Closing a home purchase

tymrtn Active member

41POSTS

8 years ago

Hey there,
My wife and I are trying to close on a property in Condado. Unfortunately we're not act20/22 investors with millions of $, so we also have to get financing. So far we've had some promising progress.

Our lawyer indicates that we will have to cover 0.5% of the purchase price in notary fees. This seems exorbitant to us. Can that possibly be right?

Tyler

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LarryJohnsonPR Active member

63POSTS

8 years ago

Hi Tyler,

I'm a local pr mortgage banker and that is very accurate.聽 on (mortgaged) financed transactions the buyer is responsible for the mortgage deed notary fees. The standard is either 1% or .5%. The seller will typically handle the notary fee for the sales deed unless you are buying聽 a bank owned property.

The tough part for me to swallow still is the recording fees. In Pr they are based on the price of the house not the number of pages being recorded but on the flip side..home prices are great and property taxes are basically non existent.

Congrats it sounds like you are almost done!!

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tymrtn Active member

41POSTS

8 years ago

Thanks Larry! How do you determine if it鈥檚 0.5% or 1%?

We also asked for a sellers concession in our offer. As long as it appraises above the sales price value including the concession, do you think we鈥檒l have any problems closing the mortgage?

LarryJohnsonPR Active member

63POSTS

8 years ago

The notary fee for your mortgage is based on your loan amount.聽 You can always ask for a seller concession towards closing聽 and yes if the appraisal comes back above the list price the seller's net shouldn't be impacted much (depends on a few other factors though) and they may be more willing to accommodate.

Financing in PR聽 is somewhat of a different animal compared to the US but as long as the property doesn't have legal (title) issues the process should go relatively smooth.

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tymrtn Active member

41POSTS

8 years ago

Thanks again Larry! How do I find out about the legal title issues? Is this something that only the notary/lawyer can do?

LarryJohnsonPR Active member

63POSTS

8 years ago

It depends.聽聽If you are doing direct owner financing then yes typically the attorney is the one that will order the title search.聽 If you are trying to obtain financing through a bank or independent mortgage company ( I work with an independent mtg company ...commercial banks in PR are a whole different story) then they would handle this service.聽 Cost for this ranges from $50-100.

curarico Active member

26POSTS

8 years ago

what do you mean when you say that property taxes are almost non existent? what does the crim do?

tymrtn Active member

41POSTS

8 years ago

CRIM is about 0.5% compared to about 1.3% in some metro areas in the US. Lots of properties seem to get exemptions entirely, so 0% CRIM.

LarryJohnsonPR Active member

63POSTS

8 years ago

I simply meant they are low cost.聽 Plus if the buyer will be occupying the property as a primary home they are provided an exemption from CRIM up to a certain amount. The exemption generally ends up covering the tax amount in its entirety. Do note that this depends on the actual聽 taxed amount of the property and each municipality on the island has its own factor to determine the amount.

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curarico Active member

26POSTS

8 years ago

#10

Thank you, I will love to get in touch with you when we return to PR in a few weeks

LarryJohnsonPR Active member

63POSTS

8 years ago

#11

Sure thing.聽 Anytime

tymrtn Active member

41POSTS

8 years ago

#12

If we are purchasing this home for our primary residence, we can get a CRIM exemption? How do we do that?

LarryJohnsonPR Active member

63POSTS

8 years ago

#13

This is where a good real estate attorney comes in very handy as ultimately it is their responsibility to do this for you.聽 The exemption comes into play every January. So if you close on a property prior to January, primary home or not,聽 you are required to pay the full amount of the property taxes due from the time you take ownership.聽

There is a special request form that your attorney should turn into the CRIM a few day after you close.聽 Here is link to view the document if you want to see what it looks like:

Even if you feel you have a great attorney you will want to follow up with his/her office about a week after you close to request a copy of the form w/ a stamp from the CRIM on it as evidence that it was turned in.聽 Once this process has been completed you should be all set w/ the exemption but still always good to keep record of the document in the event you receive an unexpected bill.

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tymrtn Active member

41POSTS

8 years ago

#14

Hey Larry, another question for you. In the purchase option agreement the inspection clause reads as follows:

Property Inspection. The Buyer may inspect the Property before the Closing, in accordance with P.R. Law 93 of May 16, 2006. If the Buyer does not find defects in the Property before the Closing, or if the Buyer finds them but does not notify them in writing to the Brokers before the Closing, it will be deemed that the Property is in satisfactory conditions to the Buyer. The Buyer will continue to pursue the purchase of the Property only if the property's inspection report confirms there are no hazardous conditions that may adversely affect the health, safety and welfare of the Buyer. The purchase contract will be cancelled and the Good Faith Deposit will be refunded in full to the Buyer if any of these aforementioned circumstances prevail. The Buyer will have ten (10) business days from the Effective Date of the purchase contract to carry-out at its expense the inspection of the Property by a Property Inspector licensed by the Commonwealth of Puerto Rico and to hand the resulting report to the Brokers within five business days upon the inspector鈥檚 visit to the Property.

Seems like the inspection won't provide any opportunity to renegotiate without an issue impacting the health and safety of the buyer. I would be more concerned about appliances that aren't working, especially hot water heaters, etc. Though the building is only 9 years old.

We pushed back on this clause but the seller says he's already been quite flexible (he has). Is this critical?

Thank you in advance for all your help and insights!

LarryJohnsonPR Active member

63POSTS

8 years ago

#15

In my experience most properties sold here in PR are "as is". It's always good to have an inspection for your own personal peace of mind but very seldom are they used as a means for termination of the contract.聽 As for appliances, I'm assuming the utilities are connected so you can do at least see the condition they are in currently, but not sure if there is enough time for the proper testing to get completed in the allotted timeframe. As for hot water heaters I would advise switching that out any way if it's not a聽 tankless one.聽 There are many efficient inexpensive options here for this.

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mrtibbs Active member

65POSTS

8 years ago

#16

Larry,

I must say you are on top of your game and a wealth of knowledge! Thank you so much for the detailed information we all are learning from to point us in the right direction to make better purchasing decisions. You truly are appreciated! I have taken notes on everything you've stated for when we make our cash purchase.

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ReyP ViP

5509POSTS

8 years ago

#17

LarryJohnsonPR wrote:
In my experience most properties sold here in PR are "as is". It's always good to have an inspection for your own personal peace of mind but very seldom are they used as a means for termination of the contract.聽 As for appliances, I'm assuming the utilities are connected so you can do at least see the condition they are in currently, but not sure if there is enough time for the proper testing to get completed in the allotted timeframe. As for hot water heaters I would advise switching that out any way if it's not a聽 tankless one.聽 There are many efficient inexpensive options here for this.

You are right, but ...... The offer contract and the rules are up to the contract. You can insist to change the standard offer contract to meet your needs unless the seller disagrees. You can back out of the deal and retain your down based on the conditions set forth in the contract you modified including on the day of signing. You could have the right to inspect the property hours before the signing and if anything is not as agreed, you can walk out and demand your money back. It all depends on the offer contract, so it is up to you before you put money down to take the offer contract, discuss it with your lawyer, make changes, then discuss it with the seller.聽 If you two agree, then sign and provide the assurance money. Most contract for selling and for renting protect mostly the owner.

If you can protect yourself, use your lawyer. Also if the closing is delayed past the end date of the contract due to no fault of your own, you can get your money back. I walked out of the deal and got my money back because the property measurements and the CRIM did not agreed and they had not straight it it out by the deadline in the contract.

LarryJohnsonPR Active member

63POSTS

8 years ago

#18

Thanks for your kind words..I'm always glad to help on topics I have a bit of knowledge on.聽 Sometimes for people new to the island it can be difficult to find answers beyond the familiar phrase of聽 "that's just the way it is here in Puerto Rico" so if i ever have an opportunity to elaborate more for someone I do my best as I was once in the same position when I first arrived here and was left with frustration at times when answers were difficult to come by......but on many occasions you just have to live with " that's just the way it is in PR" and after a while you get use it and learn when and where to pick your battles..

I wish you ( and all others that are preparing to do the same) much success with your transition to the island.

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tymrtn Active member

41POSTS

8 years ago

#19

Hi again Larry. I'm back with more questions! We finalized the purchase option contract and are now at the point where I will be sending the deposit and setting up the appraisal and inspection. Reviewing the agreement, I noticed it says "It is also contingent on the bank鈥檚 appraisal being the same or higher than the purchase price." Does this mean if we hire our own appraisal it won't be useful for renegotiating? Also, must we then wait for the bank to get their own appraisal?

LarryJohnsonPR Active member

63POSTS

8 years ago

#20

Yes, that is correct.聽 The bank will always handle the appraisal piece of the process.聽 I have had cases where a seller has had an outside appraisal done to help in determining the list price, but since you are financing the purchase I would not advise getting your own personal one as it would be overkill at this point.

I would though check to see if the title study has been received yet and if so, pass it by your attorney to see if there are any noticeable issues that could cause delays with the transaction (plus most appraisers need the title聽 before they release their reports anyway).聽 Also follow up with the bank to get a stance on where things are with your file (verifications of income etc) The appraisal fee is non-refundable so before actually having the bank do it, it's good just to check the overall pulse of how everything else is going.

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