Navigating the legal and otherwise logistical waters of buying a home on the East End requires planning, persistence and being dedicated to detail. As part of your preparation, read on…
Can you afford the carrying costs? Before you even go looking for the house, you should condition yourself to the added expense of paying for an increase in your lifestyle. Think about what you can afford in terms of taxes (village and town), electric, gas, water, garbage removal, gardening and mortgage payments. Also, put away money for reserve, because houses break. Remember, this is not a condo/co-op where your maintenance covers repairs—you are the superintendent and you need to hire repairmen from the money in your pocket.
Do you want beach rights? What about horses? Is a marina important to you? It’s imperative that you identify what you are looking for before going out on your search. Then, go back to affordability and determine what the cost of this advantage is and if you can afford it. Next, see your attorney and ensure that you have the rights that you think you have; meaning, to illustrate, does the town permit horses on your property? Are there clearing limits? Do you have a right-of-way to the bay through your neighbor’s yard?
Check your credit score before you start shopping for a house, as it’s a major factor in getting a mortgage. Plus, while Bloomberg reported that “a record 43% of U.S. deals in the first quarter” of 2014 were “all-cash home purchases,” it’s always a good idea to ensure you have access to money. Services like Credit Karma permit free searches, but many of these services have their own proprietary algorithm to determine credit score, which differs from a traditional FICO score used by lenders. Nonetheless, the federal government only endorses one source to get your free credit score, pursuant to The Fair Credit Reporting Act, from the three major credit reporting companies—Equifax, Experian and TransUnion—at annualcreditreport.com.
Have you hired a broker or are you just trolling online for houses? Remember, when you call a broker whose sign is in front of a house, they represent the seller, not you. Many novice purchasers hire a buyer’s agent. By law, this type of real estate broker owes the purchaser fiduciary duties, including confidentiality, obedience, loyalty, accountability, full disclosure and reasonable care. This type of agent looks out for your best interest, finds leverage to help you negotiate and then advocates on your behalf to get you the best price.
A lender can determine how much money you can borrow before you go looking for that home. Yet, the real question is how reliable is that lender’s assessment of your borrowing power. While a lender can give you a pre-qualification by way of sheer qualitative guesswork, a pre-approval utilizing desktop underwriter can be relied upon when you make your offer to purchase. The key to getting a quality assessment of your borrowing power is to provide a lender with documentation that substantiates the information that you provide concerning your assets and liabilities. So, while it’s an arduous task to get the lender everything it asks for, make the effort.
This is perhaps the most important item in shopping for a home. It tells you that the sellers actually own the property, it specifies the liens against the property, it shows you what structures are on the property legally, it tells you the property tax amount and if there are amounts currently owed, and much more. Talk about leverage in negotiating—a title report is a must for purchasers, and if you are getting a mortgage from an institutional lender, it’s required. So you might as well order a search during negotiations to get the best price.
Ever wonder why a pool looks out of place? Maybe it’s because the pool is located outside the boundary line of the property. A survey shows the property lines and all structures existing on the property. Most sellers have an existing survey, so it’s a good idea to request a copy and then walk the property to ensure that the structures match the survey’s pictorial representation. If not, order a new survey to ensure that all structures are where they are supposed to be. Plus, remember that towns and villages have required setbacks for structures in their codes, so being up to the line, typically, is not permitted.
If you want to rent out the property for part of the year, you’d better check the municipal code to see if it’s permissible. A great resource to find your local code is generalcode.com/codification/ecode/library. Some localities have minimum rental periods, others require a permit and still others have maximum unrelated occupant restrictions. Don’t just act—do your due diligence first, as tickets for violations are expensive and you can even face jail time.
Date for Possession
Your closing date is not generally something that is set in stone. In fact, the laws of the State of New York provide for reasonable adjournments of “on or about” closing dates, “on or before” closing dates and “on” closing dates. So, regardless of the date set in your contract of sale, you cannot rely on that date as your move-in date. The only way to lock a date in a contract, which can be relied upon, is to make the contract identify that date as a time of the essence/law day. If a contract of sale says either of these locked terms, then the date is solid and a failure to close on that date will result in damages being paid by the breaching party. So don’t lock your mortgage rate until your attorney advises that you should, because an early lock will result in unnecessary costs in extending your rate.
Certificate of Occupancy
That pool house is really a shed. Those bedrooms are an unfinished basement. The deck is a grass field. A certificate of occupancy (CO) is a certification from the town/village that a structure on real property was built pursuant to the municipal code and the construction as permitted by law. If there is no CO, the structure needs to go. This is the most common reason a deal dies and the buyers walk. Always confirm that the structure is properly built before going to contract.
Andrew M. Lieb, Esq., MPH is the managing partner of Lieb at Law, P.C.