Avoiding the closing day rush to get certified funds. If the terms of your purchase involve bringing the balance of funds for downpayment and closing costs to the closing, you'll have to provide that money in the form of certified funds. Generally you won't know to the penny how much that will be until 24 hours before the closing. This really becomes stressful because gee, you're packing, doing a walk through on the property you're buying and possibly even closing on the sale of the place you're living in. The last thing you need is to also have to make a trip to the bank.
What I do when I buy a house in New Jersey, and what I also suggest to buyer clients, is, a week or so before closing, I write a personal check for more money than will be necessary to the trust account of my attorney. The closing will be taking place at her office and she will be disbursing the funds from her escrow account for everything that isn't already in the seller's attorney's trust account. I make sure that there's a couple of hundred dollars more than I will need, and she just cuts me a check for the difference at the closing. It not only removes one big headache from my closing day To-do list, but it means I also get to go home from the closing with a check in my hand, like everyone else. And, so long as there is plenty of time for the personal check to clear, there is no additional bank fee for a certified check or bank wire.
Real life experience: A couple of years ago, I had buyer clients whose closing had to be postponed from Friday until Monday because they didn't get their "final number" in time to get to the bank for certified funds that day. They had had painters scheduled to come in over the weekend, before the furniture was to be delivered. Ironically, they had had these funds in their account for months. They could easily have deposited a bit more than they would need to their attorney's account weeks in advance.
Monday, June 19, 2006
Real Estate is local
The longer I'm in the business and the more I interact with colleagues around the country, the more I find that the way real estate is bought and sold is truly a local phenomenon. Of course, each state has its own licensing rules, but even the way real estate agency is practiced and how contracts are presented and the protocol for getting property transferred from the seller to the buyer can be very different in New Jersey than in New Mexico or even in New York or Connecticut.
I'll be posting only about how things are handled in residential real estate sales in New Jersey, although I might bring in information from other states to contrast. You can also narrow down my posts to relate to Northern and Central NJ, where most buyers and sellers are represented by attorneys. (In South Jersey it works differently.)
I'm not an attorney and I'm not going to give legal advise; I'm just going to comment about things I've observed while selling a few hundred houses over the last 20 years. These are things that have surprised both me and my clients over the years.
Contract closing dates are like stop signs... In NJ, they sometimes seem to be mere suggestions. (If you've driven here, you'll know what I mean.) Regardless of what date it says in the contract that both buyers and sellers have signed, obviously some very important items have to be completed first. The biggest item is making sure the money is there in time, but there are other certificate of occupancy and title items that sometimes hold things up. There IS usually verbiage in the contract that if it doesn't close "on or before" the date on the contract, any date acceptable to everyone is okay too. Unfortunately for the sellers and the buyers who are trying to plan for movers and perhaps trying to coordinate another closing on another property, it's more of the exception than the rule that the date gets moved around.
I'll be posting only about how things are handled in residential real estate sales in New Jersey, although I might bring in information from other states to contrast. You can also narrow down my posts to relate to Northern and Central NJ, where most buyers and sellers are represented by attorneys. (In South Jersey it works differently.)
I'm not an attorney and I'm not going to give legal advise; I'm just going to comment about things I've observed while selling a few hundred houses over the last 20 years. These are things that have surprised both me and my clients over the years.
Contract closing dates are like stop signs... In NJ, they sometimes seem to be mere suggestions. (If you've driven here, you'll know what I mean.) Regardless of what date it says in the contract that both buyers and sellers have signed, obviously some very important items have to be completed first. The biggest item is making sure the money is there in time, but there are other certificate of occupancy and title items that sometimes hold things up. There IS usually verbiage in the contract that if it doesn't close "on or before" the date on the contract, any date acceptable to everyone is okay too. Unfortunately for the sellers and the buyers who are trying to plan for movers and perhaps trying to coordinate another closing on another property, it's more of the exception than the rule that the date gets moved around.
Don't forget to compare the property taxes
This is especially important when comparing condominiums for sale in Jersey City. Unlike in some other areas of the country, NJ property taxes are high (the highest in the country, I'm afraid). It gives the politicians something to rant about every election.
At about $46 per $1000 of assessed valuation, a unit that's assessed at $100,000 will cost you $383/mo. in addition to what you pay in principal and interest on your mortgage and the monthly maintenance charge.
Earlier conversions (especially pre-1990) can be a bargain. The increase in property values since 1996 has been dramatic. Condo buildings built or converted more recently are assessed (valued for tax purposes) as of the time they are first certified for occupancy as condos.
Developers of downtown Jersey City properties almost always apply for a tax abatement from the city. This allows buyers to at least temporarily reduce their property taxes. A recent property I sold was assessed at $159,000 (newly converted condo that sold for almost $400,000). A tax abatement reduces that assessment by $25,000 for the next 5 years to just under $135,000. Current (abated) taxes are just over $500/mo. After the 5 years are up, that would go up by another $100.
A similar sized unit sold recently for $375,000. It was a 1980s conversion and could use some updating. ($20,000 in updates would make the unit at least as nice.) The assessment is just over $60,000 so the monthly taxes are just over $200/mo. (that's $300 less per month…every month…) True, property taxes are deductible, but while that lessens the pain, it doesn't eliminate it.
Say you were buying one of these units with a $330,000 mortgage (6% for 30years). Your monthly payment on the 1st unit would be $2733 ($1980 + $240 maint. + $513 tx). The second unit would cost you $2424 ($1980 + $206 maint. + $238 tx). Looking at it another way, $300 per month could pay for a condo priced $50,000 higher.
So, if you're considering purchasing a condo in Jersey City, be sure to:
At about $46 per $1000 of assessed valuation, a unit that's assessed at $100,000 will cost you $383/mo. in addition to what you pay in principal and interest on your mortgage and the monthly maintenance charge.
Earlier conversions (especially pre-1990) can be a bargain. The increase in property values since 1996 has been dramatic. Condo buildings built or converted more recently are assessed (valued for tax purposes) as of the time they are first certified for occupancy as condos.
Developers of downtown Jersey City properties almost always apply for a tax abatement from the city. This allows buyers to at least temporarily reduce their property taxes. A recent property I sold was assessed at $159,000 (newly converted condo that sold for almost $400,000). A tax abatement reduces that assessment by $25,000 for the next 5 years to just under $135,000. Current (abated) taxes are just over $500/mo. After the 5 years are up, that would go up by another $100.
A similar sized unit sold recently for $375,000. It was a 1980s conversion and could use some updating. ($20,000 in updates would make the unit at least as nice.) The assessment is just over $60,000 so the monthly taxes are just over $200/mo. (that's $300 less per month…every month…) True, property taxes are deductible, but while that lessens the pain, it doesn't eliminate it.
Say you were buying one of these units with a $330,000 mortgage (6% for 30years). Your monthly payment on the 1st unit would be $2733 ($1980 + $240 maint. + $513 tx). The second unit would cost you $2424 ($1980 + $206 maint. + $238 tx). Looking at it another way, $300 per month could pay for a condo priced $50,000 higher.
So, if you're considering purchasing a condo in Jersey City, be sure to:
- Check the property taxes
- Check to see if the unit is under an abatement
- If it is, find out for how much longer (the abatements vary greatly by complex.)
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