You've Found YOUR New Home
...and NOW...It is time to NEGOTIATE

NOTE: this section covers the entire time between making the offer and completing all actions at the closing table. Anywhere along this process something can come up or change, requiring that a negotiation take place to get things back on track.

FIRST, your REALTOR® needs to complete some HOMEWORK

The first thing the REALTOR® needs to do is break out the spreadsheet and do a value analysis of the property compared to recent sales. This requires some skill and knowledge in today's market, because there aren't many sales to compare to. You better hope your REALTOR® knows what they are doing here.

NEXT, your REALTOR® needs to go to the village, town, and county to make an initial assessment that things like closed permits are in order. Also, a check of the county records to determine a little about the seller's financial position (mortgages and judgments) would be helpful in the negotiations.

Then, Determine the OFFER CONTINGENCIES

Contingencies (subject-tos) are things that the offer is dependent on. The more contingencies you have, the weaker your negotiating position, with some contingencies being worse than others in this regard.

• House Sale Contingency: Having a house of your own to sell that is not already UNDER CONTRACT will put your offer in a VERY WEAK POSITION. Sellers may take this kind of offer, but will attach a 24, 48, or 72 hour "knockout clause" to it AND will not go into contract until your house is under contract. With the knockout, if the seller gets another offer from a buyer who DOES NOT have a house to sell, they will give you the specified amount of time to REMOVE YOUR CONTINGENCY or get 'knocked-out' of the deal.
• A MORTGAGE contingency - which is strengthened somewhat by the mortgage pre-approval, but in today's evolving mortgage environment, can be a limiting factor the seller won't agree to for some reason.
• An INSPECTION contingency, which is fairly typical and which only temporarily weakens an offer.
• Occasionally a buyer's attorney will throw in an APPRAISAL contingency when the buyer is sinking a hefty sum into a down payment. You will learn more about this in financing.

The OPENING Offer - a Balancing Act

Based on your REALTORS® analysis, an opening offer is determined. When the house is priced well inside the market: where it's features and price compare favorably with other sales, the opening offer should be a kinder/gentler offer than one where the home is overpriced. Kinder/Gentler is approximately 92-94% of it's asking price, and you expect to wind up with a negotiated price somewhere in the middle around 96-97%

When the house is overpriced, and your REALTOR'S® value analysis substantiates this, you should go in somewhat lower - so much so that when the difference is split, you wind up AT 97% of market value or LESS. Folks, here is where the HEARTBREAK of a home purchase occurs. When the seller thinks MORE of the house than what it is really worth, THEY GET TO KEEP IT. We tell sellers that the only price they get to DICTATE in a buyer's market is the price that will cause them to KEEP THE HOUSE. And sometimes they do, and the only thing for you to do is WALK AWAY. That's the heartbreak part, for YOU.

The WALK-AWAY is a negotiation tactic that sometimes works in lubricating the deal back into action. You never know. Learning that the seller is being stubborn can cause a jilted-lover effect, and the house you once loved you now think less of. Time to go back out and look for another. Possibly the seller will come to his mind a week or more later and you can re-establish a relationship with the house, but move on you must, for the time being.

Understand, there is far more to OFFER negotiation than we will describe here. EVERYTHING is negotiable, but the ONLY thing you want to be negotiating on is the REAL ESTATE: PROPERTY, IT'S FINANCING, AND THE TIMING OF EVENTS.

"I'll buy it IF you throw in that couch, the chandelier, and the motorcycle!"

NO, let's NOT go there!

Loose items like the furniture, lawnmowers, cars and other unattached things the seller wants to throw-in or sell to you are not legally "real property" - the "real" in this case being real estate. These things must be kept SEPERATE FROM THE NEGOTIATIONS. Keep it simple and stick to the REAL ESTATE. The real estate sale process here in the Southern Hudson Valley uses ATTORNEYS. Yes, re-locaters, ATTORNEYS! We are backwards (and very slow) for that here.

So, what IS real property? For a house or a townhouse, it's the land and any improvements that are attached to it, as well as the air above. Buildings, landscaping, fencing, these things are attached to the land and are part of the "real" property. For a condo, there is no land involved, but there is airspace, and generally what you would own would be from the walls IN. With a co-op, you don't own real property: instead, you own shares in a corporation.

You don't want attorneys to be killing time negotiating with each other over loose items that are not part of the legal entity of "real property." If you get two attorneys who are nit-picking each other's addendums over loose items they can torpedo your purchase over nothing. Buyer and seller can rationally work those things (legally referred to as 'chattel') out between themselves, completely separate and non-binding to the REAL ESTATE TRANSACTION itself.

Here, we will continue on as though you and the seller have come to terms and have agreed on an offer.

The Home Inspection

We always recommend that the offer be contingent on a "successful home inspection," and preferably by a Licensed NY State Inspector. This event is agreed to be completed within around seven to fourteen days of agreeing to terms. The inspector will take around three hours on a house, and one on a condo and will walk through the house with you pointing out and recording various items, highlighting benefits, risks, and safety issues that need attention. A good one will crawl the attic, walk the roof, crawl the crawl space, and even dig up the septic. While they can (mostly) only inspect what they can SEE, and not anything behind a wall, the inspection is very beneficial and may uncover something that will cause you pause and may even suggest to avoid purchasing the house. An inspection "failure" is determined in the eyes of the buyer, and this is a point where you can back out of a deal easily if necessary.

When significant things are found in the inspection, buyers can ask that the seller fix the issue as a contingency to proceeding with the sale. Sometimes the seller agrees, and other times not. Common BIG issues in the Hudson Valley are:

• The Basement Floods during rains. This can be mitigated by installing a "B-Dry" system. Sellers often refuse to do this one, and walk away from the deal. Actually, this is not usually an issue that waits to be discovered at inspection. It is often an obvious problem that can be seen easily when the house is originally shown. You will make your offer knowing that the basement is in this condition.
• Radon, which can be mitigated by installing a "radon system" for around $1,500.
• A Buried Oil Tank, which when tested by a licensed test company, is found to be potentially leaking. Costs for this can be high since government involvement kicks in (DEC). Once this issue is found, the seller is stuck because it is now a known material fact, which has been found by independent professional inspection, AND the seller is required by law to disclose this to anyone they try to sell the property to.
• Mold is found in an area the seller is unaware of. This can be mitigated by companies who will clean-up an then guarantee for an extended period of time that the problem will not re-occur. Once this issue is found, the seller is stuck because it is now a known material fact, which is found by independent professional inspection, AND the seller is required by law to disclose this to anyone they try to sell the property to.

Ths scary-sounding issues are all removable, and because they are so common, there are entire industries organized to deal with them, so don't freak-out when you come across one of them.

The "Binder" and the Contract

Once the inspection is successfully completed, we "go to contract"

Where in most other parts of the country the REALTORS® will write up a contract on a standard contract form, WE DON'T DO THAT HERE...the local custom here is for the REALTORS® to write up an offer form, commonly known as the "binder." This is a one or two page document that details out the people, property, price, amount to be financed, down payment, total cash into the deal, type of financing, timing and contingencies. When agreed to, it is signed and turned over to the buyer and seller attorneys. More on how to choose an attorney later.

Once the inspection is complete, all issues are known, and the parties wish to proceed, the seller's attorney will write up the original contract, using his own contract document. No two are the same! He will send the contract over to the buyer's attorney, who will review, and if necessary make changes. The binder will be used by the attorneys for source information and then be discarded. The contract will be sent back and forth like this until everything is perfect. NOTE: attorneys don't work electronically like the rest of us, each "send" is via SNAIL MAIL! There can be lots of delay at this stage, depending on which attorney you choose.

Once the contract is perfect, both buyer and seller will each sign two copies (this is why you will hear REALTORS® say "contracts" when there is actually only ONE contract). Each side gets a copy.

DO NOT DELAY in signing the contract. An unsigned contract leaves an opening for the seller to entertain a higher offer if any come in, and you will definately want to avoid this.

Survey

The requirement for a survey can come from you, your attorney, or the lender. In today's lending environment, the lenders are asking for surveys more frequently. The problem here is TIME. A survey will take from two to four weeks to complete. If you wait for the mortgage underwriter to say they need it when they begin their work (near the end of the process), well, you've just added that time to when you are able to move into your new home.

• DO THIS: Ask your mortgage person (AKA the "mortgage originator) to ASK THE UNDERWRITER if they are going to require this. DO NOT take an off the cuff answer from the mortgage originator. MAKE THEM ASK the underwriter. Remember the lender is working for YOU and not the other way around.

Occasionally, there is a survey already on the property, done by a surveyor who is still active. This original survey can often be "re-certified" by the surveyor, which takes less time and costs less money. It is worth looking into this if the seller can produce his original survey.

Title Search

You'll need a clear title to the property to get a mortgage. You will want clear title showing that the property has no historical encumbrences or issues that could prevent you from selling the property later without problem. Either you or your attorney can request a title search from.....a title company! Title agents will search the public records to determine who has owned any piece of property, but these records may not reflect irregularities that can be difficult to find. The hopeful outcome of this title search will be a declaration of clear title that will satisfy requirements to obtain title insurance. If you are getting a mortgage, you will pay for a policy to cover your lender. You may also elect to purchase, separately, a policy for yourself. What these policies cover is legal fees if ever a challange to your title arises.

What could possibly be challenged? Here are some examples: an unauthorized seller forges the deed to the property; an unknown, but rightful heir to the property shows up after the sale to claim ownership; conflicts arise over a will from a deceased owner; or a land survey showing the boundaries of your property is incorrect.

For a one-time charge at closing, title insurance will safeguard you against legal fees related to problems including those events an exhaustive search may not reveal.

Municipal Search

YIKES! another SEARCH? Relax. This one is relatively easy by comparison, and there is no insurance you need to buy! In fact, this search is done by the title company as well, as part of their work in the process. What they are looking for is building permits opened for any additions made after the original construction, and evidence of those permits being properly closed. Other important municipal issues like the taxes being paid up to current, and that the owner is current on any assessments (some areas will have special assessments for trash pick-up that are paid at a different time than the taxes).

While the municipal search is "relatively easy," things discovered at a late date, like an addition the seller made without getting proper permits, or a failure to have the permit properly closed, can cause painful delays when found late in the process. You always want these searches to be done IMMEDIATELY AFTER THE SIGNING OF THE CONTRACT so there is time to address the issues properly. Attorneys will occasionally forget, slide or slack off on this, so buyer, make your attorney report to you on the progress of getting these things completed. REMEMBER: The attorney works for YOU, and not the other way around!

Documents YOU need to supply your lender

RULE OF THUMB: Whatever they ask for in documents, like pay check stubs, tax forms, whatever - make a file and keep the originals in this file. Provide copies to the lender. Continue to put new copies, like pay check stubs, in this file. WHY? Because chances are that....THEY WILL ASK FOR THE SAME COPIES AGAIN! Be ready with this so you don't have to go dumpster diving again.

Mortgage Appraisal

Here is another thing you get to pay for. This appraisal is done for the lender, to support the price agreed to in the contract. You will want to know what the appraisal value is.

Mortgage Underwritten

This is a near-to-final step in the process, and is possibly where those lender documents will be needed all over again. Be ready!

Clear to Close

The lender signals the completion of their work with the declaration that the sale is "clear to close."

Great BIG, GIANT sigh...

Schedule the Closing Date and Place

Here in the Southern Hudson Valley, you should NEVER plan a specific date for the closing. Everywhere else in the country this date can be dialed-in with fine precision, but not here. No,NO! Here is where everybody in the process gets to flex. There is a bunch of people sitting around a closing table here, and darned if ALL OF THEM don't have to be available at ONE TIME. It can get complicated.

The Closing Table

Consists of a large number of people passing around documents to review and sign. Eventually keys are moved across the table and the buyers AND sellers celebrate. Oh YEAH!

How to choose an attorney

This is not complicated, but requires some discipline. YOU, the buyer, need to ask questions! Actually just one will do: How many people work in your office? If the answer is one or two, STEER CLEAR of that attorney. WHY? because there aren't enough people in that office to give you any priority. One attorney and his assistant can get really busy on another client, especially when they are worth more money than you are, which is between $600.00 and $1,000. They could both be in court on a big one, like Erin Brockovich, and YOU get zero time or priority as a result. When the attorney has more people in their office, assistants, para-legals and so on, your dinky little $700.00 real estate sale can be handled by them, and you WILL get the priority you need. Thats what YOU want: someone focused adequately on YOU.