the mortgage. The buyer's lawyer uses this information to compute the amount of certified or bank funds the buyer will need to bring to closing.
Buyers also usually need to bring with them to the closing an insurance certificate for homeowner's insurance the new home and a paid receipt for the premium, and buyers usually need to bring various personal checks to pay for items for which certified funds are not required.
When the buyer arrives at the closing, which is usually held at the offices of the lawyer representing the bank making the mortgage, the buyer should have the correct amount of funds in appropriate form to complete the transaction, and should leave the closing with the keys to a new home in hand. Typically, broker's fees and lawyers' fees are paid at the closing. The closing concludes the transaction.
If you want to discuss your real estate transaction with me, please telephone me at (518) 392-9150 or Email.