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The dream of becoming a homeowner is almost real. So after a long home search, you finally have an accepted offer from a seller. But you’re not finished just yet. There’s still the closing process to get through and the necessary steps to overcome before you are at the closing table. Here is what happens after an offer to purchase is accepted and what to expect as you move towards closing.
Offer Accepted/Drafting a deal sheet.Offer Accepted/Drafting a deal sheet.
You may have agreed on a price, but the agreement is not legally binding until you have a signed contract. 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 parties’ roles. Once the deal sheet has been distributed, the seller’s attorney will draft a sale contract. Once complete, they will send the contract and rider to your attorney. A deal sheet will be prepared and sent to your attorney within 48 hours of the seller accepting your offer.
The contract, escrow, and due diligenceThe contract, escrow, and due diligence
Once your attorney has received the contract of sale, they will begin the due diligence process. This involves reviewing the contract, any contract 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 contract to you for signing. You’ll also be asked to make the 10% escrow payment. So 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. You don’t have a binding agreement until both parties have signed the 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 an unexpected 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 proposal.
Exclusive right to buy agreementExclusive right to buy agreement
Your best defense against this is getting a written sale contract from the seller’s broker or attorney. This can seem unfair, but it’s the way the real estate game works in New York City. Things are far from certain until you have a counter-signed contract, especially in a competitive market.
If you’re a cash buyer, you can skip the next step, move forward with a home inspection, and schedule a closing day.
Secure a mortgageSecure a mortgage
Once you have a counter-signed contract, you are 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 remember that it only gives you a sum you might expect to get. It would help if you still got pre-approved, which is a much more thorough analysis of your finances and the ability to purchase a home.
Make sure you have all your financial documents, bank statements, pay stubs, tax returns, and a list of 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 conduct a title search on the property. This ensures no outstanding claims on the property, such as tax debts or liens. You’ll have to purchase title insurance to protect your investment if anything comes up for this step. You’ll also have to buy homeowner’s insurance to protect you and the mortgage company.
Conduct a home inspection and appraisalConduct a home inspection and appraisal
Almost all purchase contracts will include a home inspection contingency. If the home inspection finds defects, you can back out of the deal without legal consequences. Most buyers use this to renegotiate for a reduced price or for credits to fix any needed repairs. It will be the buyer’s job to perform the home inspection, 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.
Once the inspection is completed, your mortgage lender will perform a home appraisal. This will determine whether the property is worth what the seller claims. If it comes back as less than expected, your lender could ask you to either make a larger down payment or accept a higher mortgage interest rate. If you’ve hired an excellent 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 dayFinal 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 upon until about two weeks. As part of the closing, a final walk-through of the apartment will be conducted the day before or on the 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 the closing day, each party involved will be present. This includes the sellers, buyers, 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 documents fall into two categories between you and the mortgage lender. Included are the terms and conditions of your mortgage, also between you and the seller who transfers ownership of the home to you.
Final ThoughtsFinal Thoughts
Becoming a homeowner in New York City is a long process with plenty of roadblocks. You will breeze through it with enough preparation and the right people. You’ll hand over checks for the remaining balance and closing costs then you receive a Deed of Trust, Certificate of Occupancy, and keys to your new home.