WHAT IS IT AND WHY IS IT IMPORTANT IN A REAL ESTATE SALE?
You have probably come across this message when looking at homes online:
"BUYER RESPONSIBLE FOR OBTAINING C/O AND FIRE CERTS"
If you haven't bought or sold a home recently, this might not make any sense to you. So I've put together responses to the most common questions about the C/O process to shed some light on the topic.
WHAT IS A "C/O"?
C/O stands for "Certificate of Occupancy". Municipalities decided that they needed a way to make sure that residential dwellings were being kept to minimum building code standards. In other words, they wanted a way to make sure that all residential property bought and sold was suitable for habitability. So they created the Certificate of Occupancy, or C/O for short.
HOW DOES IT WORK?
Every time a home is sold, a town inspector evaluates the property and determine if there are any health hazards or safety concerns. Any “violations” the inspector finds must be corrected before the home is re-occupied by the new owner.
WHO PAYS FOR IT?
It depends. In this market there are a lot of “as-is”, short sales, foreclosures, and properties that need repairs. Many of these properties require signifnact repairs in order to pass a c/o inspection. Depending on the list of violations, obtaining a c/o can become very costly. Therefore, who pays for it it becomes a point of contention during every real estate sale.
WHY IS IT THE BUYER'S RESPONSIBILITY?
Normally buyers are only responsible for obtaining the c/o when buying foreclosures and auction sales. But because we are in a seller’s market, many sellers today would rather put the responsibliy on the buyer, even in a traditional sale.
DO YOU ALWAYS HAVE TO GET THE C/O BEFORE CLOSING?
Not always. There’s something called a conditional, or temporary, C/O that allows the buyer to correct the violations after closing. In this case, the buyer agrees in writing (usually an affidavit) that he/she will not occupy the property until the town reinspects and issues the full C/O.
WHEN DOES THE SELLER GET THE C/O?
If the home is in good to great condition, then it makes sense for the seller to get the C/O. It shows the buyer that the home is safe and habitable and worth the price. Conversely, by telling the buyer that he/she must obtain the C/O, the seller is admitting that the home needs some repairs, and this usually effects the price a buyer is willing to pay.
TIP: The insepctor checks for open permits on a property before issuing a C/O, so make sure all permits are closed out beforehand!
WHAT ABOUT THE FIRE CERTIFICATE?
Depending on the town, the fire certificate can be a separate inspection or part of the C/O. Regardless of how its set up, the point of the fire inspection is make sure the home is fire code compliant. There is no “conditional” option for the fire cert, so it’s either pass or fail. This means that if the required smoke alarms, carbon monoxide detectors, and fire extinguishers are not properly installed in their correct locations, the property will fail and it will delay the sale. The town will usually have a diagram to follow for the correct placement of the aforementioned items on each floor of the home.
TIP: ALL SMOKE ALARMS MUST BE SEALED, 10 YEAR BATTERY SMOKE ALARMS. THIS IS NOW A STATE REQUIREMENT.
SO GETTING THE C/O IS A PAIN IN THE BUTT?
It can be, for sure. how difficult it is to obtain a C/O will depend a lot on the condition of the property and the willingness of the buyer and seller to cooperate. But most importantly, having someone with experience to handle the process can be a major help.
Whether it's my buyer or seller client, I always help with the C/O. I do things like fill out and submit the application, schedule the inspection, meet the inspector, discuss violations with clients, supervise the repairs, and so on.
For the fire certificate, I first walk through the property and install smoke detectors etc where needed. Then I bring a backup kit of materials to the inspection in case I missed anything.
So if you have a good experienced realtor that knows what the inspectors are looking for, passing the c/o inspection can be easy and inexpensive.
Questions? Text me: 973-506-9866
Till' Next Time!
-Silvio / Realty 33
So I've been getting a lot of questions about "as-is" sales lately, so I want to clarify exactly what it means:
An "as-is" sale in real estate basically happens when the seller doesn’t want to make any repairs or give the buyer any credits or concessions.
It acts as a shield for sellers to protect them against giving up any money later on during the inspection period.
It also relieves them of the responsibility to make repairs, should something serious come up on the home inspection. Seems pretty straight forward right? But it’s actually much more difficult to put in practice.
5 TRUTHS ABOUT AS-IS SALES:
#1. Nobody Cares. "As-is" is usually meaningless to the buyer, because regardless if the property is "as-is" or not, the buyer can still cancel the contract if the condition of the home is not satisfactory. Plus, agents and attorneys know that once they get you deeper into the transaction, you’re more likely to give a concession for fear of losing the deal and having to start all over.
#2 It's Overused. Almost 50% of listings have some sort of “as-is” language. That’s because in a strong market, sellers will use any advantage they can to get the most favorable terms. The problem is with so many “as-is” properties on the market though, is that “as-is” winds up not meaning anything!
#3. Not Compatible with FHA. If the buyer is using a mortgage, the chances of an “as-is” transaction are slim. If it’s FHA, then it’s even more difficult. That’s because the buyer’s lender may also request repairs as a condition for the loan, and most buyers are advised against spending money on repairing a home prior to taking ownership of it.
#4. Lowers Market Value. When buyers or agents see “as-is” sale, they instantly think the home need repairs. This perception can effect the market value of the home. It will also increase the probability of getting low ball offers. You can’t sell “as-is” for top dollar, it just doesn’t work.
#5. Net More with Concessions. If your home is in good to great condition, and you list it at market value, then you will likely net more money in the sale if you make small concessions during the inspection period, rather than list “as-is” for a lower price.Yes, it can be annoying when the buyer asks for a $15,000 credit for chipped paint and a leaky faucet. But if the requests are reasonable then throwing the buyer a "bone” can get you to the closing table faster, which will also save you more money in the end.
There are many smart ways to maneuver through the inspection period, and I’ll share with you some of my favorite tricks in another article.
Till next time!
The NJ real estate market has been hot in 2018, and some home sellers are getting between 5-10 offers for their homes!
When selling a home in this market, it's important to choose the right offer. How do you know which offer is best in a multiple offer situation?
Hint: It's not just about price!
In this video I give a few tips for home sellers on how to evaluate and pick the best offer in a multiple offer situation:
1. Ask for highest & best
2. Write down and organize all offers
3. Evaluate & calculate bottom line for each offer
4. Vet each potential buyer to see who's most qualified to buy your home*
*This is the step that most realtors and "for sale by owners" miss!
I also give some advice for home buyers on how to make their offer stand out from the crowd and lock down that dream house.
1. Bring your highest and best offer
2. Use conventional financing instead of FHA loan
3. Don't ask for any seller's concessions or credits
4. Make sure your realtor follows up and gets your offer to the top of the pile
It's a great market right now but even a great market has it's challenges. Use these tips to help make the best decision when buying or selling real estate.
Questions? Text me: 973.506.9866
At Realty 33, We tap into 25+ years of experience and market know-how to help our clients make streetwise real estate decisions.