First time home buyers are anxious to start life in their new place. After all, navigating the concrete jungle is not easy, particularly when in a seller’s market. Certain things must happen at a real estate closing for you to close. The average time to settle on a New York City real estate transaction is 60 to 90 days.
Each situation is different, and unique circumstances can result in an altered time frame. However, we provide a roadmap for home buyers, so they know when they officially become homeowners after reaching an agreement with sellers.
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What happens at a Real Estate Closing?
After months of searching and days of negotiating, it’s finally time to close on your New York City apartment. At this point, you’ve found your ideal home, assembled a board package (if purchasing a resale condo or co-op), passed the board’s interview in case of a coop, and you feel good about your purchase. Although you might think that the real estate closing consists of wrapping up a few details, there are still a few hurdles to overcome.
You should also have completed the essential walkthrough with your agent; if you haven’t done so yet, then don’t move forward with closing the sale until you’ve done so. Your agent must confirm that everything is as it should be and that your new apartment doesn’t have any huge problems that have heretofore gone unnoticed.
During the closing
During the closing, you, as the buyer, will (of course) be giving the agreed-upon amount of money to the seller. In return, you either receive a deed (for a condo) or a proprietary lease (for a co-op). In reality, two closings may be happening at this stage; closing for sale and possibly closing of your loan on the mortgage. The location of this closing could be at one of a few different places; the managing agent’s office, an attorney’s office, a broker’s office, or possibly even another area where the sale; is officially recorded.
You (the buyer) and the seller both will usually be in attendance along with both sets of attorneys. Additionally, a closing agent, your real estate agents, and maybe a mortgage company representative will be there as well. Some insurance deals also might have to happen at this stage—be sure you’ve gone over all these things with your attorney beforehand.
Your Closing Documents
- The Real Estate Settlement Procedures Act (RESPA) statement, also called the HUD-1 closing statement, itemizes all closing costs. You’ll need this document for income tax purposes, and when you sell your property.
- The Truth in Lending Statement spells out the terms of your mortgage loan.
- The mortgage and the note, two separate documents, explain the legal terms of your mortgage obligation and agreed-upon repayment terms.
- Property Deed; transfers the ownership to you.
- Affidavits are affirming various statements made by either party. For example, the sellers often sign an affidavit stating they have not incurred any liens on the property.
- Riders, and Amendments; affect your rights. For example, if you buy a condo, there may be a rider outlining the condo association’s rules and restrictions.
- Home Insurance policies; provide a record and proof of your coverage.
Understanding Closing Costs
When attending the closing, you will need to come with checks in hand. Your attorney will guide you for how much each check amount should be made payable for based on your contract of sale. If you’re moving into a condo or co-op, you’ll have to pay for these closing costs as well.
- Attorney fees
- Filing fees
- Flip tax (in some cases when purchasing a co-op)
- Maintenance adjustment and appraisal (depending on the specific circumstances)
Assuming you’re financing, you’ll also need to have a recognition agreement, and you’ll have to pay a loan origination fee and a UCC-1 filing fee. You may even need to pay out for prepaid mortgage interest. Your attorney will provide you with a closing statement that itemizes costs paid both by you and the seller.
What is a Closing Statement?
The closing statement will also specify the transaction’s various “debits and credits” as they pertain to the buyer and seller. All of these will need to be paid; via certified checks. The real property transfer tax (which the seller usually pays) also will be given at this stage of the transaction. If the property in question costs more than one million dollars, you’ll also have to pay a “mansion tax” that comes out to 1 percent of the property’s purchase price.
Take care that you have all the right checks lined up and that you know what all the documents mean. Assuming you’re on the same page as the seller, though, the process should more or less be painless.
If financing, your lender must prepare a reasonable faith estimate of all settlement costs before the closing, but the title company or attorney calculates the exact amount you will be required to bring to close on your new home. Be sure to get a cashier’s check for your share of the costs a few days before the settlement date.
Since these costs are paid monthly or on an annual basis, you may pay for some services used by the seller before they moved. Similarly, some expenses are paid in advance of services used. Proration allows the buyer and the seller to balance these accounts so that each only pays for the services they used.
What are the real estate closing costs?
Condo Closing Costs
|Own Attorney:||$2,000 + up|
|Managing Agent Application Fee:||$300 +|
|Credit Report Fee:||$75 - $100 per applicant|
|Lead-Based Paint Disclosure Fee:||$0 - $50|
|Mansion Tax:||1% of the purchase price when $1 million +|
|Move-in Deposit:||$500 - $1,000 (refundable if no damage)|
|Common charges, real estate taxes, and insurance:||prorated as of the closing|
|Condo Mortgage Associated Fees:||prorated as of the closing|
|Mortgage Tax:||(Paid by the buyer, condominium/townhouses only, when financing )|
|Recording Tax Sales under $500,000:||1.8% of the entire mortgage|
|Recording Tax Sales over $500,000:||1.925% of the entire mortgage|
|Application, Credit Check, etc:||$500 + up|
|Appraisal:||$250 + up|
|Bank Attorney:||$500 + up|
|UCC-1 Filing:||$50 + up|
|Recognition Agreement Fee:||$200 + up|
|Fee Title Insurance: Approx:||$450 per $100,000|
|Mortgage Title Insurance:||Approx. $200 per $100,000|
|Recording Fees:||$200 - $300|
|Origination Costs - Points:||0-3% of the loan value|
|Departmental Searches:||$200 - $400|
|Real Estate Tax Escrow:||2-6 months|
|If Purchased Directly from Sponsor *New Developments|
|NYC Property Transfer Tax:||- 1% of purchase price up to $500,000|
|- 1.425% of purchase price over $500,000|
|NYS Transfer Tax:||$4 per $1,000 of the purchase price|
|Sponsor's Attorney Fee:||$2,000|
Co-op Closing Costs
|Own Attorney:||$1,500 + up|
|Bank Fees: Points:||0% to 3% of loan value|
|Application, credit check, etc:||$500+|
|Miscellaneous Bank Fees:||$500+|
|Application Fee (Credit Report/Appraisal):||$500+ ( Short-Term Interest; Equal to interest|
for the balance of month in which you close. )
|Move-in Deposit:||One-time fee of $500.00+|
|Recognition Agreement Fee:||$200|
|Maintenance Adjustment:||Pro-rated for the months of closing.|
|Mansion Tax:||1% of entire purchase price where price is $1,000,000 or more.|
The turning point in any real estate closing, of course, will be when you finally receive the keys to your new property. Although you’ll likely end up changing all the locks right away, the symbolic significance nonetheless will still offer closure to the process. The deed and mortgage will then be recorded in the public records by your attorneys; the purchase of your new home will now be closed and registered officially.
How long does a closing take?
Co-ops and Condos
Naturally, co-ops typically have a longer closing time than other New York City properties, including condos. On top of the usual steps, which include inspection, title search, and your lawyer’s due diligence, a buyer needs the board’s approval. Your lawyer needs to conduct due diligence on the building, too. You should prepare for the extra time these steps take.
Generally, a condo sale takes a shorter period to close. If you are paying cash, you do not have to wait for the bank to approve your mortgage, further shortening the time.
Hurdles to closing
There are typical steps needed after the seller accepts your offer. These usually go smoothly, but any delay pushes back your real estate closing date.
The real estate closing occurs once terms, sales price, contract signed, and check, are sent to your real estate attorney. The contract is then binding once the seller countersigns the contract. You are in control of the first two items, but there are cases where the seller drags his/her feet. It should take one or two business days. If it takes longer, you and your agent need to question the seller and his/her agent since they could use your offer as a bargaining chip in the hopes of receiving a higher bid.
Once the seller signs the offer, the listing is “in a contract” Several things happen, including an appraisal, which you need for your mortgage. Such can delay your closing if the home appraisal falls short. If this happens, you need to come up with additional funds or renegotiate a lower price. Assuming this goes smoothly, the bank grants a commitment letter. At this time, you find out your interest rate, which you can lock in for a certain period, typically 60 or 90 days.
We also strongly advise for a home inspection. If there are any negative surprises, you may want to negotiate with the seller to pay a portion. Significant repairs could delay your closing. Your lawyer will order a title search, although these usually do not turn up an issue and present an obstacle to a real estate closing.
If this is a co-op, you have to contend with the board, and the extra steps this entails.
You do not have to worry about paying the closing costs, which can either get added to your mortgage or paid when you close at this point.
There is a bunch of documents for you to sign on your real estate closing day. Under the Consumer Financial Protection Bureau (CFPB) “Know before you owe” rule, you will receive the Closing Disclosure three business days before your closing date, allowing you to review the mortgage terms and costs. Additionally, your attorney should explain all the documents as he/she presents them to you.
Typically, the closing takes two to three hours, and you receive the keys to your new apartment at the end.
What is a real estate closing statement?
So you’ve at last secured the closing date on your new apartment in NYC. Give yourself a pat on the back. You’re at the finish line. Some things, though, remain such as the final walk-through of the condo or co-op apartment and the closing statement.
If this is your first home purchase, you may not be familiar with the last one. Read on to find out what it is and why it’s necessary.
What is a closing statement?
A closing statement is merely a summary of the sale transaction which you’ll keep for your records. It’s written up by your real estate attorney in the spreadsheet form and lists your closing costs for the purchase. What makes this an important document is that until it’s written up, you won’t have a specific figure for what your closing costs are. The problem with the closing cost figures provided by your buyer’s agent and the lender is that they’re only estimates. Until your attorney has prepared the closing statement, you won’t have an exact figure on what your final costs will be.
On closing day, checks will be exchanged, and it can get a bit confusing. The closing statement organizes everything, so you know where the money is going.
What does a closing statement contain?
At its most basic a closing statement will include the following:
- The names of the seller and purchaser
- The specific closing date
- The address of the property
- The closing location
Since most closings are postponed by a day or two, the closing statement must give the specific date. On the closing day, there will be some people present to finalize everything. Expect to see the following people:
- The purchaser’s attorney
- The seller’s attorney
- The purchaser’s lenders attorney
- The two brokers (usually, but not always)
- The title company
Once all are together, it’s time to exchange checks.
Checks to bring on closing day
Before closing day, confirm with your attorney what checks you need to pay and who they need to be, made payable too. These should be bank checks, also known as cashier checks. These can only be picked up directly from your bank. These are required because, unlike personal checks, they won’t bounce as the funds are withdrawn at the time of the issue.
Also, bring your checkbook in case there are any unforeseen expenses. It won’t exactly be ideal if your closing is delayed because you are short $100.
What to do if you’re financing
If you are receiving funding for your purchase, there’s a good chance that you won’t need to bring any checks at all. The case if all your proceeds are already accounted for by other parties. For instance, your layer will have the down payment in escrow, and your mortgage lender will be there for the remainder of the funds. Most familiar with buyers who are receiving gift funds or other wire transfers. Just remember to confirm with your real estate attorney first if whether this is the case. You can check this with them once you’ve received your closing statement.