Finding the Uncommon Deal: A Top New York Lawyer Explains How to Buy a Home For the Lowest Possible Price

Foreword Evan Farmer xiii

Preface: Greed, Fear, and Opportunity in the New Real Estate Environment xvii

Introduction: Should You Buy or Rent? 1

The Greatest Producer of Wealth for American Families 1

The United States Government Encourages Homeownership 3

The Pride of Having a Place to Call Your Own 3

The Time to Buy 4

The Cost of Buying and Maintaining a Home 5

Building Equity 6

The Case for Renting 6

Part I Finance: Do Not Go Shopping Until You Know How Much Money You Have to Spend 13

1 Get Ready to Buy: Tools and Suggestions to Maximize Buying and Borrowing Power 15

Make a List of Your Assets and Liabilities 15

Creating a Budget and Living within Your Means 17

The Down Payment and Private Mortgage Insurance 21

Obtaining a Credit Report 23

FICO Score 24

2 How to Get the Cheapest Loan at the Best Rate 27

How Banks Make Money by Giving You a Loan 27

What Is a Mortgage? 28

Obtaining the Loan: Learning the Bank’s Requirements 29

The Mortgage Broker 30

Getting the Best Loan: Fitting the Loan into Your Plans and Financial Means 30

The New Good Faith Estimate: Keeping the Lender Honest 30

Choosing the Most Appropriate Inexpensive Loan 31

Annual Percentage Rate (APR) 32

Tax Deductions and the Interest Rate on Your Mortgage 32

Paying Points 33

The Amount of the Loan 35

Documents Required to Obtain a Loan 35

The Different Types of Loans 35

The Loan Process 41

The Financing Process 42

3 Buying a Home with Little or No Money Down and Obtaining Seller Financing 49

Putting Little or No Money Down 50

Part II Finding the Uncommon Deal on a Home 57

4 Becoming an Expert on Finding the Dream Home 59

The Real Estate Broker 60

Finding a Property to Purchase: Various Choices and Forms of Shelter 60

Making the Decision 68

5 Conducting the Search: Finding Your Allies in the Real Estate Hunt 71

Insider Trading—The Legal Way 71

Making Friends in Strange Places 72

Location, Location, Location 72

Determining Fixed Monthly and Yearly Housing Costs 73

Making a Wish List 74

Real Estate Brokers: The Guardians of Real Estate 75

Maximizing the Success of the Search 79

6 The Secret to Buying a Distressed Property 83

The DNA of a Deal Finder 83

Distressed Homes: The Most Common Uncommon Deals 84

Finding the Uncommon Deals Using the Most Common Means 84

Becoming a Proactive Deal Hunter 85

7 Pre-Foreclosures and Short Sales 89

Finding a Pre-Foreclosure 89

The Foreclosure Filing 90

Buying a Short Sale 92

Learning More About the Distressed Property 94

Making Contact with a Distressed Owner 95

8 Foreclosures and Bank-Owned Properties 103

Finding a Foreclosure Sale 103

Buying a Foreclosed Property 104

Attending the Foreclosure Auction 104

Determining How Much Money to Bring to the Auction 105

Foreclosure Pitfalls: Taking the Property As Is and Evicting the Occupants 105

Losing the Property to Redemption Laws 105

Financing the Purchase 105

REO/Bank-Owned Properties 106

9 Hidden Land Mines to Look Out for 111

Determine Whether the Home Is Legally Habitable 111

Be Aware of the Number of Units Sold and Occupied in Newly Constructed Apartment Developments 112

Clear All Liens and Obtain Signoffs for Extensions and Alterations before Closing on a Home 113

Inspecting for and Understanding the Underground Oil Tank 113

Buying a Home with Occupants or Tenants in Possession 114

Purchasing a Land Lease in a Cooperative Apartment: Determine Whether You Are Buying or Renting the Land 115

Property Taxes Can Change 116

Different Ways to Take Title to the Home 116

10 Creative Ways to Get the Seller to Accept Your Below-Market Offer 121

Offer All Cash or Do Not Make the Deal Contingent on Obtaining a Loan 121

Know How to Play the Negotiation Game: Making and Responding to the Counter Offer 122

Get the First Call When the Price Drops: Give Sellers Your Price and Ask Them to Call You When the Asking Price Falls 123

Become the Real Estate Broker’s Best Friend 123

Bring Your Financial Resume to Demonstrate Your Ability to Close on the Home 124

The Right of First Refusal 124

Buyer Flexibility: Learn the Seller’s Moving Preferences 125

Endear the Seller through Thoughtful Gestures and Remembering Names and Life Events 125

Place an Ad or Create a Web Site or Commercial 126

11 Negotiating a Great Deal on a Newly Constructed Property: What You Must Know Before Signing the Contract to Purchase 129

Conduct an Extensive Inspection of the Premises Using a Qualified Inspector/Engineer 130

Know the Builder’s Past Performances 131

Obtain Warranties from the Builder 131

The Brand Names and the Appliances and Fixtures Installed Should Be Itemized in the Contract of Sale 132

The Most Common Problem When Purchasing a New Construction: The Move-In Date 132

Locking In an Interest Rate 133

Part III Getting Uncommon Deals on Closing Costs 139

12 The Closing Map: A Guide to Finding and Buying a Home 141

Obtaining Financing 141

Making the Offer 142

Hiring an Attorney 143

The Acceptance of the Offer and Drafting of the Contract of Sale 143

Signing the Contract of Sale and Making the Contract Deposit 144

Insurance and Tax Escrow 145

The Mortgage Contingency Clause and Other Contingencies 145

The Closing Date 146

The Engineer 147

Due Diligence for Cooperative and Condominium Purchases 147

Reviewing the Building’s Financials 147

Termite Inspection 148

Board Applications 149

Title Insurance and Lien Search 149

The Board Interview 150

Obtaining the Right of Possession of the Home 150

The Closing 151

13 Using the Home Inspection to Lower the Price 155

The Inspection 156

Finding the Right Home Inspector 158

Protecting Yourself When Signing the Contract of Sale 160

14 Finding, Hiring, and Utilizing an Aggressive Attorney 163

Whether to Hire an Attorney 164

Finding an Attorney 164

The Mini-Interview 165

Questions for the Attorney Candidate(s) 165

When to Consult an Attorney 166

The Functions of the Purchaser’s Attorney 167

The Makings of a Good Real Estate Attorney 170

15 The Walk Through: The Final Inspection 173

The Walk Through as an Inspection 173

The Punch List 174

Let the Buyer Beware 174

16 The Importance of Homeowner’s Insurance: Acquiring the Knowledge to Purchase and Maintain a Sufficient Policy for Your Home or Investment Property 179

The Homeowner’s Insurance Policy 180

The Function of the Homeowner’s Insurance Policy 180

Ways to Reduce the Cost of Homeowner’s Insurance 181

Maintaining a Homeowner’s Insurance Policy 182

Insurance through the Federal Government 183

Homeowner’s Insurance in Cooperatives and Condominiums 183

Obtain References 184

What You Should Know Before Making a Claim 184

17 The Purchase of Title Insurance 189

What Is Title Insurance? 189

Who Pays for Title Insurance? 190

Why an Owner’s Policy Should Always Be Purchased 191

The Function of a Title Insurance Company 191

The Cost of Title Insurance 192

Examples of When Title Insurance Becomes Important 192

Title Insurance and Purchasing a Cooperative Apartment 194

The Abstract 194

18 Closing Cost Guide: Determining the Complete Cost of Selling or Purchasing a Property 199

Customary Purchaser Closing Costs 200

Purchaser Closing Costs Unique to Cooperatives and Condominiums 205

Closing Cost Example: New York Customary Purchaser Closing Costs 206

Customary Seller Closing Costs 208

Conclusion 221

Acknowledgments 223

Index 225