BUYERS CLOSING PROCESS EXPLAINED
The real estate purchase process in New York can be difficult. It is not only my duty to protect your interests handling the legal aspects, but to make this process understandable to you. Here is a broad guide for purchasers:
STEP 1 – MAKE THE OFFER
The first step is to find the property of your liking and make a verbal offer. Under New York Law, a contract for the sale for real property must be in writing; thus a verbal offer creates no binding obligation upon either party. If and when your offer is accepted, move on to Step 2. If your offer is rejected, either make a counter-offer or move on to a different property.
Do not put anything in writing without an attorney as this may unintentionally create a binding contract. Often times the real estate agent will request that you sign an “offer” or even a “contract.” Do not do so without consulting an experienced Real Estate Attorney.
STEP 2 –RETAIN AN ATTORNEY
Once your offer is accepted, it is time to hire a real estate lawyer. If there is a realtor(s) on the transaction, they generally provide a "Deal Sheet" outlining basic terms such as price, buyers and sellers name, tentative closing date and other contingencies such as getting a mortgage. The attorneys must guide the parties, delineate deal specifics, provide and protect their clients from risks, and generally handle all the legal paperwork and closing. Have the deal sheet forwarded to WashLaw so that we can promptly reach out to Seller's Attorney to request a contract.
When researching attorneys, ensure your counsels' qualifications. Harold Washington, Esq. has personally and successfully handled residential real estate closings.
STEP 3 – HOME INSPECTION
In general, all contracts provide that the seller is selling the house to purchaser in “As-Is” condition. Simply put, the purchaser assumes the responsibility for condition of the property (after closing) and any repairs that need to be made. Our firm always recommends hiring an unbiased and unrelated licensed home inspector/engineer to inspect the house for any defects. It is recommended purchaser view the property along with the inspector to ensure they are checking and turning on every system (heating, cooling, electrical and plumbing) including flushing toilets, turning on showers to gauge water pressure, etc. The inspector generally offers additional inspections such as termite/wood infestation, mold, asbestos, etc. WashLaw can discuss specific areas of concern on a given property to guide what additional inspections may be necessary. The inspection results have some limitations though as an inspector can only view a house on its surface or what is conspicuous.
On a condo or co-op, an inspection is optional as the inspection is limited to inside the Unit and excludes operational systems of the building. It is recommended that the inspector search for leaking faucets, toilets, exposed electrical hazards, bed bugs, common issues in co-op and condos.
If the inspection reveals any defects, there are four (4) options:
· Negotiate with seller to reduce the Purchase Price,
· Request seller make repairs prior to Closing,
· Accept the house “As-Is” and make the repairs yourself, or
· Cancel offer.
In the event seller consents to make own repairs, please advise your attorney to address these specific items in the contract to ensure seller is legally obligated to perform. Never rely on verbal agreements or promises to repair item by a seller. Never rely on verbal promises by seller to do anything including payments of rent, additional monies, etc. as these items must be fleshed out in writing to be legally binding or evidence for litigation.
In some instances, a home inspection may be unnecessary or unwarranted. Although WashLaw cannot advise a client against an inspection, there are times when an inspection can hinder a transaction. WashLaw knows that many investors dealing in dilapidated homes/short sales, buyers in aggressive bidding wars on hot properties, or buying a property which is intended to be renovated, knocked down and rebuilt may not warrant a home inspection. Conveying your investment objective to your attorney is key in securing a transaction and effective negotiation.
STEP 4 – CONTRACT REVIEW, EXECUTION, TENDERING WITH DOWN PAYMENT
New York practice is for seller’s counsel to prepare the Contract of Sale. It is also practice that sellers use The New York State Bar Association Residential Contract of Sale, which delineates most aspects of a sale and tends to be fair to both parties. Transaction specifics are additionally addressed in 1 or 2 Riders. WashLaw will call you to schedule an in office appointment to review specifics. Telephone and electronic execution is also possible upon request. In person, we address necessary contract additions and you execute six (6) copies of the contract. You and I retain one copy each and 4 are sent to Seller's counsel for execution along with a check for the downpayment. Assuming the seller agrees, he/she signs all four (4) copies of the contract and mails the firm back two (2) fully executed copies.
Upon receipt, WashLaw will send you or your mortgage broker a copy to begin the mortgage application process.
Note, the downpayment on a Contract can range from $500.00 to 10% of the Purchase Price. Assuming the contract has a mortgage commitment contingency, it is your responsibility to timely apply for a mortgage and our firms duty to ensure that your down payment is protected/returned from Sellers counsel in the event you do not qualify.
STEP 5 –MORTGAGE APPLICATION
Obtaining a mortgage commitment must be within mortgage commitment period guildelines as specificed in the contract. Typically, these can range from 30-45 days but specific transactions may require shorter or longer time frames. It is crucial to submit all required mortgage documentation to your lender to ensure compliance with contract. Additionally, different lenders have different lending programs geared towards types of loan products and types of borrowers. WashLaw has some experience dealing with and knowledge about most local NY Lenders, however you will be obligated to shop around for a lender that works best for you. Applying with the correct lender is key to making the process smooth, successful and timely.
STEP 6 – BOARD PACKAGE (COOPS & SOME CONDOS)
Most co-ops and some condos require board approval requiring a good faith effort by the purchaser to submit a board application with processing fee for the board to approve or deny the purchase. Some building board of directors will not review an application until the Purchaser has received a mortgage commitment letter. Some boards also only meet once a month which can affect timing of certain contract contingencies and closing.
STEP 7 – SCHEDULING CLOSING
To schedule a closing, the following items must be satisfied:
The seller’s have cleared all title issues appearing in purchasers title report,
The seller's have completed any/all remedial work to the property or other items required by contract,
Approval issued by the co-op or condo board (if applicable),
Purchasers Lender gives WashLaw a “clear to close”.
Schedule a closing at mutually agreed time and location (usually seller's attorney office or purchasers lending attorney/institution).
STEP 8 – PRE-CLOSING WALK THROUGH
Prior to closing, a purchaser should do a “walk-through” to inspect the property to confirm that the property is in the same condition at closing as it was in when the contract was signed. Please conduct the walk-through yourself; Do not rely on your realtor. Oftentimes, sellers remove sentimental light fixtures, chandeliers or window treatments last minute. Only you would recognize if the items were removed or anything has changed.
STEP 9 -- THE CLOSING
At closing, the deed conveying ownership/title to the property and keys (Stock and proprietary Lease for a Co-op) are exchanged for the balance of the contract sales price. The following individuals usually attend the closing: (1) Purchaser, (2) Seller, (3) Buyer’s Counsel, (4) Seller’s Counsel, (5) Purchasers' Bank Attorney, (6) Seller’s Bank’s attorney (in co-op transactions only), (7) Title Closer (non co-op transactions only), (8) all real estate brokers, and (9) Managing Agent (in co-op transactions only). Purchasers and Seller counsel generally review closing adjustments (real estate tax, water/sewer bills, rents, etc.), ensure all monies are paid to appropriate parties, and ensure all contract terms are complied with. Both attorney will agree on these sums and provide a closing statement detailing all adjustments, closing expenses, and a chart of disbursements.
STEP 10 -- POST CLOSING
After closing, documents evidencing title/ownership to the property are recorded timely at the appropriate county clerk (on non-co-op transactions). Additionally, both parties are obligated to switch over utility accounts as of the date of closing. Please ask your utility provider to rate your bill based on an actual final reading to avoid estimated use appearing on your bill. In the event of a post closing escrow for possession or repairs, your attorney will follow up with you to ensure timely execution and delivery of the property in vacant and clean condition. Additionally, we retain copies of all files in case you request them for tax season or future needs.