Engineers: The “How-To Gurus” Larry and Al Ubell

Al and Larry Ubell, the “Gurus of How-To” appear regularly on Leonard Lopate’s radio show on WNYC.

I have been a faithful listener of Leonard Lopate’s radio show on WNYC FM for many years. Since I’m often driving around making sales calls in the middle of the day, I have the luxury of tuning in to Leonard’s show while tooling around Brooklyn, Queens, and Long Island.

One of the regular features on Leonard’s show is a visit by the Gurus of How-To, Lawrence and Alvin Ubell. Their most recent appearance was November 9th.

I highly recommend tuning in to the show (and maybe even posing a question for the Gurus!) either via radio or on the ‘net. Larry and Al present often complicated issues about home inspections, engineering issues, environmental testing topics, and even chats about ugly or not-ugly newfangled flourescent bulbs. They always have great answers for the listeners who call in. If you miss the show, you can always find it in the WNYC Archives.

As much as I know about homes and stuff, heck, I still manage to learn a thing or two from the Ubells. They have a wonderful newsletter, too. I highly recommend it: it’s good reading.

Larry and Al also provide home inspection services to homebuyers through their company Accurate Building Inspectors. If their inspections are anything like the superb information provided on the radio, I imagine any homebuyer could consider herself in very capable hands by hiring them.

If you’ve read my blog and advice before, you know that not only am I a strong advocate in favor of a quality home inspection by a Certified Engineer, but that I also believe the Engineer, ready to inspect immediately you make an offer, should be part of a Homebuyer’s negotiating strategies.

A quality home inspection is part of the process of buying your first home. When you prepare in advance by getting prequalified, and lining up your professional advisors—your attorney and engineer—you negotiate with a Homeowner from a much stronger position. In this market, that can make the difference between getting the home you want at the price you’re willing to pay, and endless frustration with Realtors and Sellers who don’t seem to “get it.”

One other note: if you tune in and love what you hear, don’t miss the opportunity to make a contribution and support public radio.

How To Make An Offer: Practical Guidance

This is the process I recommend to my clients on the “How-To” of making an offer.

When you make an offer to purchase a house you are opening a dialogue with the Homeowner. You want to buy the home at the price you’re willing to pay; that doesn’t always equal the listing price. I think it’s important to view the offer as a process and not the be all and end all of the transaction. Often Buyers feel “constricted” by the offering process. It is perfectly understandable that you might feel impatient with the process of shopping for a home. Too, some Realtors might try to make you feel as if you must make your “best and highest” offer.

I encourage you to discard that oppressive feeling. Liberate yourself and use the offer as a way to get what you want: the home you like at the price you’re willing to pay.

Follows is a process I recommend to my clients on the “How-To” of making an offer. I hope you find it useful in achieving your goal of homeownership.

In my view of the offering process, I want my clients to present themselves as the best Buyer for a home the Homeowner has ever seen. Everything you do within this “How-To” creates that sense in the mind of the Homeowner.

I know from personal experience these methods work. Many of my clients have had offers accepted by following my advice. Realtors have told me, “We had another Buyer offering $10,000 more than your client, but your client impressed us and the Homeowner as clearly being the ‘better Buyer.'”

1. Always make offers in writing. Yes, it is absolutely true that offers can be presented verbally. Don’t do that. Put your offer in writing every time. Even if you are in a situation where you and the Seller are sending counter offers back and forth, every new offer should be in writing.

When your offer is in writing, you come across to the Seller as serious. Think about it, anyone who is taking the time to go in to the real estate office and sign the form is serious about buying a home. Seriousness counts big time.

Put the following into your written offer:

-The amount of your “earnest money deposit” or “good faith deposit.” That is the amount of money you’ll put into escrow with the Seller’s attorney upon signing the contract of sale.

-The amount of your mortgage financing. Of course you’ll back this up with a prequalification letter, but you must include the amount of your mortgage in the offer.

-Items included in the sale.
If the appliances and the chandelier in the dining room are to be included in the sale, make sure they are written in to the offer. This shows the homeowner you were paying attention when you inspected the home and asked, “What’s included in the sale?”

-The name and telephone and fax numbers for your attorney.

-Anticipated contract date. Always make this date within 48 hours of your offer. Present the assumption the Seller will accept your offer and immediately forward a contract to your attorney.

Again, this demonstrates to the Seller how serious you are. You are in effect saying, “I am so serious about buying this home I want to sign the contract immediately!” Imagine how many other Buyers out there are delaying things like signing the contract (and potentially changing their minds).

-Anticipated closing date. This is an interesting point for the offer. I always recommend putting the closing date for an offer within thirty days of the contract (check with your mortgage Lender to be sure this is possible). The fact is most closings take place within 60 days of contract, and your attorney will likely put that in the contract, but if your offer says “thirty days,” once again you demonstrate how serious you are about buying the home.

2. Prequalification letter. Your mortgage professional should be available to fax a prequalification letter within hours of your making your offer; even on Saturdays or Thursday evenings. The prequalification letter should match your offer, not display a higher loan amount. You don’t want to give away your negotiating position by showing the Seller you can afford more than you’re willing to pay.

3. Mortgage pro phone call. I think a phone call from your mortgage professional to the Listing Agent is a home run. When the Listing Agent here’s from the mortgage person directly how eminently qualified you are, imagine how that raises your profile to the agent and the Seller!

4. Credit Scores. Your mortgage person should be prepared to disclose your credit scores. While you don’t want your credit report released (that’s not allowed, anyway), many times the Listing Agent wants to know the credit scores.

5. Engineer ready to go. When you sign your offer, be sure to tell your Realtor that you’ve already spoken with your Home Inspector and you can have the inspection done tomorrow. Whoa, that’s really the mark of a serious Buyer!

6. Get ready with your counteroffer. If you offered less than the asking price, then you need be prepared with your counter offer if the Seller either declines or counters your opening offer. All of the steps above should be repeated with the new price replacing the original number. Organization and swift responses rule the day! Oh, you may not want to counter offer. That’s okay, too.

LifeHacker.com: The “Walkthrough” Inspection

A great discussion came up this week on LifeHacker prompted by a reader’s question about the “walkthrough” before closing.

I love LifeHacker.

LH is a wonderful blog presented under the manifesto “Computers make us more productive. Yeah, right. Lifehacker recommends the software downloads and web sites that actually save time. Don’t live to geek; geek to live.”

I have learned so many great things about computers, the internet, and life in general from the information and links to blogs, websites and news articles posted there. I highly recommend you bookmark the site, put it in your RSS reader and geek to live!

A great discussion came up this week on LifeHacker prompted by a reader’s question about the “walkthrough” before closing.

When you’re getting ready to close on your home, schedule an appointment with your Realtor to inspect the home. You usually do the walkthrough inspection the night before or morning of the closing. You want to make sure there are no nasty surprises waiting for you once you move in and you want to verify that everything in the house and the condition of the house is reasonably the same as when you decided to buy it.

Below are the suggestions I offered on LifeHacker. Be sure to check out the LH site, too, as there’s lots of good advice from the LifeHacker readers.

1. Take your original home inspection report with you. Highlight in advance any major items that were to be repaired by the Seller prior to closing.

2. Take your time as you conduct your inspection.

3. A standard purchase contract provides that Plumbing, Heating, and Electrical systems are in working order and the roof free of leaks. Concentrate on these items.

4. If any personal property is included in the sale, such as refrigerator, stove, A/C, chandelier, etc., be sure those items are present and in good working order.

5. Observe any major cosmetic damage. Often you’ll see damage to a floor or wall that was previously obscured by furniture or carpeting.

6. Does it look like the Seller is packed and ready to move? Most contracts call for the Seller to vacate within 3-5 days. If it looks like they haven’t even begun packing yet, be prepared for a surprise request at closing.

7. Bring to the attention of your Realtor and attorney your concerns or checklist of missing or damaged items. Remember that for the most part you are purchasing the home “as is.” You can’t start negotiating price reductions at the closing table. Your attorney should be your guide in this area: she’ll know what you can and can’t fight for and/or ask for a credit for at closing.

8. Don’t forget your utilities. Once your closing date is confirmed, you should coordinate with the Seller their moveout date so you can have all utilities switched to your name and turned on effective that date.

9. If something is a glaring problem—huge hole in the wall, leaking bathtub onto ceiling below—be sure to snap photos. And, if you’re going to ask for a credit at closing, you’d better have at least two contractor estimates for the damage/repair. Don’t expect the Seller’s attorney to concede to your informal, “Well, I went online and saw a new bathtub is $3,000” estimate when deciding if and how much credit you’ll get.

10. Remember the Seller is holding your money in escrow. If it appears you are trying to “default” and get out of the transaction they could very well walk away and keep your money. Tread carefully, rely on the counsel of your attorney, and remember this is supposed to be a happy time, the purchase of a home. Don’t get bogged down and angry over minutiae. The fact is, when you own a home, things break. It could happen the day before closing, three months or six years later.

Protect yourself: engage an attorney to represent you for your home purchase.

Have your attorney on your “team” before you get out there shopping for a home. It makes good sense to protect yourself in this way with the single biggest purchase of your life.

It is common here in New York to have an attorney represent the Buyer in a purchase transaction. I know elsewhere in the country this is not necessarily the case. Frankly, I can’t understand how anyone could proceed with signing important legal documents without an attorney present to review and advise.

I’ve recently encountered two situations where the Buyers were not represented by an attorney at contract or closing.

In the first case, the Buyer purchased a property in Florida. Until I reviewed their documents a year later, they had no idea a prepayment penalty existed on the mortgage loan for the Florida home. Their mortgage person was one of those, “Sign here! No Problem!” quick-talking salespeople who doesn’t bother to counsel, advise, inquire of, or explain the loan product.

Sure, the Buyers received a Truth-In-Lending statement for the loan prior to closing. But the TIL does not actually explain the loan terms. It provides only the fundamentals such as term (30years), Fixed/ARM, and the prepayment penalty box is way down near the bottom of the page and only says, “…may have to pay a penalty.”

That’s not much detail is it?

Had the Buyer been represented by an attorney at this Florida closing, their lawyer could have advised them right there at the table about the existence of the penalty, and the particularly onerous nature of this penalty (five years!).

That’s what the attorney does at closing: reads the documents before you sign and explains or questions those documents if there is something there that may be detrimental to your best interests.

The second case I heard of was last night. A Buyer signed a contract to purchase an apartment without an attorney representing her. The Buyer is not the least bit qualified for the mortgage loan. There is no way possible this Buyer can obtain financing to purchase this apartment.

Normally, you might think, “Well, alright, Buyer makes application to the bank, is denied for the loan, presents the denial letter to the Seller and gets the downpayment back.” Seems simple enough—and very common, indeed—but, not in this case.

The contract of sale has no mortgage contingency. And the Buyer put 10% of the purchase price down on signing.

If the Buyer had an attorney, at the very least the attorney would have made provision for a mortgage contingency in the contract. If the Seller refused to provide such a contingency, the attorney would have advised the Buyer of this deficit and the potential loss of downpayment. If the Buyer insisted on proceeding with the purchase minus the contingency, then an attorney could have advised the Buyer to be absolutely certain that mortgage financing was possible before signing the contract.

No attorney. No mortgage contingency. No mortgage loan approval. No way to get back the 10% downpayment.

Have your attorney on your “team” before you get out there shopping for a home. Your team of professionals should be at your disposal to advise you before you open up the paper to look at the “Homes For Sale” ads or contact a Realtor to show you homes.

It makes good sense to protect yourself in this way with the single biggest purchase of your life.

Buying Strategies: Prequalification Letter as negotiating tool

Two tools. Buyers use them to get what you want: your dream of homeownership at the price you’re willing to pay. Sellers beware!

I believe the prequalification letter is a negotiating tool. Buyers must use this important device wisely when making offers to purchase a home.

In today’s uncertain and changing market, a Buyer has only two fundamental advantages when bargaining with Sellers. Remember, Sellers are still holding all the cards on price and timing of a sale. Those Sellers who aren’t “real” Sellers, will just sit it out until they can get their price or they finally give up, take the sign down, and head for the backyard barbecue grill.

Too, there are many “real” Sellers who want to believe beyond all hope they can still get top dollar (read: Summer 2005) for their home. As such, they’re not willing to negotiate on price, closing deadlines, downpayment, financing, or incentives (tossing into the sale price that freezer in the basement they would otherwise sell you for $350!). They really do want to sell, but haven’t gotten it through their heads, yet how dramatically the market has changed.

If you’re a serious Buyer—that is, you really want to get out of the rat-trap of renting an apartment—you’re faced with the dilemma of breaking through this impregnable mindset of Sellers. I don’t believe we’re in a “Buyer’s Market” yet, and there’s no guarantee this market will become a full-blown “Buyer’s Market.” Therefore, you have to focus on the fundamentals if you are truly to accomplish your goal of homeownership.

A Buyer has two devices, tools, or “weapons” in the quest to make the dream come true.

The first is the ability to get up and walk away from the negotiating table. I’ve said it before, and I’ll say it again a thousand times, a Buyer’s power is defined by the willingness to get up and say, “No, thanks.” You have to draw the line, and force a Seller to negotiate. If they come running after you as you leave the table, great, you’re making progress. If they don’t, well, you’ve just saved yourself a whole bunch of aggravation and potentially financial distress.

The second tool is the prequalification letter. Never show a Seller your maximum loan qualifications. If you’re negotiating down a price of, say, $425,000 to your offer of $387,500, and your prequalification letter says, “$500,000” the Seller has absolutely ZERO incentive to bargain with you. After all, according to the letter from your Lender, you can handily afford the price the Seller is asking. Boy! You’ve got nerve trying to bargain that Seller down when you’re obviously well-off enough to afford more than the asking price! The nerve!

Your letter should reflect only the price you are offering. If you increase your offer, have your mortgage person increase the prequalification letter. If you have to do this three or four times to get what you want, then so be it!

I have always customized my prequalification letters based on the offers my clients are making. Since
I specialize in 100% financing, the offer and the letter are usually the same amount.

But, there’s more to the use of this important tool. The letter is just a piece of paper, and you want the Seller (and their Realtor) to truly have confidence in you. You want to present yourself as the one and only Buyer for this home, so, “Take my lower offer NOW!”

The prequalification letter should be delivered immediately you make the offer. If you made your offer on a Saturday afternoon at 3:30p.m., the latest the prequalification letter should be delivered to the Seller is 10a.m. Monday morning. I usually send mine within hours of the offer, even if it’s a Sunday evening. Yet, too often, I hear from Realtors how they’re still waiting for a prequalification letter the following Wednesday! Frankly, I think that’s ridiculous.

This delay only serves to dilute your credibility in the mind of the Seller. And if you’re trying to get the home for less than asking price, if you’re strong enough to use option one in bargaining (walking away), then why would you knock yourself down a few pegs by working with a mortgage person who isn’t as aggressive as you are? The speed with which you—and your team of professionals: mortgage person, engineer, attorney—work puts action ahead of words. As the old saying goes, “Actions speak louder than words.”

Two tools. Buyers use them to get what you want: your dream of homeownership at the price you’re willing to pay. Sellers beware!

How To Buy a Home: Strategies for a Changing Market

Buyers need new strategies to help them accomplish their goal of homeownership. You can make your own buying opportunity.

Buyers need new strategies to help them accomplish their goal of homeownership. The market has changed. While I don’t believe it’s a “Buyer’s Market,” as yet, certainly the prices have leveled off.

Buyers may still be stymied by intransigent Sellers and Realtors who are living in the past and pushing Buyer’s offers higher, higher, higher.

My advice to Buyers: prepare for War. First, get all your ducks in a row. Get prequalified, have your mortgage person available and ready to act quickly to send out a customized prequalification letter with each offer you make. If you make an offer on a Saturday afternoon at 4p.m., that letter should be faxed to the Seller or their agent within two hours. It’s complete nonsense to wait until Monday.

If you do this, you set yourself above the crowd. You also set a tone of seriousness in the negotiations. You get the high ground. That makes it easier for you to set the price you want to pay (not what the Seller or their Realtor wants to get). It also prepares you for hard bargaining. You’re hot, you’re ready to buy and close. This preparation raises your confidence level to Herculean strength.

Buyers can seek out opportunities. Identify a house that has been on the market for a while. The house might be on MLS or it might be a local FSBO (For Sale By Owner) that you have noticed in your travels the past three months.

A house that isn’t sold quickly is most likely not priced correctly. Take your Herculean confidence, set your price and make your offer. Keep it simple.

You can make your own buying opportunity this way. It’s so easy. Don’t fall in love with the house. Fall in love with the numbers. Put your offer out, give the Seller just enough time to consider it. If the Seller doesn’t move (counter offer or accept) you move on.

Find another house. Repeat. Buy your first home. Tell tales of your Herculean adventures over cool lemonades and hot steaks on your back patio years from now.

I live on Long Island. There are several FSBO’s in my immediate neighborhood—within two blocks in either direction. All of them have been “on the market” for a minimum of two months, probably longer (I’ve lost count).

These folks seem to think the way to sell a home is to just put up a cheesy red “For Sale” sign with a phone number scratched in on the bottom in Scripto black. Yah. Right.

We checked on the price of one. Ridiculous. Absurd. Ludicrous. And the guy was in the habit of running two open houses every weekend for about six weeks. He would make sure there were no cars parked out front and he’d spend two hours Friday afternoon with his visor down, and his weed-whacker going at full throttle trimming to perfection the edges of the lawn. Yah. That’s going to sell a house. Right.

If I show up at the farmer’s market with a batch of potatoes and the going price is 20 cents a pound, why on earth would I price it at 35 cents a pound? What, I think I’m going to sell my potaters by cleaning and polishing and trimming off the nasty bits? I Don’t Think SO!

I’ve been doing mortgages for seventeen years, and looked at FSBO’s for three years before that as I shopped for my first home. The single common denominator with ALL FSBO’s: highest price, largest greed factor, Most Cluelessness, and stubborn refusal to pay a professional to SELL the home.

Homes don’t sell themselves: salespeople do it. Their incentive? Profit, plain and simple.

These homes are prime opportunities for Buyers. Show up, make your offer and either buy your first home or walk away and go down the block to the next FSBO.

The Rules of Real Estate

Do you know the three rules of real estate?

There are three rules of real estate. Do you know them?

Rule number 1: Location.

Rule number 2: Location.

Rule number 3: Location.

With all the talk of “bubbles” and “ROI” it seems absurd that everything important about real estate can be boiled down to one word, but it’s true. That word is location.

Whether a property is something to be lived in or something to be invested in, the location of the property determines the price and so much more.

Clients ask me all the time about why a certain property is priced the way it is, or if I think a property is priced incorrectly. The first thought that comes to mind when considering a reply to the question is “Where is the property located?”

That question could mean any number of things. It could be very general like, “The property is located in New York City.” Or very specific, such as, “This property is the second house from the end of the block, in a block of neat and well-maintained detached homes, but immediately adjacent to the commercial property with the nasty-looking truck garage and oil stains on the sidewalk.”

Sometimes you come across a house that is priced correctly for the location. Even in this crazy market, it happens!

Then there is the personal opinion of the purchaser that affects location.

My wife, The Realtor, and I are working with a young woman looking to buy her first home. We went out with her last Saturday. One of the houses we looked at was located a short walk from the elevated subway line. I’d say about 100 yards or so.

The client indicated she really liked that feature of the house. She stressed to us that she wants to be at least that close to the subway line, that she likes the short walk, and she doesn’t mind the noise.

This client is, like me, a native New Yorker.

I, on the other hand, having grown up in apartment buildings both located less than a hundred yards from an elevated subway line want to be as far as possible from such a location. Heck, where I live now on Long Island, just the noise of the LIRR trains honking their horns at RR crossings bugs me sometimes. And they’re half a mile away!

The point is, location is not only related to the physical characteristics of the property, but is also a function of the personal opinions and, more importantly, desires of the owner or purchaser.

Remember the three rules of real estate when you are shopping for a home. It all comes down to that one simple word. That’s a good thing to remember as you worry your way through open houses, showings with Realtors, grammatically incorrect advertisements on Craigslist, and various other strange home-shopping experiences.

Negotiating an offer in a changing market

There are plenty of houses out there. Keep going until you find a Seller who really is serious about selling their home.

Negotiating an offer in a cooling market.

Okay, so there is a general consensus that the market is cooling off. Houses are sitting a bit longer on the market; some prices have been reduced, but not all. New houses come on the market, still priced at zany “summer of 2005” prices.

What’s a Buyer to do?

Let’s assume you are past the whole “housing-head” “bubblehead” thing. Let’s assume you believe the investment in a home involves much more than just some silly investment pricing strategy. You understand the intangible benefits of owning a home, you’re tired of paying rent, and you want your own “piece of the rock.”

Right, so you are heading out there in this “cool” market and you’re shopping for your first home.

I have some negotiating strategies for you that may help you “shake the trees” and “turnover some rocks.”

1. Know your market. You must create a personal pricing sense; you must do an appraisal in your mind of the home you wish to buy. For that, there is no substitute for going to see as many houses as you can in your chosen neighborhood.

You have to learn the prices of the homes so you know almost instinctively what a house is worth by comparing it to the 23 similar houses you’ve seen over the past six weeks.

When you walk into the home you want to buy, you will know the right price to offer. You will know the maximum price you’re willing to pay for that home.

2. Your Prequalification Letter is a Negotiating TOOL. You should not be walking around with a blanket prequalification letter stating the maximum loan you are qualified for. Rather, your letter should be customized for each offer you make.

This way the Seller never knows your maximum price. If you have made an offer and the Seller counter offers, and you wish to increase your next offer, have your letter updated to reflect the higher amount.

And when you make your offer be sure your prequalification letter is faxed over immediately. I can’t tell you how many times I have heard from Realtors the reason they accepted one of my client’s offers is due to the alacrity with which we submitted our letter. Realtors relate stories of offers that come in on a Sunday afternoon, and the Buyer is still trying to get a prequalification letter the following Tuesday or Wednesday from their Loan Officer!

I send out my letters the same day you make your offer, even on weekends. I followup with a phone call to the Realtor to support your qualifications verbally.

If you want to buy a home for the price you are willing to pay—-not what the Seller wants to receive—you must show the Seller how serious you are. Sending over the prequalification letter right away is an important part of that.

3. Offer less, Offer more. When you make your offer, it doesn’t have to be for full price anymore. Summer of 2005 is long gone. The market has changed. While many Sellers may still be asking outrageous prices, that doesn’t mean they are getting it.

Since you are an educated Buyer who has researched your market, set a maximum price you are willing to pay for a particular house and create a pricing strategy. You should have an opening bid, then one or two counter offer positions ready. These counter offers raise your price, but do not exceed your maximum price. Start with your opening bid and your prequalification letter for that amount.

The Seller will do one of three things. First, the Seller may accept your offer. Bully for you! Second, the Seller may not respond, or refuse. Third, the Seller may counter.

If your offer isn’t accepted, or countered, the next step is up to you. If you like the house enough to move up your price, then step in with your next position and a new prequalification letter.

If your offer is still not accepted, it may be time to move on. If you decide to increase your price, that’s fine. Just don’t go over the maximum price you decided originally you would pay for this house. The heat of the moment of a negotiation quickly becomes emotional and you may lose all sense of reason.

Remember: you want to buy the house at the price you’re willing to pay for it, not the price the Seller wants. Don’t go over the maximum price you set before making your first offer.

4. Serious Sellers. Oh boy there are a lot of houses on the market. Don’t let that fool you into thinking they are all ready for the taking by smart Buyers like you.

Assume there is a percentage of Sellers out there who are not serious about selling their homes. They still think it’s last year and the prices are still mega-millions. Note to Sellers: the market has changed!

You want to discern who is serious about Selling and who is standing there thinking their homes are cash cows waiting to be milked by an unsuspecting Buyer. Note to Buyer: that’s not YOU!

Some folks don’t need to move. The job is not relocating to Arizona; it’s not time to retire; they don’t need to buy a bigger house to accommodate the elderly Mom who is moving in with them. Some folks just have this idea they can sell their home and make tons of money. That’s not “serious about selling” in my book.

You can ask a lot of questions to get at the “truth” behind a Seller’s motivations to sell. You may not get answers to your questions, or the answers may reveal nothing of the Seller’s intentions, or, worse, you may be lied to.

In my long experience I have found the best way to get at the secret of whether or not a Seller really wants to/needs to sell a home is to make an offer.

The person who doesn’t respond to an offer probably thinks he’ll just sit tight to get his price. That’s fine, but if the house isn’t worth that price anymore, then you, educated Buyer, will be moving on to greener pastures.

If your original offer is seriously low, and there is no response, try raising it. If still there is no reaction—a counter offer from the Seller is what I consider a reaction—then this Seller probably isn’t serious.

Time for you to move on. There are plenty of houses out there. Keep going until you find a Seller who really is serious about selling their home.

These are just basic suggestions to help you chart the mysterious waters of a cooling market.

You really must be out there looking, looking, and looking some more, making offers, and making more offers in order to develop a good sense of where the market is going and how you can achieve your goal of homeownership.

Closing Costs in NY: Arrrgghh!!!

Closing costs, expensive as they are, are a “fact of life” when financing a home in New York.

Yes, it’s a teeth-grinding, heartburn-inducing, stomach-churning experience buying a house in NY with closing costs being so high.

I am not going to go into the long winded and detailed explanation of the breakdown of closing costs. That’s for another time. I really want to express for you the reality of what the closing costs are: HIGH.

(NOTE: I am referring here to the purchase of houses and condominiums, NOT Co-OPs)

First, the average closing costs total out to about 4.5%-6% of the mortgage amount. On a $400,000 loan, that’s $18,000 to $24,000. WHOA! That’s an awful lot of money. I came to realize a long time ago how difficult it must be for the average New Yorker to save up the money for a downpayment on a house, only to later learn they would need all this extra money for the closing costs. That’s why I have always helped my clients obtain financing high enough to allow the minimum down payment (or recently NO downpayment). In this way, the money they’ve saved up is used for the closing costs.

In New Jersey and Connecticut, closing costs are half of the norm here in New York.

I don’t know why that is, or why the costs are so danged high here in NY. I just know that’s the way it is. If you are getting ready to get out there and shop for a house: get used to this idea. It’s painful, I know, but it is what it is.

Next, let’s talk about disclosure. Federal regulations require disclosure of closing costs to the borrower. We Lenders have to send you an estimate of your closing costs as soon as you make your loan application. The problem is these estimates, being estimates, are subject to the discretion of the party preparing them.

Without complicating the issue, let’s just say that it is entirely possible you could receive an estimate of closing costs that is woefully short. Even if the costs disclosed to you are substantially short of what you actually pay, it’s perfectly fine.

At my office, the company prepares the most accurate estimate possible.

For my part, I have ALWAYS given my clients the ugly numbers right from the get-go. I hate surprises and I want my clients to know well in advance how much money they’ll need. My estimates include things that aren’t even listed on the standard Good Faith Estimate: Purchaser’s attorney; adjustments to the Seller for taxes, water, fuel; the “tip” to the title closer, even!

My estimates are usually within less than $1000 of the final cost to my clients.

Finally, beware of “NO CLOSING COST” advertising come-ons. Unless the loan is a Home Equity second mortgage, the borrower has to pay closing costs. This cute advertising gimmick could be perfectly truthful and mean any number of things. Without breaking them down, understand that you will pay closing costs one way or another.

Closing costs, expensive as they are, are a “fact of life” when financing a home in New York.