Real Estate Attorneys
Bronx, Westchester & White Plains, NY

PROTECTING YOUR INTERESTS FROM CONTRACT TO CLOSE

Buying or selling a home will be one of the largest financial transaction you’ll ever partake in.

A high-value investment such as this requires an experienced real estate attorney to protect your interests at every phase of the process. In New York state, it is custom for both buyers and sellers to be represented by attorneys.

NY attorneys ready to help you with your Westchester real estate closingReal property law is extremely complex and requires a sophisticated knowledge and understanding of the “fine print.” If you sign a contract before seeking legal advice, you risk serious financial consequences.

To avoid any potential negative pitfalls, it’s imperative to contact us before you sign a contract.

The attorneys at the Law Office of David J. Babel Esq., P.C. have over 50 years of combined legal experience and are fully equipped to handle any problems that may arise.

Eastchester based lawyers for real estate closings in Westchester, Bronx and throughout the NY area

We are committed to making sure your transaction goes smoothly so your purchase or sale of a home is an enjoyable and rewarding experience.

Here are just some of the services we provide:

  • Draft or review your sales contract
  • Negotiate the real estate agreement
  • Review your lending documents
  • Search and clear title
  • Survey review
  • Attend the closing and review all the papers you will be required to sign

COMPETENT DRAFTING, NEGOTIATING AND REVIEW OF THE PURCHASE AND SALES AGREEMENT

Our role as your attorney usually begins after a mutually agreed upon offer has been accepted by the seller.

  • If we are representing the seller, we will draw up a legally binding contract called a Purchase and Sales Agreement (P&S), which will outline the terms of the purchase.
  • If we are representing the buyer, we will carefully review the document before giving the green light to sign.

Real estate contract attorneys in Eastchester.  Also serving Westchester, White Plains, the Bronx and throughout the New York area

ITEMS INCLUDED IN THE CONTRACT

  • Final Sales Price
  • Earnest Money Deposit
  • Closing Date
  • Contingencies of Sale
  • Title Search/Examination
  • Title Insurance Company
  • Title Condition

FINAL SALES PRICE

The purchase price agreed upon by the buyer and seller. It is subject to change during negotiations per any problems with the home.

EARNEST MONEY DEPOSIT

Dollar amount of deposit and instructions on making the deposit.

Depending on your financing, your deposit can range from roughly 3.5% to 10% of the contract purchase price.

CLOSING DATE

On this day, the purchase is completed, the transfer of property is recorded, and the seller receives payment.

CONTINGENCIES OF SALE

In order for the home purchase to be completed, certain contingencies must be met.

INSPECTION CONTINGENCY

New York real estate attorneysThis contingency allows the buyer to have the home inspected before going ahead with the purchase. Inspections will look for defects or malfunctions in the building’s structure, systems, and physical components, such as the:

  • roof
  • plumbing
  • electrical and heating/cooling systems
  • drainage
  • floor surfaces and paint
  • windows and doors
  • presence of radon, pest infestations or dry rot and similar damage.

We will review the inspection reports, and if representing the buyer, will advise them on what they can ask for. Then we can renegotiate with the seller to repair or offer credit.

If the damage is severe, you can back out of the purchase without losing your earnest money deposit.

If we are representing the seller, we will review the buyer’s requests and consult with guidelines pursuant to the contract.

FINANCIAL CONTINGENCY/MORTGAGE COMMITMENT

Most buyers secure a mortgage loan from a lending institution to finance a substantial portion of the purchase price. We can help the buyer by working with their mortgage company to make sure requirements are met so the underwriter will grant the loan.

To protect buyers in the event financing does not get approved, we can add a mortgage contingency and mortgage commitment date to your offer, which will protect your earnest money deposit from being lost to seller.

A mortgage commitment is a letter from the lender that commits to providing the buyer a mortgage loan for a given property.

To protect sellers, we will propose a deadline to the buyer for securing financing so that we can terminate the transaction and pursue another purchaser if the lender declines the loan.

APPRAISAL CONTINGENCY

This contingency allows the buyer to back out of the deal if the home’s appraisal reveals that the home is not worth as much as the buyer intended to borrow and pay for it.

HOME SALE CONTINGENCY

Less common than the other contingencies listed above, this contingency gives the buyer the right to back out of the deal if they are unable to sell their current home.

ADDENDUMS TO PURCHASE AND SALES AGREEMENT

If the buyer or seller needs to make any changes to the original P&S document, we can renegotiate and prepare an addendum to incorporate the necessary changes.

Examples may include:

  • a buyer’s request to have the seller pay part of the buyer’s closing costs
  • or that the seller include appliances or furniture not originally included in the home’s sale price.

SURVEY RECOMMENDATION

Our real estate attorneys can help setup your surveyUnless there is a fairly recent survey of the premises as it presently exists, we recommend that buyers obtain a house location survey.

This costs just a few hundred dollars and is the most reliable way of making sure the legal description matches the property.

A survey determines:

  • where your property borders are
  • whether there are any encroachments on the property by neighbors
  • the extent to which any easements on the property may affect legal title

A title defect could affect your chances of getting a loan approved.

Title Search/examinatioN

Title examinations are critical to ensuring that a loan will close.

As a buyer’s attorney, we would examine the title package to determine that the buyer will receive a good, clear and marketable title.

This means that the property is not encumbered by any burdens that could prevent you from closing now, or at a later time, from selling the property to another party.

We will conduct a comprehensive search and examination of records to identify the prior chain of ownership and to make sure there is nothing standing in your way like:

  • tax liens
  • judgments
  • unreleased mortgages
  • undisclosed boundary disputes
  • defective deeds
  • missing heirs
  • bankruptcy

If, for example, a lien is discovered, we might request that the seller “sweeten the deal” or reduce the price. Conversely, we would provide the seller with suggestions for financing so they could satisfy this claim.

Once the title issues have been cleared and the bank gives a clearance to close, a closing is set where all parties complete the transaction.

“We are Real Estate Lawyers in Eastchester, Westchester, The Bronx and surrounding communties”

RECOMMENDATION FOR TITLE INSURANCE

Title insurance is an insurance policy you pay for once at the closing table when you buy your home, ensuring that you are the only home owner for the property and that the seller had every legal right to sell you the property.

This protection is equal to the purchase price of the property or its current market value.

Another great value of title insurance is that all of the real estate taxes are paid up until the close date. Title insurance lasts for as long as you own the home, giving you great peace of mind that no one else can claim the property.

THE CLOSING

attorneys for real estate closingClosing is when the money and the title to the property transfer from the seller to the buyer.

There are many key players who attend the closing including:

  • the seller’s attorney
  • buyer’s attorney
  • bank attorney
  • 1 or 2 Realtors
  • a bank rep or mortgage broker

As the closing day approaches, we will coordinate with the lender for the preparation and delivery of certain key documents to be signed.

We go through your settlement statement to show you an itemization of all the costs and will explain the terms of the promissory note, mortgage and other documents.

We will also coordinate with the seller to receive:

  • the deed to the property
  • final utility bills
  • smoke detector/CO2 certificates
  • condominium 6(d) certificates

The lender’s representative will collect the signed documents and make sure the documents (deed, mortgage, discharge of seller’s mortgage) are recorded in the county clerk’s office.

Do I Need a Real Estate Attorney?

Importance of AN Attorney

This is the most commonly asked question and also the most troubling since, for the average person, buying and/or selling a home will be one of the most important transactions of their lives!

Regardless of whether you are selling or buying a house, condo or co-op, your real estate attorney will protect you from the unexpected and will make sure your process runs smoothly. He or she will also protect you from the many potential pitfalls you may encounter along the way.

No Substitute for an Experienced Attorney

An experienced Westchester real estate lawyer has the knowledge and the expertise needed to handle the unique issues that often arise in these types of transactions, and the more experience your attorney has, the better equipped they are to recognize the issues in advance and help you avoid the problems a less experienced attorney may fail to anticipate.

An experienced Westchester real estate attorney sees a lot of contracts, knows the local customs, and can help you make your way through the roadblocks you are likely to encounter.

Your Independent Voice

Your attorney is often the only party totally on your side, and he or she should be your “voice of reason,” advising you from start to finish with a clear and impartial eye.

Not every deal is one that should go forward.

An ethical attorney zealously represents only his client’s interests and assesses whether to put the brakes on a bad deal or proceed with extreme caution when the circumstances arise dictating that position.

Other parties to the transaction may operate solely out of self-interest and push or enable a bad deal to go forward.

WHAT ARE THE STEPS FOR A FIRST-TIME HOME BUYER?

lawyer to help with purchase of a home in new yorkPre-Planning

The first step in the process is pre-planning:

  • Where are you looking?
  • What areas do you want to look in?
  • What is right for you?
  • How much can you afford?
  • Will you need financing and from whom will you obtain it?
  • In addition to the down payment, do you have enough money for closing costs?
  • Has the lender of your choice provided you with a good faith estimate of costs?
  • Do you know what the property tax structure is?
  • Have you consulted with a reputable real estate agent and do you have a good and experienced Westchester attorney lined up to assist you?

Find Your Property

If you know all of the answers to these questions, then you are ready to hit the ground running.

From this point on, we will assume you have located a house or condo of your choice (co-ops are slightly different and will be addressed in another entry) and your offer has been accepted.

What comes next?

Home Inspector

You engage the services of an independent licensed home inspector (this is true for houses and condos) who will inspect the property for you and prepare a report for you to review with your agent and attorney.

The Parties and Details of the Deal

You provide your agent with the name, address and phone number of the attorney you have selected and the agent will prepare a memorandum of sale which will be sent to your attorney and to the attorney for the seller.

The memo will contain all the necessary details of your proposed transaction:

  • the contact information for all the parties and their attorneys
  • the stated purchase price
  • the estimated closing date
  • the amount of the down payment
  • the terms of financing
  • any pre-negotiated contingencies (for example, a clause which makes the contract contingent upon the purchaser being able to get a mortgage or contingent upon a satisfactory appraisal or inspection) which should be clearly delineated in the contract

 Seller’s Attorney Drafts Contract

heap lawyer for real estate closing in westchesterThe seller’s attorney will then prepare and send a first draft of the contract of sale to your attorney, who will review it in advance and then go back and forth with the other attorney on contract provisions and revisions until a satisfactory agreement is reached.

 Due Diligence

In the meantime, you are performing your “due diligence,” such as:

  1. obtaining copies of the documents on file with the local buildings department to provide to your attorney for review,
  2. verifying the amount of the property taxes at the local tax assessor’s office,
  3. engaging the services of professionals to complete all necessary environmental testing for items such as radon, asbestos, lead-paint, and oil leaks from an underground oil tank, when applicable, and
  4. testing the well water and/or septic system, when applicable.

Buyer Signs the Contract

Finally, you have completed your due diligence and you meet with your attorney to sign the contract and put down a contract deposit.

The contract deposit is the amount of money the seller’s attorney will hold in escrow to secure your performance under the contract and is NOT the same as the total amount of money you are putting into the purchase.

Contract Deposit

Generally speaking, and unless your contract provides otherwise, if you default under the contract, you will forfeit your contract deposit to the seller as what is known as “liquidated damages.”

It is critical that you and your experienced Westchester real estate attorney discuss all your obligations under the contract so that you know all of your contract deadlines and contingency dates in order to ensure that you will get your contract deposit returned to you, if your deal or financing should fall through.

Seller Signs the Contract

After you have signed the contract and your attorney forwards it along with the deposit to the other attorney, the seller will then sign, thereby binding both parties to the transaction.

Mortgage Process

Once you have a fully executed contract, you will proceed full steam ahead with your mortgage application, and (assuming the property appraises for the stated contract price and your credit remains good) you should receive your mortgage commitment within 35-45 days from the date of the contract.

 Title Report

Your attorney has ordered your title report which he or she has reviewed in detail and a copy has been provided to your lender for review.

Clearing Title

Assuming title is clear (meaning there are no issues identified by the title company which might prevent you from receiving free and unencumbered ownership of the property) and you have provided your lender with all required documentation, you will then get the official “clear to close” from your lender’s underwriting department.

Setting the Closing Date

At this point, your attorney will be free to schedule the closing consistent, of course, with the schedule you have set contractually with the seller and provided the seller is ready to deliver the home vacant, broom clean and free from all tenancies.

For example, you may be ready to close but your seller may not be ready to move out, or there is a tenant in the home who has not yet moved out.

Issues such as these often come up, and you and your attorney will have to deal with them before you can close.

The Closing

Finally, the house is empty; you have done your walk-through to make sure the property is still in good shape and you are ready to close.

Your attorney will do all the necessary calculations and tell you exactly how much money to bring and in what form to the closing.

You and your attorney will attend the closing together and your attorney will assist you in reviewing all documents carefully and thoroughly.

Experienced Attorney Navigates the Way

Our attorneys can help your real estate transaction close smoothlyOf course, there is so much more that goes into this process and the information provided above is intended only as a very basic primer for those who are looking for a quick step-by step reference guide to the process.

Every deal is unique and subject to its own individual contract terms and contingencies. 

Only an experienced Westchester real estate attorney can guide you through this process and help you navigate all of the twists and turns that you may encounter along the way.

Will I Qualify for a Mortgage and When Should I Apply?

FINANCING FOR THE 1st TIME HOMEBUYER – WHERE TO BEGIN?

For the first time buyer, the question of financing can appear a bit overwhelming.

  • Where do I look?
  • Who should I contact first?
  • Should I use my bank or a mortgage broker?
  • Should I consult a lender before or after I find a home I like?

All of these questions and many more will be filling your head and rightly so. Once again, the best source of information is through word of mouth.

Contact your friends, family members, and co-workers. Ask them for a referral. Did they have a good experience? Would they use them again? 

At this time, you may also want to consult an experienced Westchester real estate attorney for a referral. Remember, he or she has helped numerous buyers through the process and they very often can refer you to someone who will be the exact right fit for your needs.

Pre-Approval vs. Pre-Qualification

Once you’ve selected a lender, you will first need to know if you are “pre-approved” for a mortgage and, if so, how much you can afford to borrow?

It’s important to have this information before you start looking; this way, you will know your price range and whether or not you can borrow enough to finance the home you want. 

Please note there is a big difference between “pre-qualification” and “pre-approval.”

  • Pre-qualification is a cursory and often a verbal process where you give a lender some preliminary information (which is not verified), and they give you a ballpark amount of what you may be able to borrow; often times, they are not even checking your credit.
  • The “pre-approval” (which is what most realtors want to see before even showing you a property) is much more involved. Here the lender will check your credit and require you to complete an official application, supplying them with documentation concerning your finances. From this information, the lender can provide you specifics on the loan amount for which you are approved and the rates you will be likely to get, depending upon when you lock in the rate.

Gather the Necessary Documentation

What information will the lender need in order to provide you with the “pre-approval?”

First, your lender will want to know about your income and expenses, including any bonuses, commissions, overtime, and whether or not these sums are reliable from year to year.

Generally speaking, your lender will want to see that your fixed housing payments (principal & interest, taxes and insurance (“PITI”)) will not exceed 28% of your gross monthly income. 

They will also want to know what debts you have, for example, auto loans or leases or student loans.

Before you begin this process, you should gather the following information: 

  1. Documentation of income (pay stubs, W-2’s, tax returns), your recent bank statements showing how much you have saved for a down payment and documentation of other sources of income, such as spousal or child support, pension income, or disability payments;
  2. Some type of verification of employment history, showing how long you have been at your current job (2 years is helpful); but even if you have changed jobs, you should be ok, provided you’ve stayed in the same line of work and are earning the same or more income at your new job;
  3. Documentation of your credit score (the lender will likely pull your credit, but it doesn’t hurt to have this);
  4. Documentation of any other assets you have, such as 401ks, IRAs, whole life policies,  stocks or bonds
  5. The balances and account numbers for all loans and debts, such as auto and student loans, credit card balances, and any other loans you owe.

Receive your “Pre-approval”

With this information, the lender can determine if you will be approved and for how much.

Remember, the percentages and credit scores referenced herein are generalities, and although many lenders rely on statistical models, each lender has its own underwriting guidelines and may evaluate you differently. 

Essentially, a lender will look to see:

  • your ability to repay the loan (based largely on your income)
  • your likelihood of success based on your credit score (roughly 680 is considered good)
  • the amount of money you wish to borrow which, of course, depends upon where you want to live

Begin Your Search

Law firm in Westchester, NY to help with all real estate mattersOnce you are pre-approved and you know where you want to look and how much you want to spend, you will be armed and ready to begin your search in earnest.

Once you find your home, you and your lender will enter the next phase of financing: application to closing.

From Contract to Closing

You’ve Found Your Home and Signed the Contract. What’s Next?

You’ve finally found the home you want!  Your offer has been accepted; you’ve been pre-approved for your mortgage; you’ve had the house inspected and otherwise performed your due diligence.

You and your attorney have met to discuss and sign the contract and she’s returned it to the seller’s attorney, along with your contract deposit.

What happens now?

The Seller Signs and the Attorney Deposits Your Check.

White Plains real estate attorney for closingThe seller will sign the contract, and the seller’s attorney will return a fully executed copy to you, and she will deposit your check in an escrow account (see below).

Depending upon your type of financing (for example FHA or Conventional – find more about this in our entry on financing options) your contract deposit can range from roughly 3.5 % to 10% of the contract purchase price.

Escrowing of Monies

This deposit is held by the seller’s attorney in an “escrow” account-a special account set up by the attorney, separate and apart from the business operating account, for the specific purpose of holding funds for transactions such as these.

This deposit will be held by the attorney and either paid to the seller at closing or returned to you, if the deal falls through, depending upon various circumstances and the provisions of your particular contract.

In other words, most contracts have contingencies such as acceptable appraisal, clear title and/or loan approval which may allow you to get your money back if your deal collapses. 

Remember, these provisions must be negotiated in advance of signing in consultation with your attorney and are specific to your particular deal.

 Approval Process

Fully Executed Copy of Contract Goes to Lender

This is what your lender has been waiting for.

Since issuing your pre-approval, your lender has been in a holding pattern, waiting for you to provide them with a fully signed contract.

Once you provide all the remaining or updated documents, the next steps are the appraisal of the property followed by the submission of your file for an underwriting review.

Appraisal

Much depends upon the appraisal; if it does not come in at an amount equal or greater than your contract price, this can spell the end of your deal.  However, assuming you get past the appraisal issue, you should now be on track to receive your loan commitment.

Loan Commitment

This is the official letter from the lender who agrees to lend you a sum certain, at a stated interest rate, over a set period of time for the particular home you have chosen.

Your commitment may contain certain conditions that you will need to clear before closing which you will work on in consultation with your Westchester attorney.

Locking in Your Rate

You will also need to determine (with the assistance of your attorney) when to “lock” your rate.

A bank will typically hold a rate lock for a fixed period of time, often somewhere between 30 and 90 days.

Timing your lock is an art, not a science, and you need an experienced Westchester attorney to guide you through this potential pitfall. 

Locking too soon can cost you substantial fees if you are not ready to close before your lock expires. Much will depend on your contract provisions, stated closing date and whether your sellers have certain issues they must deal with which may delay your closing.

Discuss this with your attorney before you lock!

Attorney Orders and Reviews Title Report

While you are working with your lender, your attorney has been busy reviewing the title and dealing with the seller’s attorney and the title company on issues raised in the title report that may need to be cleared before closing.

For example, is there a problem with: a certificate of occupancy, a discrepancy between the survey and the property description; or the existence of any liens, judgments, law suits or unpaid estate taxes? 

All of these things can come up in a title report and must be dealt with before you close.

Hopefully, your attorney has been working on these things while you have been providing paperwork to your lender, and by the time your lender has cleared you to close, the title issues have been resolved or are nearly resolved.

Clear Title: Proceed to Closing

Scheduling

Our attorneys help clients all over the New York area for all legal related real estate issuesYour lender has cleared you to close; you have purchased a homeowner’s insurance policy and paid for the first year; your title report is clear and you are finally ready to schedule your closing!

Your attorney will now reach out to coordinate the many stakeholders and schedules involved in setting up a closing.

This includes:

  • you
  • the seller
  • the attorney for your lender
  • the attorney for the seller
  • your attorney
  • the title company

All of these parties must attend the closing. Because of this scheduling complexity, agreeable dates and times may be limited.

You will need to be flexible! Your contract closing date is an estimated date and not set in stone. Your attorney will do his or her best to schedule your closing as soon as possible.

The Walk-Through

Once the date is set, you will arrange to do a “walk-through” with your real estate agent to confirm that the property has remained in good condition and that no problems have developed between the time you signed the contract and the closing.

If there are problems or issues with the condition of the property, you must inform your attorney immediately! 

She or he will help get you through and discuss the various options available to you for dealing with these types of last minute issues.  These types of problems do arise and are not that uncommon.

This is yet another reason why you need an experienced Westchester attorney to help guide you through what can be a particularly stressful situation.

You Attend the Closing with Your Attorney

Congratulations! By now your issues are resolved: your attorney has been in touch with your lender; he knows exactly how much money you will get from your mortgage proceeds; as well, he has done all of the calculations.

Typically, lenders deduct certain fees off the top; thus, you will NOT get the full loan proceeds at closing and you must make up the difference.

It is imperative that you have an experienced Westchester attorney who has warned you about this in advance; hopefully, you won’t be caught short!

Cutting Checks and Signing Paperwork

Your attorney will also advise you on exactly what checks you need to bring to the closing, which must be in the form of official bank or certified checks.

You may not write a personal check at closing unless it is for a small adjustment, typically less than $500.00. 

You will bring those checks to closing where you will meet with your attorney, review and sign all the mortgage papers, and any other documents required to transfer ownership to you.

The Deed to Your New Home

After all the documents are signed and money has been exchanged, the seller will present you with a signed deed which, once reviewed by your attorney, will be collected by the title company and submitted for recording (it will come back to you or your attorney within a few weeks).

You will receive a copy at closing to take with you for the time being.

Experienced and Competent Representation is Essential

Please remember the foregoing is only a primer and assumes that you are purchasing a house or a condo.

Co-ops are different in many ways and will be addressed in another entry. 

Please remember that we cannot include every bit of information you will need to know, nor can we possibly contemplate the many twists and turns you might meet along the way.

Because of this, experienced Westchester representation is absolutely essential!

“We are a real estate law firm based in Eastchester and serving Westchester, White Plains, The Bronx and surrounding communties!!!”

WHAT IS THE ROLE AND IMPORTANCE OF A REAL ESTATE AGENT?

Buyer’s Agent and Seller’s Agent

Because buying or selling your home is one of the most important transactions you will ever be involved in, many people choose to engage the services of a real estate agent to help them locate a home or find a buyer for their home and to negotiate on their behalf.

Generally speaking, there are two categories of agents: the buyer’s agent and the seller’s agent.

It is commonly misunderstood that an agent who attempts to find you a property is a buyer’s agent. In fact, unless otherwise provided for in an agreement, that agent may have prime responsibility to the seller.

A buyer’s agent is an agent retained specifically by the buyer to work strictly on the buyer’s behalf. 

He or she can help put you on equal footing with a seller because almost all sellers have selling agents who are working on their behalf and whose goal is to get the best possible price for their client.

Agents are Facilitators and Negotiators

Agents, in either case, can be quite helpful because they know the area and are generally familiar with the prices and comparable sales so they can properly advise you if your purchase offer or your selling price is in the right range.

Very often, after an accepted offer is made, the real estate agents will continue to negotiate for the parties if, after inspections are done, issues arise that may affect the value of the property. 

This generally happens when a buyer finds out that a property may need more repairs than originally contemplated and feels the seller should either bring the price down or make the requested repairs.

Agents Set Up the Deal for the Attorneys

Once these issues are negotiated and a firm price is established, the focus then shifts to the real estate attorneys who then take the deal to contract.

The attorneys will obtain the general information about the transaction from the real estate agent and either prepare or review a proposed contract on behalf of their respective clients. 

Of course, this does not mean the agent’s job has come to an end. A good agent should be there for you throughout the duration, ready and willing to assist you if additional issues of concern arise.

Hiring Trustworthy and Capable Professionals

Often the best way to find a trustworthy and knowledgeable real estate professional is through word of mouth or recommendation.

Make sure the person you hire, whether they are a real estate agent, mortgage loan officer, or attorney has a reputation of integrity and professionalism and can point you to testimonials or references from satisfied clients. 

It is also important to remember that your agent works for you! Stay in control, know who you hire, and ask questions. If you don’t feel comfortable, trust your instincts and move on.

Condos vs. Co-ops

Condo Owners are Real Property Owners

Co-operatives and Condominiums provide a buyer with alternatives to the purchase of a single or multi-family home.

Condominiums are multiple-unit dwellings where each residence is privately owned and the common areas are shared with other unit owners.

Condos, unlike co-ops, are deeded real property and each unit comes with an undivided percentage interest in the common areas.

Co-ops Owners Have Ownership Interest in a Corporation

Co-ops, on the other hand, are NOT real property.

When you buy a co-op, you are purchasing shares of stock in a corporation which owns the property. 

Your investment entitles you to an ownership interest in the corporation which thereby gives you the right to occupy your unit pursuant to the terms of a proprietary lease or an occupancy agreement.

Co-ops are traditionally run by a board which consists of shareholders who have been elected by fellow shareholders to serve. They frequently employ, at the discretion of the board, a management company who runs the day-to-day operations of the property.

How Do I know if a Co-op is a Good Investment?

DOCUMENT REVIEW

Westchester real estate attorney for contractsWhen considering whether to purchase a co-op, you need to carefully review the financial statements produced by the corporation.

An experienced attorney will ask to see (at a minimum) the following: 

  1. the financial statements for the past two years;
  2. the operating budget put together for the current and/or future year;
  3. the subscription agreement;
  4. the offering plan (prospectus) with all amendments;
  5. the minutes of the last several board meetings; and
  6. the by-laws and house rules governing life at that particular development.

Much of the same material will also be requested by your lender who will want to analyze the co-op’s financial information to determine if it is safe to lend you money to buy into a particular corporation.

Remember, if you default on your loan, the bank is left owning the unit and, if the corporation is not financially sound, they won’t want any part of it.

Co-op Purchase Costs

Mortgage Payments

Generally speaking, co-ops cost less that condos or private houses (both to purchase and to maintain), but that does not mean there aren’t a variety of costs to be carefully considered.

When financing your purchase with a co-op loan, you will encounter many of the same costs associated with obtaining a mortgage for a condo or a house. 

Of course, you will be required to make monthly mortgage installment payments at a set or variable interest rate over a stated time period in order to pay back that loan.

Maintenance

In addition to your regular monthly loan payments, you will also be responsible for paying a share of the costs of running the corporation and maintaining the property.

This is typically termed “maintenance,” and the amount of the monthly maintenance depends in large part on the number of shares assigned to your individual unit which, in turn, is based upon the size of your apartment. 

In other words, if you have a three bedroom unit, you will own more shares of stock than a person who has a one bedroom unit and, thus, you will pay more per month by way of maintenance.

Of course, as the cost of goods and services rise and property taxes increase, your monthly maintenance will go up.

Assessments

You may also be asked to pay, from time to time, something called an “assessment,” which is a surcharge levied against all shareholders, typically used to fund a major repair or renovation.

Therefore, don’t assume because your monthly loan payments are “fixed” that your total monthly costs in a co-op are fixed. They most certainly are not!

 Board Scrutiny

This is why your purchase application will be closely scrutinized by the co-op board.

They will want to evaluate:

  • you
  • your credit
  • your finances (independent of your lender) to see if you can afford the current and future costs associated with your intended purchase.

“If you need a lawyer for planning a real estate contract, contact our firm today!!”

Board Approval is Required

As we have stated, co-ops are often less expensive than a house or even a condo, but they are also more restrictive.

Very often, unit owners cannot rent out their units and there are significant restrictions associated with re-sale.

For example, your potential buyer will have to meet the financial requirements for purchase set down by the board who will want to know that they have a certain net worth and have sufficient income to meet their obligations.

They will ask your buyer (just as you were asked) to complete an application, provide supporting financial documentation, submit to a credit check, and attend an interview where the board can either accept or reject them within their discretion.

Board Restrictions

There are also restrictions imposed on your day-to-day life.

As a co-op dweller, you will be required to follow a strictly enforced set of rules and regulations designed to govern daily life at your development. 

Remember, there are many rules to be followed and decision making is often not within your control. For these reasons, not everyone is cut out for co-op living.

Do Your Homework

While co-ops can be an affordable alternative, they come with very special concerns.

Make certain you know what you are buying! Discuss your options with your attorney.

Find out:

  • What life is like at your chosen development
  • How it is managed?
  • What will it cost you?
  • Can you rent it?
  • Will it hold its value?
  • Can you sell it later without difficulty?

Even supposed simple issues, such as the pet policy and residence renovations or changes to your apartment, can be very challenging and controversial.

Ask questions now! Speak with your attorney. Go the extra mile. There’s no harm in asking questions; a little work beforehand will save you many headaches later!

What and Why About Title Insurance?

Unfamiliar to Most People

Do I need title insurance?

This is another very common question we are asked by new buyers, most of whom have not heard of the concept of title insurance. 

It isn’t until a buyer has consulted with an attorney, or has been provided with a good faith estimate of fees from your mortgage loan officer, that you will be asked to pay for something called title insurance.

Protects Your Property Against Claims

This logically leads to the question “what is it and why do I need it?”

The answer is simple; title insurance is the single most important protection you can obtain when buying a property and yes, you need it!  

Title insurance is just what it sounds like; it is a form of insurance that protects you against future claims against your property, once you buy it.

Claims Will Provide Grief

It is different from other forms of insurances.

You pay a one-time fee at closing, and it protects you from past events, such as a claim against your property by someone who alleges to have some type of ownership interest.

In fact, there are countless ways in which title can be compromised.

For example:

  • a forged deed or will
  • a married person who poses as a single person
  • an impersonation of the true owner
  • the signing of documents with an expired or invalid power of attorney
  • intentional or unintended mistakes on recording documents
  • and the list goes on

Mandatory

Is it optional?

Again, the answer is simple, no! 

No lender will give you a loan without title insurance, and even if you are purchasing a property for cash, no experienced attorney will ever allow you to close without title insurance.

Title Report is the Road Map

How does title insurance work?

A title company (usually selected by your attorney from among several reputable companies that she or he has done business with in the past), will perform a detailed search of the property records that pertain to the property you plan to buy.

The title company will then prepare a report which will be reviewed by your attorney and the attorney for your lender. If the title company finds issues with the property, they will list those issues as “exceptions” on a schedule contained within the report.

Homeowner’s Policy Provides Protection

It then becomes the job of the sellers and their attorney to clear those exceptions or the closing cannot proceed.

Once the closing takes place, the title company will issue you a homeowner’s policy, which you will retain for as long as you own the property. 

If there should ever arise a title problem in the future, the title company will stand behind their policy and make good (both monetarily or with a legal defense) to defend against any title claims.

What is the Significance of a Survey?

Survey Defines Your Boundaries

When buying a home, you are faced with a variety of fees, one of which is the cost of the survey.

You may ask, “is this something I really need?”  “Can I get by without one and do it later?”  Unfortunately, the answer is, no.  

A survey is crucial because it is the only document that determines whether or not the house you are buying is actually within the property borders. It will tell you if it encroaches in any way onto neighboring properties and whether or not any of your soon-to-be neighbors are encroaching onto your property.

It will also tell you if there are any easements (rights of way that allow others access) over your property granted to others.

Good Fences Makes Good Neighbors

Your survey will tell you if there exists any of the following:

  • fences encroaching onto your property
  • fences encroaching onto a neighboring property
  • the existence of a shared driveway with your neighbor
  • any issue with regard to certain trees that are part of your property, part of your neighbor’s property, or are straddling the property lines; this will determine who is responsible for their care.

Survey is Mandatory, Not Optional

A survey is required by all title policies or else they will “except” (in other words exclude) coverage for these types of issues.

Of course, most lenders will refuse to provide you financing if you do not get a survey, but what happens if you are paying cash? Do you still have to get one?

The answer is an unequivocal, YES!

Survey Reading vs. New Survey

No experienced attorney will allow you to purchase a house without a new survey or at a minimum a “survey reading.”

A survey reading is when an older survey is reviewed by an expert who makes a visual inspection of the property and determines if the older survey is still valid in light of the current condition of the property and its structures.

Survey and Title Insurance Provides Protection for the Future

Your survey will be the only way to obtain full and complete title insurance coverage and will help you in many practical ways down the line, in the event you wish to add a porch or a fence.

In fact, your survey may save you headaches when you try to sell your home at a later date. 

Suppose you purchased your home without a survey, and you never knew that the neighbor’s fence encroached on your yard? Now you’re selling your home and your buyer does a survey and spots the issue with the fence. Guess whose problem it is?  Yours!

You cannot now say, “well I bought it like that!” You should have done a survey so that this issue would have been corrected by your seller. After the fact, a problem like this can cost you thousands.

Always Obtain an ALTA Survey

You may also ask what kind of survey do I need?

In order to obtain full insurance coverage, you want to get what is called an ALTA (American Land Title Association) survey.

This is fully detailed and the most complete type of survey available. 

At closing, you will want your Westchester attorney to review the survey with you and explain any issues he or she feels may arise.

Our real estate lawyers are ready to help you with a closing, contract or any other real estate need you may have.  Contact our firm today to how we can help you.