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For anyone looking to buy a home in New York, you’ll need a real estate attorney. Unlike most states, New York State law requires buyers and sellers to retain a separate real estate attorney for handling specific parts of the transaction. While NYC has no shortage of qualified and experienced attorneys that can be trusted to look out for their client’s best interests, it can still be helpful for a buyer to understand the attorney’s role fully.
Better still, the buyer knows what questions to ask their attorney when assessing a purchasing contract.
Attorney’s Role in a New York Home PurchaseAttorney’s Role in a New York Home Purchase
In NYC, it is customary for the seller’s attorney to prepare the first draft of the purchasing contract for a property transaction. This will be sent to the buyer’s attorney once the buyer and seller accept an offer. Remember that at this point, neither party is in a legally binding contract, which will remain the case until both sides sign the purchasing contract.
Before that happens, your attorney will look over the initial purchasing draft and may suggest changes or additional riders that will be negotiated with the seller. This process can go back and forth a few times, with the main issues of contention being the sales price, the method of payment, the closing date, and any contingencies.
Their next task will be to order a title search on the property to check for unpaid liens or an uncertain title that could complicate the deal. This is known as the due diligence period. Next, your attorney will source and provide any documents related to the property that your lender requires as part of your mortgage application. After that, your attorney will calculate your closing costs, which will come due on closing day.
Assuming that both parties can come to a satisfactory agreement and the title is free of liens, the final draft of the purchasing agreement will be drafted and signed by the buyer and seller. Congratulations, you’re now officially in contract, meaning the deal is legally binding, and neither party can walk away without being in breach of contract.
The final task for your attorney will be to represent you on closing day, where all documents pertaining to the purchase will be reviewed and signed. While some buyers may wish to attend the closing day alongside their attorney, you can also choose to provide power of attorney and leave everything to them, which tends to be what many buyers and sellers do in NYC.
Questions to Ask Your Attorney About a Purchasing ContractQuestions to Ask Your Attorney About a Purchasing Contract
Now that you understand the roles of an NYC attorney let’s look at some of the questions you should ask your attorney during the pre-contract stage. Remember, nothing is legally binding until both parties have signed the purchasing agreement, but once it is signed, you will be locked into the deal with no way out that isn’t covered in the terms. As such, you must know precisely what you’ll agree to.
Are there any unfavorable clauses in the contract?Are there any unfavorable clauses in the contract?
Many purchasing contracts will include contingency clauses that require one party to complete specific actions by a specified date. While contingencies typically exist to protect the buyer, such as mortgage or inspection contingency, the seller may also include specific contingency clauses.
For example, the buyer may be required to complete their due diligence within 7 business days and/or secure financing within 21 days. While these are typical time frame clauses for NYC purchase agreements, you’ll want to ensure they suit your schedule. If not, you can always negotiate for extensions.
Do you see any issues with the property, such as title restrictions?Do you see any issues with the property, such as title restrictions?
While a title search is typically performed after the buyer and seller have an executed contract, it’s still worth asking your attorney if they see any red flags that suggest possible issues with the title. For example, a typical purchasing contract will include seller disclosures, one of which will be the title condition that states whether the seller holds a clear or restricted title.
If there are title restrictions on the property, such as a tax or contractor’s lien, the seller must pay off these before the deal closes. Otherwise, they will become the buyer’s responsibility. If you’re concerned that there will be title issues and that the seller may be unable to pay them off, then you can include a clause that allows you to back out of the deal in the event of an unclear title.
How much will my closing costs be?How much will my closing costs be?
While your exact closing costs can’t be determined until closing day, you can get a rough estimate of what you can expect. Fortunately, you can sometimes negotiate to have the buyer pay some of these costs. For instance, the transfer tax is easy to decide since it is based on the sales price, 1.425 percent for properties priced at $500,000 or less and 2.625 percent for properties over $500,000. Buyers can expect their total closing costs to be between 1.5 and 6 percent of the sales price.
Do you foresee any legal issues that may arise from this purchase?Do you foresee any legal issues that may arise from this purchase?
Buyers should be wary of properties with potential legal issues that could impact how they plan to use them. For instance, purchasing an apartment that a tenant currently occupies can be problematic if you plan to move into the property. This is because tenants hold special rights, and you may have to allow them to remain in the property until their lease expires. Other potential legal issues include Department of Buildings (DOB) violations, which can take anywhere from 24 hours to 90 days to clear, depending on the violation.
Can you walk me through the offering plan/bylaws/Rules & Regulations?
Depending on the property type, there may be some building documents that you’ll want to take a close look at. For instance, purchasing a sponsor-owned condo or co-op, you’ll need to consider the offering plan. This will include information about the building, its sponsors, and what will be included in the purchase. Most offering plans are well over 1,000 pages, making for pretty dry reading. As such, having your attorney walk you through the essential bits and point out anything that might cause concern can be helpful.
For co-ops, a key document you’ll want to read closely will be the building rules and regulations, which will dictate precisely what residents can and can’t do. NYC co-ops can have stringent rules that regulate almost every aspect of home life, so make sure you know what you’re buying into. As for condos, the bylaws will provide information on the building’s house rules, board members and their duties, and the rights of each owner. While not as restrictive as co-ops, condos can still have specific rules, such as limitations on the number of pets you can own or the number of visitors you can have over.
Final ThoughtsFinal Thoughts
Your real estate attorney will be critical in ensuring your home purchase goes as fast and smoothly as possible. Listen to their advice and always ask for clarification if there’s anything you’re uncertain of. As for finding a qualified attorney, you can ask your buyer’s agent for recommendations or potential research attorneys online.