The Buyer’s Guide to Purchasing in Santa Fe Buying property in Santa Fe is complicated and includes many considerations and steps. If this is your first home purchase in New Mexico, the process might be very different from your past experiences. The following points will help you prepare for the process, with the goal of making it fully transparent and to help you make informed decisions. We will be with you from start to finish, providing expert assistance at every step. Choosing Your Broker • • • • • •
How long have they been in business? How long have they been in Santa Fe? What are the brokers’ production numbers? What are their average sales prices? What is their knowledge and experience in your area of interest? Can they provide you with testimonials from past clients?
Create Your Buying Profile • • • • • • • • • • •
Price range Number of bedrooms, offices, baths Location in Santa Fe Urban or Rural? Paved roads or unpaved? What proximity, if any, to specific amenities is needed? Gated or non-gated community? Are views pivotal? Pristine condition or open to making renovations? Preferred architectural style (Pueblo, Territorial, Historic, Contemporary)? A primary home or vacation property?
Preparing Your Offer Formulating Your Offer - Factors to Consider • • • • • •
Days on Market - how long has your desired property been available? General condition of the Santa Fe market. What are the latest statistics and trends? Length of the escrow period - what timeline works best for you between the acceptance of your offer, closing and move-in to the property? Earnest Money - what is customary and what message will you communicate to the seller by the amount of your earnest money? What will be your costs of the purchase, other than the purchase price? How will you take title? Sole and separate property? Joint tenants? In an LLC? If in a trust, you will need to provide a copy of your trust certificate to the title company.
If You Make a Cash Purchase • •
Proof of Funds - when you go under contract you will be required to provide a document verifying that you have the liquid funds to close. Who is best to provide this verification? What forms of proof are acceptable? Appraisal - at your option in a cash purchase. What are the pros and cons?
If Your Purchase Requires a Loan Choosing Your Lender • • • • • • • • • • •
Determine your criteria for choosing a lender. Points to consider are the range of products, interest rates, fees, ability to close on time, local or online, and whether the servicing of your loan will be retained or sold after closing. Consider the pros and cons of using an online vs. “brick and mortar” lender. Ask the lenders you are considering how much time they require to fully process, underwrite and close a loan. Ask the lender how they manage appraisal orders. Do they have an in-house appraisal service or do they use a third-party provider? Request information on how appraisals are managed. Are they ordered internally using an appraisal desk or does the lender use an Appraisal Management Company (AMC)? Ask the lender if a seller credit or price change that occurs as a result of the inspection contingency resolution will have any impact on the timing of your loan closing and what documentation they will require to proceed. Ascertain when you can realistically expect to obtain the lender’s “clear to close”. Ask the lender what they require in order to release funds for your transaction after the closing occurs. Request information on how the lender communicates loan status to you and the other parties to the transaction. Anticipate that you will be require to provide the seller with a loan pre-qualification letter. Ask the lender for a comprehensive list of required documentation and be prepared to provide this when you pre-qualify for a loan.
Once You Have Chosen Your Lender • • • • •
Know that your lender will need to understand the requirements of the loan contingency. They will receive a copy of the purchase agreement as soon as you go under contract. Sign all disclosure documents within 24 hours of receipt. Submit any documentation the lender requests within 48 hours in order to expedite the processing of your loan. If you will be wiring funds for your closing, confirm with your bank what their wire transfer request requirements are and when you should make the request. Why might the seller request a post-closing occupancy agreement when your purchase involves lender? What are the reasons to grant this request?
If You Involve an Attorney in Your Purchase • •
Is it wise and/or necessary to have an attorney involved? Consider the areas where he/she could provide assistance: review of the purchase agreement, review of the title commitment and recorded documents (e.g., easements, covenants and deed restrictions), review of the survey, preparation of the deed, review of water rights and/or well-sharing agreements, licenses, etc.
The Contract Contract Documents Used in All Cases • • • •
Broker Duties, Parts I & II Supplemental Brokers Duties The Purchase Agreement Tax Levy Certificate
Contract Disclosure Documents • • • • • • • • • • • • • • • • •
Information Sheet - FIRPTA and Taxation of Foreign Persons Receiving Rental Income from US Property Information Sheet - Estimated Property Tax Levy Information Sheet - Wire Fraud Information Sheet - Earnest Money Dispute Information Sheet - Mediation Information for Clients and Customers HUD Disclosure - Get a Home Inspection Information Sheet - Mold Information Sheet - Water Rights and Domestic Wells Information Sheet - Septic Systems and Septic System Contigency Addendum Information Sheet - Homewonwer’s Association Information Sheet - Lead-Based Paint Renovation Repair and Painting Program Lead-Based Paint Addendum to Purchase Agreement (for homes built prior to 1978) Lead-Based Paint Pamphlet - Protect Your Family from Lead in Your Home Confirmation of Receipt of Lead-Based Paint Pamphlet Disclosure Addendum - Lead-Based Paint, Renovation, Repair and Paint Program Short-Term Rental Ordinance and Confirmation of Receipt Wire Fraud Disclosure
Contingencies A contract contains various contingencies, each with its own deadline and each must be resolved before the transaction will close escrow. Most contingencies require the delivery of documents or reports by one or the other of the parties and period fro the recipient to review the documents and register objections. Each contingency provides a specified time period in which the parties resolve the contingency or the contingency leads to a contract termination. Typically, the contingencies in a contract are as follows: • • • • • • • • •
Financing Title review Insurance Property Disclosure Statement Review Inspections Survey HOA/Condominium Association Review Septic system evaluation Well/water rights evaluation
Title Review Contingency • • • • •
The title company will deliver a preliminary title commitment and underlying recorded documents (covenants, road agreements, deeds and the like). Who should be involved in reviewing these documents? What is the difference between Schedule A and Schedule B in the title commitment? What does it mean to delete Standard Exceptions 1-4? When should an attorney be involved?
Insurance Contingency • • • • •
Within a specified number of days after going under contract, you will be required to make application for property insurance to determine if an acceptable policy option is available at an expected and customary premium cost. Past claims may impact options and premium rates. Is the property located in a flood plain? Is the property located in or near a heavily forested area? If so, this will likely impact the availability and cost of insurance options. The location of the nearest fire hydrant and pressure at that hydrant will be important.
Property Disclosure Contingency • • • • •
The Property Disclosure is a commonly used form that the seller will complete that summarizes their general knowledge of the property. This disclosure is not required in New Mexico, but is typically requested by a buyer. Whether the owner is a full time or part time resident has implications as to the accuracy and range of their knowledge. There are times when a Property Disclosure will not be provided. Which is reasonable under certain circumstances. Most commonly this occurs when the property is owned by heirs or an estate or when the property was purchased as investment. In both cases, the owner may have never occupied the property. The Property Disclosure can be very challenging for the owner to complete and for a buyer to understand. Please ask questions, as we can get answers to them in almost all cases.
Homeowner/Condominium Association Contingency • • • •
What type of information will be provided for review? How is the review of these documents handled? Who pays for the documents that the association provides? Who pays the HOA transfer fee at closing?
Inspection Contingency • • • • • • • • • • • • • •
Which inspections should be obtained initially? What is covered in a general inspection? What are typical costs of the common inspections? What additional inspections might be required or desired? (e.g., roof, plumbing, electrical, structural, or drainage-related engineering, pest). And who pays for them? If radon is a problem in your area of choice, is it an issue for you? When was the house built? If the property has in-floor radiant heat, is Kitec or Entran II present in the home? What are the ramifications? Consider obtaining a mold test if a history of moisture is indicated in the Property Disclosure or if the general inspection indicates a mold test is merited. An inspector may not find every issue in the house. What happens if he misses something? When inspections are completed, should the buyer request cures in the form of repairs, a credit against the price or a price reduction? What are reasonable requests? What about cosmetic issues? What requests are fair and reasonable? If a lender is involved, cure options may be limited. (See financing). When is terminating the contract due to inspection finding the right decision? If repairs are needed, consider the pro and cons of the seller completing them. If repairs are agreed-to and completed by the seller, there will be a deadline for their completion and the seller will be asked to provide invoices to evidence the work has been done.
Septic System Evaluation Contingency • • •
If a property is served by a septic system, a professional inspection, pumping and NMED evaluation will be require within 180 days of the property transfer. The Buyer chooses the septic inspector, but the Seller pays for the evaluation. Why is this so? In addition to standard septic systems, some properties have advanced treatment systems. What is the difference between the types of systems and why is this important?
Well/Water Rights Contingency • • • • • • • •
Is the well that serves the property is private or shared? If shared, how many users? How much water is legally available to the property every year? ( 1 acre foot = 325,851 gallons) Is the well part in the Aamodt lawsuit area? If yes, what are the implications? Who owns the well (depends on the well location)? Are recent well inspections and test reports available (e.g. flow test, electro-mechanical inspection and water quality test results). If recent reports are available, are they sufficient for you or will you require new inspections? Who pays for tests and inspections? Who is responsible for any damages that the system might incur in the course of inspections?
Survey Contingency • • • • • • • • • •
What is the difference between an Improvement Location Report and a Boundary Survey? Who determines what kind of survey will be required to provide full survey coverage? Should the Buyer request for the corners to be flagged? What is the difference in cost? Who pays for the survey? What kind of survey is used when the property is a condominium? When can a prior survey be used? What does the “deletion of the standard survey exception” mean? What conditions on a survey might be objectionable? When is legal assistance advisable?
Closing Pre-Closing Walk-Through • • • • • • • • • •
Will you be in Santa Fe to attend the walk-through? What are the options if you are not in Santa Fe? Have repairs been completed satisfactorily? Do you want your inspector to attend the walk-through to evaluate the completion of repairs? Was there any damage due to the seller’s move-out? What level of cleanliness should you expect? Is the contract specific on this point? If nail holes are to be patched and painted contractually, has that been completed satisfactorily? Are all personal property items that were to convey present? If personal property is purchased, a bill of sale will be created by the seller. Why is a Walk-Through Statement used? What are your options if you find unacceptable conditions?
Transferring Utilities • • • • • •
When is the best time to do this? Which transfers will you handle and which ones will the title company handle? If propane is used of the property, who pays for what is remaining in the tank? What does the contract state? If the property includes a solar power system, what documentation is desired for the transfer? If the seller occupies the property after closing, utilities will typically remain their responsibility until possession is taken by the new owner. What warranties will be transferred from the seller to the new owner?
Escrow Closing • • • • • • • • •
There are three stages to a closing: the signing of documents by buyer and seller, the buyer and/or lender providing the necessary funds and the recording of the deed. Who should be at your closing? What do you need to bring to closing? When will you know how much you need to wire to the title company and when? Must you be in town for closing? If not, how is closing handled remotely? At what stage does the buyer take ownership and possession? When will you receive keys, remotes and access to the property? If something in the house breaks shortly after closing, who is responsible?
Important Note: This Buyer’s Guide is intended to give buyers an overview of issues and process that are specific to Santa Fe purchase transactions and is based on years of real estate brokerage experience in the Santa Fe market. Every transaction is unique, and this guide is not intended to be an exhaustive checklist of every possible issue or step in the process. Buyers should raise any specific questions with their real estate broker and with their legal counsel and other professionals with whom they choose to engage.
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