Helpful Buyer Info

Can you buy/sell a house with a failed septic system?

Can you buy/sell a house with a failed septic system?

Although they are very common in Metrowest, not all homes have septic systems. A system that no longer functions as designed is considered “failed” and while they are always problematic,  they can be incorporated into a real estate sale and get you to the closing table in one of three ways.

First, you can undertake the work and complete it prior to closing, with a full sign-off from the Board of Health in the form of a Title 5 Certificate of Compliance. This is often the preferable course for all parties and a lender, if any, and this option will get you the highest selling price for your home. You will need a design and this takes time for testing holes and design approvals so plan accordingly. If you’re short of funds, some septic installers will begin and complete the work slightly before the closing date and get paid out of the seller funds at the closing. This would require you to agree to release the funds directly to the installer at the closing.

Alternately, Title 5 does not require that a system be in passing condition prior to the sale, but most lenders will not issue a mortgage until the failing system is upgraded or funds to perform the upgrade are escrowed.

So you and the Buyers can agree to put an appropriate amount of money in escrow guaranteeing that the system will be installed after the closing. The usual formula for calculating this amount is taking the median of three bids plus a 50% contingency reserve. Most installers are able to give solid estimates based on a design, but they will charge more it they hit ledge, or other unforeseen conditions, so the contingency is there just in case. Again, this would require you to agree to release the funds from the closing to the escrow account. The escrow funds are usually held by the bank’s conveying attorney who will pay the bill for the septic when it’s completed, and then return any extra money to you. Many lenders don’t allow septic hold-backs at all, so this option, while an excellent solution if you’re tight for funds, might limit your pool of buyers and thus extend your time on market, but it won’t affect the price you’ll get for the home. Here’s an example of how this might work: A home is on the market for $300K with a failed Title 5. A buyer agrees to purchase the property, and they both agree to put the septic repair money in escrow. The median estimate is $30,000 for the system. The buyer, at the closing, pays the seller 300K, and the seller then pays of his mortgage (100K, for example) and then takes 150% of the 30K ($45,000) and puts that in escrow with the closing attorney. The seller leaves the closing table with $155,000. The buyer then has the new system put in place, and it only costs $30,000. The buyer sends the bill to the closing attorney, who pays the installer, and refunds the difference ($15,000) to the seller. There are variations on how this unfolds, but this would be a typical scenario.

A third option would be to get the buyer to pay for the septic system, although this is less likely to occur. A buyer who agrees to assume the cost of replacing the septic system will factor the cost of replacement plus a contingency factor into his bid price for the property. If it costs less than he planned, he pockets the difference. This would most likely have to be a buyer who can pay cash for your home. Most municipalities will allow him up to a year to fix the septic system and update the Title 5. But if the septic system isn’t working, the Board of Health can require that nobody will be living there. Not many people can buy properties with cash, so counting on this option will severely restrict your buyer pool, exponentially lengthen your market time, and ultimately get you less money for your home. So, in summary, bottom line … marketing your home with a failed septic system will affect the property’s value and restrict the pool of buyers, but it has been done many times successfully and with the right agent (shameless plug for “me”) you can do it too.

Okay, So What’s a Condo?

Okay, So What’s a Condo?

Often mistakenly referred to as a type of construction or development, it actually refers to the type of ownership.

A condo (condominium) is a type of ownership in real property where all of the owners own the property, common areas and buildings together, with the exception of the interior of the unit to which they have title.  Said another way, when you buy a condo you have exclusive ownership rights to the interior space of your particular dwelling unit but you share the ownership of the common areas (walls, grounds, fences, facilities) with the other owners in the complex. 

What is the appeal of a condo?

Condos offer you an alternative lifestyle for many individuals especially those who prefer to be independent and have their own place to call home that is affordable and at the same time more convenient that buying a conventional home.

What kind of condos are there?

There are many types of condominiums available out there. Each type can satisfy the different needs of different individuals. The building shape could be a high-rise, a mid-rise, a townhouse, a garden up or down, or a villa, either attached or detached from other units. There is what is known as a condominium apartment and there are those also known as condominium townhouses which might have slight differences with each other save for their structure type and ownership regulations.

What’s the main difference between a condo and a single family home?

Condo living is much different from owning or renting a single dwelling home or apartment. This is because of the dual nature that comes with every condo unit ownership. Condominium owners hold ownership over their respective units but each one sharing responsibility over the operating costs and maintenance of the shared elements in the property such as lobbies, passageways, elevators etc. that are essential parts of a condominium complex. By choosing to live in a condominium, you are choosing to live within a community of other condo unit owners who become your instant neighbors. Each condominium complex is a community in itself and each owner accepts and follows the standard rules and regulations unique to condo living.

What are the typical benefits of owning a condo?

1. A condo unit is less expensive than owning a single detached dwelling which may take you years to save for before owning it.

2. Amenities and shared facilities like the pool, clubhouse, and weight room are usually part of most condominium complexes.

3. You become part of a unique community where you are an integral part in the whole decision making process.

What are the typical drawbacks of owning a condo?

1. Depending on the condo complex, there might be some restrictions such as on owning pets, or having outdoor barbecues.

2. Owners are also required to follow some rules of conduct on common areas such as passageways and lobbies.

3. Owners might not be as “free” in their home because they also have to respect the rights of their neighbors living just on the other side of their walls.

What is the condo fee for?

Maintenance of the condo complex is shared by all the owners. When you buy into a condo or townhouse complex, you become a member of the homeowner’s association. As a member, you pay monthly dues to the association. Your dues will normally cover the management of the homeowner’s association, hazard insurance for the complex and a certain amount of routine maintenance. Precisely what is covered by the homeowner’s dues will vary from one complex to the next.

Is a co-op the same as a condo?

Co-ops are very common in New York city, not so much in the Boston area.  A Co-op is a actually a different type of ownership than a condo. When you buy a Co-op what you actually buy is a proportionate number of shares in the corporation that owns the building. The corporation in which you are a shareholder then issues you a proprietary lease entitling you to live in the unit you have purchased. Financing, the manner in which sales are recorded, rules and other details are also often different for  Co-ops than for condos.  The corporation also has the right to refuse to sell you shares based on any number of subjective criteria by the board of directors … that does not occur in condos.

 

DO’s & DONT’s When Applying For a Mortgage

DO’s & DONT’s When Applying For a Mortgage

Okay, you’ve found a great home to purchase, but you’ve got to replace your car and your furniture is hand-me-downs from your grandparents. Before you start doing your duty to the God of Consumerism, here is some wise advice to follow:

DO’s

  • Notify your mortgage broker of income changes … any changes from when you applied need to be above board
  • Keep documentation of any large deposits … lenders will need to verify where you received the money from
  • Pay all your bills on time … keeping current on all existing accounts is extremely important
    (a single late payment 30 days could affect your credit score between 50 and 100 points and may change your mortgage rate)

DONT’s

  • Apply for new credit of any kind … credit scores will be requested and this will be recorded, your score could be adversely affected
  • Go over your limit on credit cards …try to keep your balance below 50% of your available credit limit on any/all of  your cards
  • Consolidate your debt over 1 0r 2 credit cards … appearance is reality, it will look like you’re maxed out on the remaining cards, again could adversely affect your credit score
  • Change or quit jobs … if anything – especially your employment changes from your initial application your approval may change or be revoked.

Your mortgage company will verify your employment and credit score approximately 2 days before the closing, so keep everything steady and calm and you’ll be fine and get that great home you wanted.

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