Buying a home in a competitive market often requires buyers to be creative and find ways to make their offers stand out among the rest. For some buyers, this means dropping certain contingencies. But before you consider this approach, it’s important to understand what each contingency means and what you risk by waiving one or more in your offer.
Financing Contingency: A financing contingency protects a buyer by allowing them to back out of the contract if they are unable to get a mortgage. While dropping this contingency makes the offer more appealing to the seller, it means that the buyer cannot back out of the contract if they are unable to get a mortgage. This contingency should only be waived if the buyer is extremely confident that they will be approved or has enough cash to purchase the home without a mortgage.
Appraisal Contingency: An appraisal contingency means that if your home doesn't appraise for the purchase price, you can walk away from the deal with your deposit. You should only consider waiving the appraisal contingency if it’s very unlikely for the appraisal to come in below the purchase price.
Inspection Contingency: An inspection contingency gives the buyer the right to conduct a home inspection prior to signing contracts. It allows the buyer to back out of the deal or negotiate repairs based on the findings of a professional home inspector.
The decision to remove a contingency is an important one with many implications so you should always consult with your agent and lender.
Closing costs are the fees that need to be paid at the time of closing for the services of the lender and other third parties, such as appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges. Your lender will provide you with a loan estimate prior to closing which will include estimated closing costs, but there are a few things you should know about the different closing costs in CT and NY.
Mortgage Tax: For any purchases with a mortgage in New York, the buyer will be required to pay a mortgage tax at closing. This varies by county, but in Westchester, the gross tax is1.3% of the loan amount. The buyer is responsible for 1.05% of the loan with .25% paid by the lender.
Mansion Tax: For any purchase over $1 million in Westchester County, the buyer is required to pay a mansion tax, which is equal to 1% of thepurchase price.
Pre-paid Real Estate Taxes: At the time of closing, the buyer is required to prepay 6 months of real estate taxes, so be sure to pay attention to taxes when searching for homes.
The typical timeline to close for financed deals is 45-60 days. Cash deals can close in as little as 30 days. There are many important steps that need to be taken in between an accepted offer and closing.
Home Inspection: Once your offer is accepted, a home inspection is scheduled to determine the condition of the home. During this inspection period, the buyer has the opportunity to negotiate repairs with the seller.
Formal Contract: Once inspections are completed and deemed satisfactory, the seller's attorney will draft a formal contract of sale and deliver to the buyer's attorney. Once all terms are agreed upon, the buyer delivers a 10% contract deposit which is held in escrow by the seller's attorney until closing.
Loan Processing: Once you are in contract and your loan application has been completed, your loan file is turned into the processing department. The loan processor will immediately order your appraisal and begin to process your loan file. *Note: at this stage, you should not make any large purchases or major life changes without discussing with your lender.
Appraisal: A licensed professional will conduct a review to reassure both you and the mortgage lender of your new home's value. The appraiser will visit the property and note its style and overall condition, measure square footage and confirm the number of rooms. The appraisal is reviewed and the file is submitted for underwriting.
Title Search: The title search is ordered by the buyer's attorney to check for any liens, violations, easements or other concerning items of record. The title company will issue a title report certifying clear title and a title insurance policy.
Homeowners Insurance:This covers the cost to repair, rebuild or replace your new home or items in your home if either is damaged or destroyed. Homeowners insurance is required by a lender and usually included in your monthly mortgage payment. You are also required to pre-pay 12 months worth of premiums at closing.
Underwriting: At this point, the underwriter evaluates your application and documents, double checks the loan guidelines and if all is accurate, issues a conditional approval. Once any additional documentation is supplied to processing, your file returns to underwriting for final review.
Clear to Close: Clear to close means your mortgage has been fully approved and final documents are ready to be prepared. An initial closing disclosure (CD) will be issued and should be signed right away. Once signed, closing can occur after 3 business days.
Final Walkthrough: The final walkthrough is typically scheduled by your real estate agent within 24 hours of closing. The purpose of the walkthrough is to make sure that the seller has removed all of the belongings from the house and that there has been no additional damage requiring repair since the inspection.
Closing:Your closing date is the day you become the legal owner of your new home. At the closing table, you will sign documents, including the note, the mortgage and the settlement statement. The seller will also sign documents transferring property ownership and the title company will register the new deed in your name.