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The average real estate deal can generate hundreds of documents, some of crucial importance that should be filled away carefully and others that matter less. For buyers, knowing which documents you should keep a close hold on will be important for reducing your liability against any non-disclosure, misrepresentation, or other claims. Hopefully, that won’t happen, but it’s always better to be prepared.
While it is true that your closing company is required by law to retain all documents related to your closing, providing a fallback in case of any misplaced documents, it’s still better to have those documents on hand anyway.
With that in mind, let’s look at the most important real estate documents and why you should keep them safe.
1. Buyer’s agent agreement1. Buyer’s agent agreement
When hiring a buyer’s agent to represent you in future transactions, you may be asked to sign a buyer’s agent agreement. This document will outline the terms of the relationship between you and your agent, such as the length of the agreement (usually 90 to 120 days), who will pay the agent’s commission (typically the seller), and the terms for canceling the agreement. Holding onto your buyer’s agent agreement will be crucial if any issues arise between you and your agent after closing the transaction.
2. Purchase agreement2. Purchase agreement
Every property transaction will include a purchase agreement between the buyer and seller. This document confirms the agreed purchase price, the expected closing date, and any other terms or contingencies included in the deal. In NYC, this agreement doesn’t become legally binding until both parties have signed, after which both sides are locked into the deal with no way out that isn’t covered by a contingency clause.
As such, you’ll want to keep the purchase agreement on hand to ensure you and the seller adhere to its terms. Failure to fulfill your duties in the agreement could land you in legal trouble.
3. Seller disclosures3. Seller disclosures
By law, sellers must disclose any known defects in the property that could impact its market value. Some examples of typical seller disclosures include the property’s age and repair history, damaged or faulty systems, liens on the property, or whether there has ever been a death in the home. That said, many sellers in NYC opt not to complete the seller disclosure form since the penalty for not doing so is only a $500 credit to the buyer at closing.
However, paying the $500 fine does not protect the seller from liability when there is a special relationship of trust with the buyer, such as trustee-beneficiary, guardian-ward, or client-attorney. Moreover, any seller who deliberately attempts to conceal a defect could still be found liable to the buyer for any damages caused by the defect.
4. Home inspection report4. Home inspection report
The home inspection is a crucial step in the due diligence process for buying a home. As the buyer, it will be your responsibility to hire (and pay) a professional home inspector who will visit the home and provide a detailed report on its physical condition and any potential issues. Unless the property is being sold as-is, any issues detailed in the inspection report can be used to renegotiate with the seller for repairs or credits.
5. Closing disclosure5. Closing disclosure
Once your lender has given you the clear to close, your credit and employment status will be checked one final time. Provided that everything looks good, your lender will begin preparing your closing disclosure, which will outline the terms of your loan, such as the monthly mortgage payment, the total closing costs, and any additional loan fees.
Upon receiving your closing disclosure, you must confirm you have received it, as three days need to pass before you can finally close on the property. This mandatory waiting period allows you time to review the documents, ensure everything is correct, and prepare the checks you’ll need to bring on closing day. After the closing day, you’ll still want to hold onto your closing disclosure as you will need it for filing your taxes and claiming any mortgage points deductions.
6. Title insurance policy6. Title insurance policy
During your due diligence period, a title search will be run on the property to check for unpaid liens. By purchasing title insurance, you can protect yourself against any responsibility for an unpaid lien that the title company failed to find in the search. This policy is well worth keeping in a safe place, as an unpaid lien can leave you on the hooks for tens or even hundreds of thousands of dollars.
7. Property deed7. Property deed
On closing day, you will hand over the checks for any remaining payments and, in return, receive the property deed, a document that confirms you as the legal homeowner. This must be signed in the presence of a public notary and, once filed at the county clerk’s office, will officially place the property’s title under the new owner’s name.
The property deed is perhaps one of the most critical documents in the entire real estate transaction as it is the only way to show you are the legal property owner, with all the rights and responsibilities that entails.
8. Any amendments or riders8. Any amendments or riders
When drafting legal documents, it’s common for additions or alterations to be made by the interested parties. This can take the form of an amendment, which is a correction of a fault, or a rider, which is an added provision that supplements the primary document. These can change the terms of a document, so it’s always important to hold onto them in case any issues arise.
Final thoughtsFinal thoughts
As a general rule, you should always keep documents relating to a legal matter, such as licenses, certifications, and deeds. There are two reasons for this. First, it allows easy access to these documents if you need them. Second, these documents can be a serious pain to replace, often requiring time and money.
Therefore, keep them organized in a folder marked as “Important Documents” and secure them in a fire-proof safe.