Describe what a real estate attorney does for a seller of New York real estate
The seller’s attorney typically drafts the proposed contract, sends it to the prospective purchaser’s attorney, and with the seller’s assistance negotiates and finalizes the contract. The seller’s attorney also helps the seller to weigh an offer’s plusses and minuses, helps resolve any title issues, handles the escrow deposit, calculates closing adjustments, and coordinates the closing with either the purchaser’s attorney or the coop or condo managing agent. The seller’s attorney also attends the closing to explain the closing documents and closing adjustments to the seller and guide the seller through any last minute issues which may arise.
Describe what a real estate attorney does for a purchaser of New York real estate
The purchaser’s attorney typically conducts what is called “due diligence” on the building and advises the purchaser about relevant information such as the building’s financial history, complaints by or about other owners in the building, and issues involving building management. The purchaser’s attorney also, with the purchaser’s assistance, negotiates and finalizes the contract with the seller’s attorney, orders and reviews a title report (for a coop, a judgment and lien search) to make sure that the purchaser gets clear title, and coordinates matters with the board and managing agent. The purchaser’s attorney also attends the closing to explain the closing documents (and loan documents if there is financing) to the purchaser and guide the purchaser through any last minute issues which may arise.
Describe the main concerns I should have when working with a real estate broker
• Commission agreements should be in writing; you should be aware that you can negotiate the amount of commission payable to the broker.
•When a buyer is found, the broker may ask you to sign a binder.
• You should have an attorney review any documents a broker asks you to sign, including a commission agreement, because sometimes there are clauses in the broker’s agreements that have legal consequences between you and the buyer.
• You also need to ask whether the broker is going to list your property on the Multiple Listing Service (MLS), or whether the broker will be the exclusive agent. If the broker is the exclusive agent, then he or she has the right to find you a buyer, without opening up the process to other “selling brokers”; this may limit the number of buyers who will have access to your sale.
• Even though the broker is representing your interest rather than the buyer’s, I recommend that you obtain your own lawyer, and not engage a lawyer recommended by the broker. It is important that your attorney’s loyalty is only to you.
Sellers of Real Estate in New York
Among common topics real estate sellers ask are the following:
Describe the documents that I need to give to my attorney
You should have copies of your deed, your latest real estate tax bill, your survey and, if available, your title report. If you have a mortgage, you should give copies of current statements to your attorney to obtain a payoff amount in time for the closing.
Describe what your attorney will do after an agreed sales price has been reached
As your attorney, I will prepare the contract of sale for the purchaser’s attorney to review. The contract will be negotiated, so that both sides are satisfied with the transaction’s terms and conditions. Once a formal agreement has been reached, the purchaser and you will sign it, and the down payment will be placed in my escrow account. The purchaser usually gets 45 days from contract to obtain a mortgage commitment. If no mortgage commitment is received in that time, the purchaser can ask for an extension of time. If the extension is not given, the down payment will be returned to the purchaser and the transaction is ended.
If, however, the mortgage commitment is timely received, the parties will proceed to closing.
Before closing, the purchaser’s attorney will order a title report, which I will thoroughly review. I will address any title issues before closing. I will order a payoff statement for your existing mortgage, and will coordinate a closing with all parties. In addition, at the closing I will make sure that you receive all amounts due to you on account of the purchase price and adjustments.
Describe some title issues that may arise
The contract will require that the seller deliver a certificate of occupancy for the house, garage and other structures added to the house, such as a deck, or shed. In the absence of a required certificate of occupancy or certificate of completion, the seller may be required to obtain these before closing. In that case, an attorney or the purchaser’s lender will typically hold money in escrow to make sure that the certificate is obtained in a specified time period.
Other title issues can involve judgments against either or both parties, which must be satisfied at or prior to closing. Also, any violations or liens directly affecting the property will have to be satisfied. I will address and resolve any other title issues which may arise.
Explain what adjustments are
Adjustments are credits or debits made at closing to either the seller, the buyer or both, depending on the nature of the item being adjusted and the related period to which it relates, such as:
•Real estate taxes; these are pro-rated, with the seller either receiving or giving a credit, depending on whether the taxes have already been paid, or not yet due but already a lien.
•Rents, if applicable.
•Water charges.
•Remaining oil, if the property contains an oil tank; a reading should occur a day or two before the closing.
•In New York City, a final water meter reading must be done near to the closing date, to enable the transfer of the account to the purchaser and the final bill to be paid by the seller. Utility companies must be called to transfer ownership as of closing.
Describe what happens if I am not ready to move by the scheduled closing date
The normal and recommended practice, for a variety of reasons, is for a seller to give a purchaser vacant possession, assuming that all issues were resolved at closing. Sometimes this condition cannot be met when trying to coordinate a move into another house and a closing date on your purchase. Occasionally, the parties agree to what is termed “post-closing possession”, usually for only a few days. This involves entering into an escrow arrangement, in which your attorney holds some money in escrow until you vacate the property. In this situation, closing adjustments will be made as of the date that possession is given, and the seller also must credit the purchaser with daily mortgage interest from closing through the date that possession is given. Also, the purchaser could claim that one or more appliances are not in working order, or that the property was not in broom-clean condition upon transfer of possession.
Buyers of Real Estate in New York
Among common topics real estate buyers ask are the following:
Describe what I need to know when working with a real estate broker
When working with a real estate broker, the most important thing to understand is that typically the broker represents only the seller’s interest. The broker must have you sign a disclosure form to inform you whose interest the broker represents. You should read any disclosure carefully before signing it, and understand which party is being represented; usually the broker is a “selling broker” who has located properties on the Multiple Listing Service. The selling broker finds potential purchasers to bring to the seller, and the seller pays the selling broker’s commission. This helps a buyer, who generally does not have to pay any part of a selling broker’s commission. If you want a broker who is strictly loyal to your interests, however, you must locate a “buyer’s broker” and enter into a contract with that broker. A buyer’s broker may charge you a fee, or arrange with the seller for the seller to pay the buyer’s broker’s commission.
It is very important to remember that if a broker asks you to sign any document, such as a binder, you should insist that your attorney first review the document before you sign. It may include legally binding language; if you sign without prior attorney review, you may be unable to have that language changed later.
Also, if you give a check to a broker as a deposit on a binder, this is technically supposed to obligate the seller to move forward with your deal. If you later find another house, you may be unable to get a refund of your binder check.
Finally, if a broker suggests that you use the broker’s recommended attorney or mortgage broker, I strongly suggest that you first do your own research or get a friend’s recommendation. Your goal should be to have your lawyer or your lender be independent and loyal only to you.
Describe what I need to do before signing the contract
If you plan to have an engineering inspection of the property, it should occur before the contract is signed. Unless it specifies otherwise, a contract will say that the property is being sold in “as is” condition (except that the plumbing, heating and electrical systems will be in working order at closing and the roof will be free of leaks). While the buyer may not succeed in renegotiating the sale price based upon the engineer’s report, if major problems exist which are not included in the sale price, the buyer can ask the seller to make repairs or give the buyer a credit at closing. After the buyer receives the seller’s reply, the buyer can decide whether to go forward with the purchase or not. In a buyer’s market, a seller may not want to risk losing the buyer. At a minimum, an engineering inspection is needed to confirm that the property is structurally sound, or whether it has significant problems you a buyer might not want to address. As a buyer, if a house is undervalued or it is being sold in a seller’s market, you must be willing to lose the deal if the seller locates another buyer willing to buy the house “as is”.
A buyer also must meet with the lender or mortgage broker to confirm that the buyer will have enough money available at closing to complete the transaction. A buyer also must be aware of various closing costs, which typically include a title search, title insurance premiums for the buyer and the lender, termite inspection costs, mortgage recording charges, mortgage tax, deed recording charges, lender “points”, lender legal fees and processing charges, appraisal fee, application fee, and other miscellaneous fees that the lender will deduct from your mortgage.
In addition, as the buyer, you may have to pay the seller adjustments for real estate taxes already paid by the seller, but which cover a period of time after the closing. The lender will escrow an amount to cover future real estate taxes, and may ask the title company to pick up the next quarter’s real estate taxes if they are coming due soon. The buyer will also have to pay “per diem”, or a daily interest amount, from the closing date to the end of the closing month. The buyer’s mortgage broker or lender is required to give the buyer a “Good Faith Estimate of Closing Costs”, which the buyer should review with the buyer’s attorney before signing the contract.
The buyer also needs to know the amount of the down payment that the buyer must make, and how much the buyer needs to borrow if a mortgage is needed. Upon receiving a loan commitment letter for the amount of the mortgage specified in the contract, the buyer must proceed to closing. If the buyer defaults on the contract after receiving the loan mortgage commitment, the buyer will forfeit the down payment. It is thus best as a buyer to try to negotiate as low a down payment as possible. Some sellers, however, will insist on a 10% contract deposit.
Describe what needs to be done after the contract is signed
After both parties sign the contract, you should give a copy to your lender or mortgage broker to start the mortgage application process. The contract requires that you make prompt application, so submitting the application to your lender is important to avoid breaching the contract. It is advisable that a thorough engineering inspection and a termite inspection be done before the contract is signed. If termites are found, the seller can either treat any infestation, repair any damage, and provide a one year warranty or cancel the contract.
Tell me when a title report should be ordered
The purchaser’s attorney usually orders a title report promptly after contract signing, in order to address any issues as soon as possible and not delay the closing.
Tell me if a new survey should be done
Unless there is a very recent survey, I recommend that a new survey be ordered for each purchase. A survey will indicate if any title problems exist, which must be known before closing. Title insurance will “except” any issues that would have been shown on an accurate survey; this means that if a fence encroaches onto your property, and a new survey would have shown this, it is not something that title insurance would ordinarily cover.
Describe any title issues that I should be concerned about
If a seller does not have a Certificate of Occupancy or Certificate of Completion for existing buildings or additions to the property, the seller must either obtain such certificates or put money in escrow until they are obtained. While a seller in this event has the option to cancel the contract, this usually does not occur. A purchaser can also negotiate with the seller to take title to the property without the certificate(s), but the purchaser must be aware that the lending institution may require that the certificate(s) be obtained before the lender will lend; in addition, such a purchaser will be faced with the same issue in the future when the purchaser wants to sell. The purchaser in such event may also be exposed to receiving violations from the municipality for the illegal structure or structures.
At or before closing, all title issues are resolved by the parties’ attorneys and the title company. For example, the seller must pay off and satisfy any outstanding mortgages, judgments or liens against the property.
Describe what needs to be done to prepare for the closing
A walk-through of the premises needs to be done approximately 24 hours before the closing. You need to check the appliances, the plumbing, heating, lighting, the ceilings for any leaks, and for any damage done by the move-out, or any major change in condition from when you first saw the premises. Any problems need to be reported to your attorney as soon as possible. If you do not tell your attorney at or before the closing, once you receive the deed, your opportunity will be gone. If there is a post-closing escrow agreement, and the Sellers are remaining in the premises, then you will have another opportunity to advise of any problems. However, do not depend upon this and fail to conduct pre-closing inspection.
You need to go over your closing costs with your attorney, including the title bill, what is being deducted from your mortgage, and the amount you will need to bring, in the form of a certified check, to pay the seller the balance owed, after deducting the down payment.
Describe what I should expect to happen at the closing
At the closing, I will represent your interests, including a review of all loan documents that you will sign, to make sure that the interest rate and other terms match what you were promised. All title issues are resolved, and transfer documents are signed by all parties. The purchaser receives keys to the property, unless the seller is remaining in possession pursuant to a post-closing escrow agreement. In that event, the seller’s attorney will hold money is escrow; if the seller does not vacate within the specified time, the seller must pay an agreed daily penalty until the seller vacates. Adjustments will be as of the date that possession is given to the buyer, who will also receive daily mortgage interest.
Describe what happens after the closing
After the closing, you will receive a closing statement outlining the monetary transactions at the closing, along with a copy of pertinent closing documents. You will also receive a title policy from the title company. Any post-closing escrow agreements will be monitored until the appropriate party completes them.
Describe the main differences between a condo and a coop
In New York City, the two most common types of real estate ownership are condominiums and cooperatives. Buying a condominium unit is similar to buying a house. A house buyer gets a deed for the entire property at closing and pays (directly or through a lender) that buyer’s real estate tax bill. Like a house buyer, a condominium unit buyer also gets a deed (called a unit deed). The condo unit buyer, however, buys both the physical space of the unit plus a percentage of what are called the building’s common elements. Common elements typically include hallways, driveways, gyms and lounges. After closing, condo unit owners pay a monthly “common charge” determined by the Board of Managers, covering the physical maintenance of the building’s common elements plus real estate taxes on the unit. The condo unit owner can deduct from the unit owner’s taxable income the real estate tax portion of the common charges.
A cooperative apartment is a hybrid form of home ownership, combining elements of pure real property (a proprietary lease giving the buyer the legal right to live in the apartment) and personal property (a stock certificate, making the buyer a shareholder in the apartment corporation which owns the building). The specific number of shares allocated to each apartment reflects the relative size of the apartment. After closing, coop apartment owners pay a “monthly maintenance” charge determined by the Board of Directors, covering the apartment owner’s proportionate share of the building’s operating expenses (for example, heat, hot water, insurance, mortgage payments on the building, salaries and real estate taxes). The cooperative apartment owner can deduct from such owner’s taxable income a portion of the monthly maintenance payments.
Describe what a real estate attorney does for a condo or coop seller
Generally, the seller’s attorney drafts and sends the contract to the prospective purchaser’s attorney, and negotiates and finalizes the contract. The seller’s attorney also helps the seller to determine the relative plusses and minuses of each offer. The seller’s attorney also helps to resolve any title issues, maintains the escrow deposit, calculates closing adjustments, and coordinates matters with the coop’s managing agent (typically but not always the transfer agent) or condo board’s managing agent. The seller’s attorney also attends the closing, in order to guide the seller through the closing documents and address and resolve any last minute issues which may arise.
Describe what a real estate attorney does for a condo or coop purchaser
Generally, the purchaser’s attorney performs what is termed “due diligence” on the building and tells the prospective purchaser about relevant facts such as the building’s recent financial history, complaints from or about other owners in the building, and problems involving management. The purchaser’s attorney also negotiates and finalizes the contract, orders and reviews a title report (or a judgment and lien search in the case of a coop) to make sure that the purchaser receives clear title, and coordinates matters with the managing agent. The purchaser’s attorney also attends the closing, in order to guide the purchaser through the closing documents and address and resolve any last minute issues which may arise.
Tell me what to expect to pay as closing costs in New York City, Nassau and Suffolk
In New York City, buying a home (regardless of type) involves a variety of aspects beyond merely providing the contract deposit (usually 10% of the sale price). Other closing costs can cover things such as title charges, owner’s and lender’s title insurance policy premiums, homeowner insurance policy premiums, recording fees, engineering and survey inspection charges, and lender fees. Some applicable closing costs include:
Mortgage recording tax (1.8% of the mortgage amount when the purchase price is below $500,000; 1.925% of the mortgage amount when the purchase price is $500,000 or more);
“Mansion” tax (1% of the gross purchase price when the amount is $1,000,000 or more, usually payable by the purchaser);
Bank fees, typically including origination costs, fees and charges for appraisal, underwriting, application, bank’s attorney, interest and escrow. Title fees usually include the cost of departmental searches, real estate tax searches, recording fees, survey costs and the costs of owner and lender title insurance policies.
In New York City, the seller is the party ordinarily responsible to pay real property transfer taxes to both New York City and New York State. For residential properties sold for $500,000 or less, the New York City transfer tax rate is 1% of the gross sale price; the rate is 1,425% if the gross sale price exceeds $500,000. For commercial properties sold for $500,000 or less, the New York City transfer tax rate is 1.425% of the gross sale price; the rate is 2.625% if the gross sale price exceeds $500,000. The New York State transfer tax rate for 1-3 family dwellings and condo and coop units is $4.00 per $1,000 of gross consideration; the same rate applies to commercial properties.
In Nassau County, the seller is the party ordinarily responsible to pay real property transfer tax to New York State. The transfer tax rate for 1-3 family dwellings and condo and coop units is $4.00 per $1,000 of gross consideration; the same rate applies to commercial properties. If the purchase price is $1,000,000 or more, the purchaser is usually responsible to pay 1% of the gross sale price as a “mansion tax”.
The Nassau County Legislature has approved an increase to the Tax Map Verification Fee Letter (TMVL) from $225 per letter to $355 per letter. The fee for the TMVL is paid to the county assessor’s office and is required on all instruments filed with the Nassau County Clerk’s office pertaining to title or land.
Describe what the process of seeking coop board approval involves, and how that differs from a condo
All coop purchasers must submit an application for approval by the board of directors, who govern the apartment corporation. While each coop has its own application, the board will usually require detailed financial information (copies of income tax returns, bank statements, a questionnaire describing all assets and liabilities), employment information, and personal background information. Prospective coop purchasers will also need to submit personal and professional references, and typically must participate in an interview.
Condominiums generally do not have such an extensive application; an application, however, must still be submitted to the board of managers, which governs the condominium. The evolving practice in recent years is that condo boards more frequently require an application similar to that required by coops. It is extremely unusual for a condo board to reject a prospective purchaser, since most condominium by-laws only grant the board a limited option: either timely exercise a right of first refusal (in which the condo itself agrees to buy the unit on the same terms and conditions as exist in the contract of sale) or agree to waive that right by granting what is called a waiver of right of first refusal.
