So after a long process, you finally have an accepted offer and can look forward to soon being a homeowner in NYC.  But you’re far from finished yet. There’s still the closing process to get through, and there are some necessary steps to overcome before you’re at the finish line. Here’s what to know and what to expect as you move towards closing on an NYC apartment.

Drafting a deal sheet

You may have agreed on a price with the seller, but until you have a signed contract, the agreement is not legally binding. The first step towards this will be circulating a deal sheet. This is done by the seller’s agent and will outline the terms of the deal and the roles of the parties involved. A deal sheet will usually be drafted and sent to both attorneys within 24 and 48 hours after the offer has been accepted. Once the deal sheet has been circulated the seller’s attorney will then draft a contract of sale that will be sent to your attorney.

The contract, escrow, and due diligence

Once your attorney has received the contract of sale, they will begin the due diligence process. The involves reviewing the contract; any riders attached, board minutes and the building’s financials and offering plan. This usually takes five to seven business days. Assuming everything checks out they will forward the contact to you for signing. You’ll also be asked to make the 10% escrow payment. Make sure you’re ready to make the escrow payment as soon as your attorney asks you.

Although it can seem like the deal is now effectively done this is not the time to relax. Until the contract has been signed by both parties, you don’t have a binding contract. The seller has the privilege of being the last person to sign so until they do there’s a chance another buyer with a better offer could come along and swipe the deal from under your feet. If this happens, you might receive a disappointing phone call saying the deal is on hold as a better offer has come through. If that happens, your only recourse will be to try and match or beat the new offer.

This can seem unfair, but it’s the way the real estate game works in New York City. Your best defense against this is to get a written exclusive right to buy agreement from the seller’s broker or attorney. Until you have a counter-signed contract, things are far from certain, especially in a competitive market.

If you’re a cash buyer, you can skip the next step and move forward with a home inspection and scheduling a closing day.

Secure a mortgage

Once you have a counter-signed contract, you are now officially “in-contact” and safe from other bidders. Assuming you’re financing the deal, the next step will be to secure a mortgage from your chosen lender. Ideally, you should already be pre-qualified for your mortgage. This is the initial step in obtaining a mortgage but keep in mind it only gives you a sum you might expect to get. You still need to get pre-approved which is a much more thorough analysis of your finances and ability to purchase a home.

Make sure you have all your financial documents ready such as bank statements, pay stubs, tax returns and a list of all your debts and assets. Your lender will also need a rough estimate of your closing costs within three business days of your loan application.

As part of the loan application, your lender will also conduct a title search on the property. This is to make sure there are no outstanding claims on the property such as tax debts or liens. For this step, you’ll have to purchase title insurance to protect your investment in case anything does come up. You’ll also have to purchase homeowner’s insurance to protect you and the mortgage company.

Conduct a home inspection and appraisal

Almost all purchase contracts will include a home inspection contingency. This means that if the home inspection finds any defects in the property, you can back out of the deal without legal consequences. Most buyers use this as an opportunity to renegotiate for a reduced price or for credits to fix any needed repairs. It will be the buyer’s job to have the inspection performed which will cost $300-$500. This might be a pain, but It’s a small price to pay for the peace of mind you’ll get from it.

One the inspection is completed a home appraisal will be carried out by your mortgage lender. This will determine whether the property is worth what the seller claims. If it comes back as less than expected, you could be asked by your lender to either make a larger down payment or accept a higher mortgage interest rate. If you’ve hired a good real estate agent, they should be able to give you a rough estimate of the appraisal value before you even make an offer.

Final walk-through and closing day

Once you’ve been approved for a mortgage (which usually takes 30-40 days) and all other contingencies, have been met a closing day will be scheduled. The average time to close on a house in NYC once you have a fully executed contract is 30 (if buying all-cash) to 90 days (if financing). The actual closing date won’t be agreed to until about two weeks in advance. As part of the closing, a final walk-through of the apartment will be conducted, either on the day before or on closing day. This will ascertain whether all agreed-upon repairs have been made, that the seller has vacated the property and the house is in the order you expected.

On closing day each party involved will be present. This includes the sellers, buyers, their attorneys, a representative from the title company and your mortgage lender. As the buyer, you’ll need to bring the remaining funds required to close the deal. You’ll then be asked to sign the legal documents. These fall into two categories, those between you and the lender regarding the terms and conditions of your mortgage and those between you and the seller who transfers ownership of the home to you.

In the end, you’ll hand over checks for the remaining balance and closing costs, and you’ll receive a Deed of Trust, Certificate of Occupancy and keys to your new home. Becoming a homeowner in NYC is a long process that comes with plenty of roadblocks. But with the right people by your side and enough preparation, you’ll breeze right through it.



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