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Conducting due diligence is critical in the New York City real estate buying process. It comes as the final step before signing the contract of sale and typically lasts 5-7 business days. Your buyer’s agent has advised you on the property type, layout, potential, and flaws. We also strongly recommend performing a home inspection during the due diligence process.
You may feel good about the home and purchase at this point. However, there is the final due diligence round, which your real estate lawyer conducts. You should know what they are looking for at this stage of the buying process.
Your Attorney protects you with due diligence.Your Attorney protects you with due diligence.
The first thing to know is that your lawyer is on your side. We have spoken about an exclusive buyer’s agent’s fiduciary duty; the attorney you hire is also looking out for your best interests.
They are scrutinizing the deal for legal and financial risks. There is a lot of work to do, particularly in New York City co-ops and condo sales.
The legal sideThe legal side
There are many ways your lawyer protects you during their legal, due diligence. This includes working with the title insurance company to ensure the title is free of liens and the seller can deliver it cleanly. They also make sure sellers represent the property accurately. For instance, ensuring all bedrooms listed are legal. For example, the unit’s listing may state it is a two-bedroom, but your lawyer determines that one does not meet a bedroom’s legal definition.
Your lawyer should look into the building’s history to determine if there have been any violations. They also read through the typically lengthy offering plan document. This applies to all buildings, not merely new ones. It includes every detail of the property.
Unique circumstances come up that your lawyer has to deal with when conducting due diligence. While these may allow you to obtain a bargain price, it also presents challenges for lawyers. This includes estate sales, where getting all parties’ signatures and agreements are challenging. A divorce situation, a particularly contentious one, is another one. Your attorney also has to see how the title is held. Finally, a lawyer’s due diligence extends to the bank in a foreclosure.
Review of building financialsReview of building financials
Your lawyer will conduct financial due diligence on your behalf. You want to ensure the building is financially sound. Your lawyer will check at least a couple of years’ worth of the financial statements and the current year’s budget. We think you should read the financials, too. This way, you can ask them any questions.
They typically go beyond the statements to look for any liens on a condo – coop or building.
The Condo or Co-op board minutesThe Condo or Co-op board minutes
Your lawyer should also read the co-op’s or condo’s board meeting minutes due to their due diligence. This way, they can relay any issues cropping up to you. In addition, the minutes should provide insight into the building’s financial and operational details. These internal issues could include a roof or elevator in need of repair. A buyer needs to know this since a potential assessment could increase the monthly common charges or maintenance costs.
A lawyer can help ease the process by allowing you access to the board minutes.
Final thoughtsFinal thoughts
Due diligence is a crucial stage. This gets into the nitty-gritty details, including the unit and building. This includes necessary information and whether there has been lead paint, asbestos, and mold. Should issues crop up, your attorney will advise you on the subsequent courses of action. Deals can break down at this point if you have been misled intentionally.