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4/28/2017

​The 5 simple steps to home ownership

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                Do you remember those late nights just scrolling Zillow for homes in many of the areas you want to live in? You look and then you may just feel so overwhelmed or excited to soon buy your first home, BUT you don’t really know where to begin. Sure, you may ask friends about their experience if they’ve bought a house, but if you’re the typical first-time home buyer (the average age is 32), most of your own friends may not have even started their house search! Well, don’t fear, I will break it down simple here in this article. There are 5 steps all first-time home buyers must go through.

Step 1: Get Pre-approved

                Most people would think “wait, shouldn’t I get a real estate agent first?” and you aren’t wrong to think that way. In fact, most of my clients come to me that way. However, before any reputable agent will show you many (if any) homes, they will want to get you preapproved for a mortgage with a licensed lender. You may think to yourself, “but why can’t an agent just show me a few homes and then I get preapproved?” and yes, that could happen, but there are two errors in that thinking.

              First of all, we live in a very competitive market here in Northern New Jersey (I am sure it is pretty competitive in most markets in the United States as well). If us as agents went out and showed you many properties and then you find the one you love, then you will want to submit an offer. However, we won’t be able to (or at least most sellers won’t take the offer seriously without a preapproval) as the preapproval takes a little bit of time to get and by that time, it may be too late and someone else now is under contract about to buy the house. Not to mention, what happens if we find out that you can’t even afford the houses you were looking at in the first place?

                The second thing you should be aware of is that an agent works strictly off commission. Why would an agent want to work for free without any guarantee that you even qualify? (And yes there are people that do that to agents). Would you want to work for free? I didn’t think so. Therefore, the first step is to get the preapproval as it helps us both.

Step 2: Find a home

                Your agent and you will go through several listings before you find “the one.” The agent will work tirelessly to find you a property that fits your criteria and you will typically be looking late nights as well (as I know most first time home buyers will). Remember: at this stage, when you are looking for your dream house, typically I tell my clients to think of the 80/20 rule. 80% of the home you will love and 20% you won’t. No matter what house you look at, there will always be something you may not like. The bedrooms may be too small, it is only a 1 car garage, the price is too much, the taxes are too high, it isn’t in the best area, etc. etc. ETC!!! If you don’t believe me, ask anyone who owns a home, they don’t like at least 1 thing about it and they still bought it.

                Also, I like to mention that finding your perfect home could take several months so you need to be patient. Most homes in the area have multiple offers and get under contract very very quickly. In short, this brings me to my next step. When you find your dream home, do not hesitate to make an offer.

Step 3: Make an offer

                At this stage, I like to think of this as an art. Not all offers are the same. Depending on how you are buying the property, there are several things you can do to make your offer more enticing to a buyer. For example, you could put down more of a deposit, you can close more quickly, you can get rid of some contingencies (you can’t always do that depending on how you are financing), and many other options. Also, at this stage, you may want your agent to run a comparative market analysis (CMA) to see what homes in the area that are like that home sold for. This allows you to craft your offer price at a reasonable level. Overall, at this stage, speak with your agent and he will tell you how to craft your offer in a competitive market to win.  

Step 4: Offer Accepted

                Your offer is accepted. CONGRATULATIONS! However, this is not the time you get to sit and rest. There are several things that need to be done. At this point, I would highly recommend getting an attorney to do your attorney review period and review your contract. Once that is done, you still have to do a home inspection, do an oil tank sweep, do a termite check, fill out more paperwork from your lender for a mortgage commitment, order an appraisal from your bank, ensure a certificate of occupancy is complete, ordered a title search, ensure a smoke and carbon monoxide inspection has been done, and much more! Note: Not everything I mentioned is required, but most of it is HIGHLY recommended. Speak to your attorney and real estate agent for your situation as all situations are different.

Step 5: Close on the home

You are finally closing on the home. You sign all the documents required and now you are officially homeowners. At this point or a little before, you want to start getting utilities into your name, have a moving company (if necessary) ready, and be prepared to live in your own home.

In conclusion, the process is pretty simple. I may have highlighted a lot of different aspects of it to be aware of, but do not stress yourself out over everything. You will have a team of professionals ready to help you get through it. If you are in the Northern New Jersey area and you still have any questions about the process or need any recommendations of lenders, contractors, or any other licensed professional, feel free to reach out to me and I will be willing to help. 

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4/21/2017

​Rate Locks – Understand what they are and why they are important in NJ

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           This is coming from experience with my personal residence that I am buying and supposed to close by 4/24. Each lender is different and policies change consistently so please ask your lender for further clarification on yours if you have any questions. This is solely for your understanding and to be aware of it.

             First question: What is a rate lock? With a rate lock, lenders are obligated (with a few exceptions) to offer a home loan at an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date. In my example, I was locked in at 3.375% for 60 days and the rate lock expires on 4/10. Now, with the federal hike of interest rates, my rate if I close on 4/24 is 3.75%. It may not sound like a lot, but it is in terms of the long run. It is approximately $60 a month more on my mortgage and over 30 years, it adds up to $21,600 approximately that I would be giving the bank in INTEREST!
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          As far as my situation, the rate lock started the minute I was under contract for the home. Once attorney review was done, I was supposed to schedule a home inspection, but the seller asked to push it back since there were repairs that were still needed. A month passes and I finally have the home inspection done and there are still repairs that need to be done. (That is another story for a later date.) Anyways, after that, there was also an oil tank sweep that needed to be done and scheduling it was a nightmare with the listing agent. Overall, this process for my inspections took about 45 days or so and for sure we were not going to close by the scheduled date which was 3/30. So the attorney and I extended the contract for the closing to 4/24. Little did I know of the issues that would cause me soon.

            So I asked the lender to extend the closing due to the seller’s fault in taking their time. They said they could and it would have to close by 4/10 or else my rate would expire as I mentioned above. So I frantically mentioned this to my attorney to get things rushed so we can close. She was shocked about the situation as the appraisal hadn’t even been done which is required to close the house. I spoke with my attorney and my attorney and I had a three-way call about the situation with a representative of the lender. During this conversation, the representative said that the extension for 4/24 would be granted and there would be no increase. I thought the situation was settled. (First lesson, get it in writing.)

             A few days later, the lender said they would still have to increase it even after the representative told me they wouldn’t. Now, since I did not know about the rate lock expiration and since the extension of the loan was to 4/24, I am stuck with the rate increase which was unacceptable in my eyes. I asked the lender why that would be the case if it is not my fault the contract had been extended. In fact, we suggested we wanted to close asap in the contract. The lender then mentioned that the policy was if the seller was taking their time, it is not their fault and they can increase the rate. However, if it was due to their negligence, they would honor my rate. Conveniently, I mentioned what the representative told me and now they are looking over the phone call after reaching out to the social media team for support on my issue.
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               In conclusion, the issue is still being resolved, but the lender did mention that they could keep my rate as is for an additional cost of ½ a point which totals to be about $850 at closing for my deal. If all else fails, that would be the route I would have to go with. Regardless, the lesson here is to make sure when your rate lock expires. Then, if there is an extension of the closing, what happens with the rate. Also, in what terms would the rate increase. Finally, are there any options you have to keep your rate such as paying points.  

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4/14/2017

Certificate of Occupancy – When you need it and when you don’t in NJ

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​       First and foremost, I will only talk about my experience thus far with them with the deals that I have closed or am closing. I am not an attorney so please ask them during your deal what needs to be done exactly. Also, I am a real estate agent, but each town is different with building departments so some towns are more strict than others on their requirements. I have experience in some towns such as Irvington, Maplewood, Elmwood Park, and a few others.

            Now, most of you might be asking yourself, what is a certificate of occupancy? Well, in short, as wiki puts it nicely: it is a document issued by a local government agency or building department certifying a building's compliance with applicable building codes and other laws, and indicating it to be in a condition suitable for occupancy. In other words, it is an inspection the town requires for people to be able to live in the residence. If things fail in the inspection, the inspector will have to come back again and check that those issues have been resolved BEFORE anyone can live there.

          Now, the State of New Jersey requires that before a closing on new construction can occur, the builder/seller must obtain a Certificate of Occupancy from the municipality wherein the property is located. However, for existing homes to be resold, the State does not mandate that a seller obtain a Certificate of Occupancy or Certificate of Continuing Occupancy. The requirement is left to the jurisdiction of the municipality where the property is located. However, the State of New Jersey does mandate that the seller of the property obtain a certificate of smoke detector, carbon monoxide and fire extinguisher. Overall though, from what I have seen, most do require some sort of Certificate of Occupancy if you plan to immediately live there or have a tenant in place.

             This brings me to a situation I faced as an agent not too long ago. I spoke to the lender my client was using and asked if a certificate of occupancy was necessary to close the deal. The lender said no since it was a 203k loan and repairs would be done anyways. As a result of this conversation, I was under the impression that the lender spoke with the municipality of where the property was located since he was so confident and expressed that he has done several deals in the area. Regardless, a few days prior to closing, I get a call from the attorney saying that we need a certificate of occupancy from the municipality even if we do not need it for the lender. (First lesson, never take a lender’s word on the phone. Put it in writing. Second, be explicit with asking the lender questions. Third, talk to the municipality about the situation first).

          So, I spoke with a building department about what would be required for the Certificate of Occupancy. I told them the situation that it is a 203k loan and that there was a tenant that will move out 30 days or so AFTER closing and that the owner does not plan to live in it immediately. I emphasize after because that is significant in this experience. The person at the building department told me that a full Certificate of Occupancy would not be required since the tenants are leaving and that a temporary one could be issued since no one will be living there very soon. Later, I go to pick up the paperwork for my client and fill it out on his behalf and pay the requirements (he paid using check). I finish the paperwork and expect the temporary certificate that same day. (At this point, it is closing day.) The inspector then asks if there are tenants and I am honest about the situation. As a result, he tells me that no tenant can be living there at all. Consequently, I must schedule a date for the inspections. (Lesson 4: At the municipality, make sure you speak to the right person. Apparently I spoke to the secretary when I should have spoke to the inspector.) At this point, I had to call the attorney to ensure everything would work out. The attorney and the inspector speak and everything is cleared. Now, that same day, the lender also asks that the Certificate of Occupancy is required. (Lesson 5: I must emphasize.. Get everything in writing as the lender before told me verbally. Lesson 6: Most of the time, just get the Certificate of occupancy because it is only a few hundred dollars and could save a lot of headaches.) Finally, the attorney and I speak to the lender about the situation and it is resolved as the lender is promised the Certificate of Occupancy in the coming days as this deal needed to close that day or else the short sale would be lost. In conclusion, if you are buying a home that you plan to live in immediately or if you have tenants, it is best to schedule beforehand even if others in the transaction say it is not required.
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            Finally, to note: for investment properties in which a certificate of occupancy inspection by the town would not pass, you are going to have to sign a CO waiver with you attorney . Which means that you understand that you are closing without a CO and that you are responsible for it and anything that happens. After that you will get all the due permits with the municipality in order fix the property . After that when everything is done . you go to the municipality and apply for the CO. Overall, if you have any questions, comments or concerns about the issue, please feel free to reach out and I would be glad to explain the process in depth.

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    Johnathan Boyle

    A real estate investor and agent. 

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