Do You Have Enough Money to Close?

The biggest misconception many buyers have has to do with the amount of money they’ll need to close. Another big mistake is how long it takes to close a deal. Many people believe a contract can close in 30 days. In New York, it’s more like 45-60 days from contract to closing.

The Law Office of Matthew Tannenbaum employs a different strategy with clients. At the time of contract signing, we spend a considerable amount of time with the client reviewing the contract and making sure they understand the different clauses of the deal, their duties, and responsibilities under the agreement and the protections contained in the contract. We go over things like the mortgage contingency clause, closing dates, Certificate of Occupancy clauses, condition clauses, default clauses and anything else contained in the standard contract that are of concern to the client. After reviewing the agreement, we will go through a “mock” settlement statement with them.

The mock settlement is a hypothetical situation where we pick a date in the future when we think we’re going to close, and then we go over the costs associated with the closing. By doing this, we can show the client how all the moving parts come together at the closing table, so they have a better understanding of how the process works. By reviewing everything at the beginning, the clients are in a better position and are more relaxed during the course of the deal.

Preventing Unhappy Surprises

In every case, we will calculate the amount they will need to close. The calculation includes the amount of the down payment, as well as the amount of the adjustments for items such as prepaid real estate taxes. If it’s an oil-fueled house, we will also adjust for the price of the home heating oil as well. Any other credits due to the buyer or seller are discussed and accounted for at this time.

We also discuss lender “net funding,” Title costs and other closing fees. We will explain to our clients who are purchasing and obtaining mortgage financing that when they borrow $300,000, it does not mean they get the whole $300,000 at the table. Most Lenders do something called net funding, which means they’ll get $300,000 minus the costs involved with procuring that loan, such as bank fees, short-term interest, and escrow reserves. All of those items can add up to a few thousand dollars.

We will also go over our fee since the attorney will usually get paid at the closing table. Another area we discuss is title fees. Title fees include, but are not limited to, fee insurance and mortgage premiums, mortgage tax, ancillary search charges and possibly a new survey. We then come up with a number which is an estimate of how much they’ll need.

It is essential that we discuss these money issues at the beginning of the process. We need to know whether or not our clients have the money in the bank before they start. If they don’t, they won’t be able to close, and knowing if they cannot afford to buy the house at the outset will save everyone a lot of time, money and heartache in the long run.

For more information on Misconceptions of Buyers, a free initial consultation is your best next step. Get the information and legal answers you’re seeking by calling (516) 683-1234 today.

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No information that you obtain from this web site is legal advice, nor is it intended to be. You should consult an attorney for individualized advice regarding your own unique situation. No attorney-client relationship is formed between Attorney Matthew K. Tannenbaum and you by viewing this web site.