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The biggest single investment made by the average person is the purchase of his/her home. Sure, the real estate agent will calculate your closing costs, and even the bank will give you a “Good Faith Estimate” of what your closing costs will be, but they usually do not give you the complete picture of what it will cost. How many times did we meet clients who were given a figure of the anticipated costs, and when we did the numbers, it was much higher and more accurate. On the initial interview, free and without obligation, we spend about 45 minutes to an hour, and go through every expense and cost in detail. The client is always asked if they understand why the charge, who is being paid, and what service is being rendered. Then, and only then, do we compute all the fees and charges and come up with the final closing costs. We take into consideration every cost, from the moment the client saw the house until the day of the closing (settlement), and we include them in the calculations. The same is true for sellers. We calculate their costs, including possible Gains Taxes and other charges and see if we can structure the transaction to save the client the most.
One of the most common questions asked is, “Should I buy a house or a coop or a condo, and what’s the difference between them?” To be overly simple, it’s a matter of CONTROL. In a single family home, you are the boss. No one, except the government, can tell what you can or cannot do. If you want to sell your house to a purchaser of your liking, go ahead and do so. Naturally, this will probably be subject to the purchaser’s ability in obtaining a mortgage loan and you having clear title to transfer. As the purchaser or the owner, if you decide to paint your house sky-blue, go ahead. If you want to plant rose bushes or a rock garden, no one can stop you.
If you are buying a condominium unit (apartment or house), you can basically do as you please on the inside (remodel your kitchen or bath to your color or design) but you may have a problem with that green exterior paint. And what about the condominium plan? Do you have the right to sell to anyone or must you first offer it back to the Board? And, what will the condominium be doing about that new children’s playground - will you (the person with no small children at home) have to contribute to this new amenity?
Speaking of losing control - in a coop apartment the prospective purchaser must be approved by the Coop Board before you can sell to him. If you want to change the color of the tiles in the bathroom, you need Coop Board approval. The control you do have is to vote at the Coop meetings for members of the Board whom you approve. Remember, the Board also has a very strong say as to the budget for the next year(s).
With a single family house and the condominium, you actually OWN the Real Estate, while in the Coop, you own the shares of the company that owns the real estate. One of the rights you have by owning the shares is that you get an apartment to live in with it.
For the most part, Real Estate Brokers render a very useful service to the real estate industry. A recent trend has been that there are Brokers who represent the Sellers (the usual and customary method) and there are Brokers who represent Buyers. Usually the Seller would call the Broker and tell them of their intent to sell their home. Most Brokers insist on obtaining “Exclusives”. Care should be taken as to what “Exclusive” is given and for how long is this exclusive. Is the Exclusive one that allows you to sell on your own should a customer come along, as well as the Broker, or do you have to pay the Broker the commission anyway because the house was sold during the exclusive period? As a buyer, you may want to engage the services of a Broker to find your “dream” house. If you do retain the Broker’s services, you do have to pay their commission. Remember, commissions are negotiable.
Then there are the Mortgage Brokers. Their function is to obtain a mortgage loan for you. Why do I need a Broker, I can go directly to a Bank? Banks offer a variety of different mortgage packages, i.e. 30 year fixed rate loan, 15 year fixed rate loan, 80% financing, 90 or 95% financing, full income and asset searches, no income no asset search, conforming or non-conforming loans, etc. However, you must fit to their specific requirements. Brokers can shop around to see where you would fit in and what package is good for you. Theoretically that’s what they should do, and most do that. However, some Brokers are known to put their interest ahead of their clients by steering them to where they earn a higher commission at a slightly higher cost to the customer. Care should be given.
Finally, there is the Title company. Their purpose is to search the records of the City, County and State to make sure that the Seller owns the property free and clear of anyone-else’s rights. Did the Seller really buy and own the property free and clear from his/her buyer? Do they, the Sellers, owe any mortgages or judgments to anyone or is there a lien on the property? Is the house a legal one, two or three family house and how about that garage, is it legal? All this, plus more, is searched by the company, who will then insure you for the purchase price, that you are the only owner and, except for the bank, that only one with rights to this property.
In addition to representing buyers and sellers in investment properties, including 1031 Exchanges (a method to defer the tax on gains on investment properties), we help negotiate commercial leases for landlords and tenants. Extreme care should be given by both landlord and tenant that workable and livable leases are drafted. Landlords seek to protect their investment in the real estate and have the tenant pay timely and pay an amount for the landlord to realize a satisfactory return on his/her investment. Tenant's single largest expense must be realistic to his/her operations. Basically and simply put, can you afford the rent (including rent pass alongs, such as, increase due to real estate tax adjustment, cost of living increase, insurance pass-along, etc)? What happens if the tenant wants to sell his business or go out of business? Does the landlord get an increase, does the landlord have to approve new tenant, and is the tenant personally liable for all or a portion of the rent, current and future? This is only the “tip of the iceberg.”
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