INTEREST RATES

1. Select the column with the desired term.
2. Select the row with the interest rate on which your monthly payments will be based.
3. Find the number where the row and the column meet.
4. Multiply this number by your loan amount, then divide by 1,000. This will be your initial monthly payment for principal and interest. Note that if a loan contains provisions for changes in the interest rate or payment schedule, the payments you make may also change from time to time.
    

PROPERTY CONDITION DISCLOSURE
IT’S THE LAW

Effective March 1, 2002, a new Article 14 of the Real Property Law (“Property Condition Disclosure Act”) was enacted which requires the sellers of one to four family residential real property to provide a written statement to prospective purchasers disclosing all known defects relating to the property. Residential Real Property has been defined as real property improved by a one to four family dwelling used or occupied, or intended to be used or occupied, wholly or partly, as the home or residence of one or more persons but shall not refer to (a) vacant land upon which residential dwellings are to be constructed or (b) condominium units or cooperative apartments or (c) property in a homeowner’s association that is not owned in fee simple by the seller.

Every seller of residential real property is now required to complete and sign the property condition disclosure statement, which is to be delivered to a buyer or buyer’s agent prior to the signing by the buyer of a binding contract of sale. Please be advised that your binders or offers to purchase should be modified to indicate that the document does not constitute a contract of sale thereby avoiding the need to attach a property condition disclosure to the documents. A copy of the disclosure statement containing the signatures of both the seller and the buyer is to be attached to the real estate contract. Whether or not a real estate broker is utilized in the transaction, a disclosure statement must be annexed to the contract of sale. The statute further indicates that the seller is to complete the form without the assistance of the real estate broker. The 48 questions posed in the disclosure statement are representations made by the seller and not the representations of the seller’s agent.

The failure of the seller to deliver a property condition disclosure statement to the buyer will result in a credit of $500 against the purchase price at the time of closing.

There are certain transactions that are exempt from the disclosure requirement; you should contact your legal representative to ensure you are in compliance with the law.

Article 14 also obligates the listing broker to timely inform the seller of the seller’s obligation under this article. A buyer’s agent and the selling broker (the agent representing a seller and dealing with the prospective buyer) shall inform the buyer of the buyer’s rights and obligations under this article. Upon the performance of his/her duties and obligations imposed by the statute, the agent shall have no further duties under the article and shall not be liable to any party for a violation of the article. Most importantly, the real estate licensee should be fully aware that the new Article 14 is not intended to and does not limit existing responsibilities by a seller, buyer or agent concerning the condition of the property or potential liabilities or remedies at law, statute or in equity. It is therefore imperative that the real estate agent continues to disclose to the prospective purchaser material defects of the property of which the agent is aware and that a failure to comply will result in a breach of the agency disclosure as promulgated in Section 443 of the Real Property Law.

A copy of the Property Condition Disclosure Statement may be obtained from the office of your real estate broker or in the alternative, you may contact your attorney for further information.

Capuder Fazio Giacoia, LLP
5 Hanover Square
New York, N.Y. 10004
212-5099595
718-6806140
alfazio@cfgny.com

The purchase of a home is the single most costly investment in an individual's lifetime. It is for that reason every opportunity must be taken to ensure due diligence on the part of the purchaser. Selecting and attorney to advise you as to the pitfalls of the transaction is certainly your first layer of protection. Once you have chosen a prospective property, an engineer or home inspector is retained to assess the structural integrity; thereafter, a mortgage broker will assist you in determining your qualifications to various forms of financing.

After having entered into a contract for the purchase of the real property, your attorney will order title insurance which will alert him/her as to the past chain of title, liens or encumbrances on the property as well as violations which may act as a impediment to your purchase. What protection I a purchaser getting when he/she purchases title insurance? This article will explore the benefits.

In New York State, five essential provisions insure the purchaser of real estate which comprise an ALTA Owner's Policy. This insurance protects against loss or damage which is sustained or incurred by the insured by reason of

1. Title to the estate;
2. Any defect in or lien or encumbrance on the title;
3. Unmarketability of the title;
4. Lack of a right of access to and from the land and
5. Any statutory lien for services, labor or materials furnished prior to the date of the policy.

The title insurance company cannot disclaim liability under the agreement that it was also a victim and could not have detected a forgery by an examination of the public records. The company is obligated to do whatever is necessary to correct the problem or in the alternative, must compensate you for what you paid for the property. It should be noted that the purchaser can choose a market value rider at the time of purchase wherein if a defect in title is detected, your compensation is not what you paid for the property but instead, it is the fair market value of the property at the time of the detection of the defect.

While the protection afforded by a title insurance policy covers matters appearing on the public records, if a survey is provided and survey coverage is given, the policy will also cover adverse matters which an accurate survey of the property would disclose. For example, loss arising by the reduction in value of the property by reason of easement rights of others based on evidence of easements (paths, common driveway) affecting the property or adverse claims to the property evidenced by fences, walls or encroachments unless the matters are excepted in the "survey reading". If the surveyor has made an error in the preparation of the survey map, and survey coverage was provided, the insured has recourse to the title insurance company for loss covered by the policy. The title insurance company then looks to the surveyor for reimbursement of its damages.

If the title is attacked by someone who claims to have an interest in the property derived through the estate of a deceased prior owner, the title insurance company must defend the insured's title and compensate the insured for any loss if the claimant does have an outstanding interest in the property. Your attorney will inform you as to the cost of the policy which depends on the purchase price and the amount of your mortgage. The lending institution which provides the financing will require insurance to protect its security to the property. The policy premium, which is a one time fee, is not competitive but is statutory in nature. Therefore, the title insurance premium will not fluctuate depending on the company chosen by your attorney.

Insurance in any field is used as a security blanket to protect against a risk of loss. Title insurance is an essential part of your closing package to give you peace of mind so long as you own the property. Don't purchase your home without it!!!

**Special thanks to Lawrence B. Lipschitz, New York General Counsel to Lawyers Title Insurance Corporation, for his assistance in the preparation of this article.

Compliments of...Alfred M. Fazio, Esq.

A Glossary of Real Estate Terms

Abstract Title: A summary of the history of the legal title to a piece of property: all changes in ownership, liens, mortgages or any other matter that might affect the title.

Agreement of sale; or purchase and sale agreement: A written agreement by which a buyer agrees to purchase and a seller agrees to sell according to terms set forth in that agreement.

Amortization: The reduction of a loan or debt by periodic payments according to agreed upon terms. Your mortgage is being amortized every month that you send a payment to the lender.

Appraisal: A procedure in which a qualified individual estimates the value of a piece of property.

Appreciation: The increase in the value of real estate due to external circumstances including inflation and other economic conditions.

Binder: An offer to purchase property which is accompanied by a sum of money, smaller than a down payment, to show good faith prior to a formal agreement.

Closing: The final meeting at which the transfer of title of property passes from the seller to the buyer.

Closing Cost: Includes all the charges attached to closing. These one time fees include charges for the title search and insurance, attorney's fee, survey, and points charged by lender of mortgage. These are also known as settlement costs.

Condominium: An apartment house where individual apartments are purchased, rather than leased by the occupants.

Cooperative Apartment: Rather than renting an apartment the tenant buys stock in the corporation that owns the building. The cost of the stock is usually determined by the size of the apartment.

Deed: A legal document whereby title to real estate is transferred from one person to another.

Equity: The difference between the market value of a house and the balance owned on the mortgage, usually referring the owner's interest or value on real estate.

Escrow: Money, securities, or other property placed in the keeping of a third party until obligations by the other two sides, set out in the escrow agreement, have been fulfilled.

Lease: A written document containing the conditions for the exclusive possession of real estate by the owner to another for a definite period of time.

Leverage: The use of a small investment to generate a greater rate of return through borrowed funds. The most common form of leverage is a homeowner using a small down payment to purchase a house.

Lien: A claim or charge upon property for payment of a debt, obligation or duty.

Listing: An agreement between a broker and an owner that the broker may sell or lease the real estate.

Market Value: the highest price that a buyer will pay and the lowest price a seller will accept for a property.

Mortgage: The conditional transfer of title to real estate as security for a loan.

Points or Discount: The fee charged by a lending institution for making a loan at an interest rate below the conventional rate. One point equals one percent of the loan.

Refinance: Process of paying off an existing loan with proceeds from another.

Survey: An exact measurement of a parcel of land to ascertain corners, boundaries and divisions.

Title: Evidence, usually in the form of a deed, that a person has the right to ownership of the property in question.

Title Insurance: A policy that protects the buyer against any loss or damage resulting from a defective title.

Title Search: A detailed investigation to ensure that any property is purchased from the legal owner and that there are no liens or special assessments against it.

Zoning: Procedure that classifies real property for a number of different uses: residential, commercial, industrial, etc., in accordance with a land-use plan. Ordinances are enforced by a governing body or locality.

FINDING YOUR WAY THROUGH THE MORTGAGE MAZE

There are at least 18 different ways to finance your home. Each has its advantages and disadvantages. Here are some of your major options:

CONVENTIONAL MORTGAGE -- This is the most common mortgage, although the new alternative plans are threatening its survival. Here the buyer obtains a twenty-five or thirty year loan from a lending institution at the prevailing rate. Be sure you can refinance the mortgage if interest rates go down.

F.H.A. AND V.A. BACKED PLANS -- The Federal Housing Administration and the Veterans Administration do not grant mortgages. They offer a Federal guarantee that makes mortgages attractive to lenders since payment will be made by these two agencies in the event of default by the mortgagor. Both require low or no down payments and an interest rate lower than the prevailing rate.

ADJUSTABLE RATE MORTGAGE (ARM) -- These are long term 30 year loans with rate adjustments semi-annually, annually, or every 30 months, three years, or five years to reflect current interest rates. A balanced ARM is generally offered by Federal chartered banks and is the safest and most attractive mortgage. Both rate changes and payment changes are limited to protect borrowers against the risk of sudden substantial increases in monthly payments.

REVERSE MORTGAGE -- A reverse mortgage is a loan secured by the equity in a home. The loan is made to an older homeowner through a series of monthly payments that continue for a period of time or for the life of the borrower. The amount of the monthly payment made to the borrower is calculated based on the appraised value of the home and the borrower's life expectancy. This particular mortgage is used as a way to help cash-poor but property rich elderly.

BUY-DOWNS -- Builders and sellers are offering below market creative financing through a lending institution. The seller buys down the rate for a period of time, ranging from 30 months to the life of the loan by paying the bank a fee which generally makes up the difference between twhat the lower rate would net and the represent value of the interest payments the bank would otherwise have charged. This results in lower monthly payments for the buyer and increases his chances to qualify for the loan.

SECOND MORTGAGE -- Financing real estate with a loan or loans that are subordinate to the first mortgage. It usually calls for a higher interest rate and shorter repayment period.

ASSUMABLE FIRST MORTGAGE LOANS -- Often a seller's first mortgage loan is assumable by the purchaser without the lender's consent. Most of these loans were written 20 to 25 years ago when rates were 6 ½ percent of lower. This mortgage can be a good deal if the buyer has enough cash to cover the difference between the mortgage and the purchase price or if the rate on second financing is attractive. The buyer can also save a mortgage tax of as much as 1 ¼ percent by assuming an existing mortgage.

BALLOON MORTGAGE -- This mortgage is offered for a three to five year period. After the short term loan expires, the lender may either renew the loan at current rates or ask that the loan be paid in full.

ROLL-OVER MORTGAGES -- This mortgage is offered for a three to five year period backed by a bank's commitment to extend the loan at whatever rate is prevailing at maturity.

BLANKET MORTGAGE -- This mortgage creates a lien on two or more parcels of property that are pledges as security for a debt. The blanket mortgage is most commonly used in financing the development of residential subdivisions.

PURCHASE MONEY LOAN (PMs) -- These loans are extended by the seller to the purchaser, generally at below market rates on an interest only basis. There are different variations to this plan. Sometimes sellers will set terms of five years or so, until the buyer can obtain permanent financing.

ZERO RATE LOANS -- Usually offered by builder. Buyer pays only the principal and no interest because builders sell the mortgage to a bank at a discount. Since no interest is charged, the sale price of the home is increased accordingly.

BRIDGE LOAN -- A bridge loan involves the short-term or interim financing of real estate and is available for any type of real property. It is used to purchase residential property when a property owner has signed a contract for purchase of one property in anticipation of selling another, currently held property prior to closing on the purchased property. This short-term funding allows a home to be purchased prior to the sale of a party's present home; when the existing home is sold, the bridge loan is paid in full.

THE EXPENSE OF PURCHASING OR SELLING A HOME

The purchase of a home is probably the largest investment a person will make in his or her lifetime.

The first thing clients want to know when they come in to my office (except for my fee) is what their closing cost will be.

I always inform them that the Rule of Thumb estimate is 7% of the mortgage they will apply for. This estimate is usually pretty accurate. This estimate includes Lender's expenses, Title expenses, Hazard insurance and Attorney's fee.

The Seller's expense are not estimated in the same way, as they are comprised:

• Broker's Commission (which is not fixed and varies from a percentage to flat fee)
• City Transfer Tax (usually 1% of price)
• State Transfer Tax (usually $4.00 per $1,000 of price)
• Attorney's Fee

Numerous times a Lender's loan processor will underestimate closing costs when they provide their good faith estimate as required by banking law.

Therefore it is very important to go over projected closing expenses with your attorney before you sign a contract of sale or apply for a loan, so you are not surprised later on.

There are creative ways you can finance your closing cost which you should discuss with your loan processor when you have little cash to invest. One method is what is called adding a seller's closing cost concession onto the price. An example of this would be as follows:

Purchase Price is $100,000

You only have a total of $20,000 cash to invest in the purchase of the house including closing cost -- You can qualify for only an 80% or $80,000 loan and therefore would have no cash for closing cost.

Applying the 7% closing cost rule, closing costs on an $80,000 price would be $5,600.

Therefore, the purchase price could be increased to $107,000 which would generate an $85,600 loan which would finance the closing costs. The contract would provide that the seller would give a $7,000 closing cost credit at closing, thereby netting the same $100,000 price.

Not all closing costs are tax deductible. Check with your accountant as to what expenses are deductible and what expenses are considered a capital investment and added to the purchase price.

Prior to the closing, your attorney will provide you with a list of all the closing checks you need for the closing and after the closing will provide a closing statement listing all your expenses.

Compliments of ...
EUGENE A. ROMANO, ESQ.