How Can I Prepare Beforehand To Buy Or Sell A Property In New York?

For Property Sellers:

When selling a home, you want to get your house in good condition for the closing.  The standard Contract used in the greater NYC area requires the Seller to provide the house in vacant and broom-clean condition and that “All plumbing (including water supply and septic systems, if any), heating and air conditioning, if any, electrical and mechanical systems, equipment and machinery in the building(s) located on the property and all appliances which are included in this sale being in working order as of the date of Closing.” You should make sure that any improvements you did to the house that required building permits, certificates of occupancy, or certificates of completion are recorded with your local building department. You do not want these building department issues to delay your closing. You also want to get a sense of the market in your area and the approximate value of your property to get an idea of what type of proceeds you can expect after you pay off any liens on the property and factor in your closing costs. You also want to make sure all your real estate taxes are up-to-date, and bills are paid. In addition, it is wise to make sure that a satisfaction of mortgage has been filed with the county clerk for any mortgages that you paid off in the past.  That way, there are not any unexpected open mortgages or liens on the title report that you will have to deal with prior to closing.

You should be aware of your closing costs in the New York City and Westchester area. The main closing cost for the seller is going to be the brokerage commission to the agent, if you are working with a real estate agent or company, and that is usually anywhere from four percent to six percent of the purchase price in the Westchester and NYC area, although each broker-client arrangement is unique. The other closing cost would be the New York State transfer tax, which is 0.4% of the purchase price (.004 multiplied by the purchase price). Also, there are some additional transfer taxes for certain cities.  If you sell a residential property in New York City, the rate is 1% of the purchase price if the value is $500,000 or less and 1.425% if the value is more than $500,000.

For Purchasers:

From a purchaser’s perspective, you must mentally prepare for the mortgage application process. It can be very cumbersome and take a lot of time. Many times, your lender will ask for a lot of documents and sometimes, they make duplicate requests.  In addition, your lender will ask to sign letters of explanation to clarify certain financial transactions or other aspects of your economic circumstances.  You should also get an idea of your closing costs. If you are getting a mortgage, your lender will take their fees out of the proceeds of the loan, so you need to keep in mind that you are not going to get the full amount of the mortgage loan at the closing and will have to make up for the fees that are deducted from the mortgage loan proceeds. There is also a mortgage tax in New York State, which can be quite significant. In New York City, the mortgage tax ranges from approximately 2% to 2.8%.  In Westchester County, the rate is 1.3% but if in the City of Yonkers, the rate increases to 1.8%.

If there are any property taxes around the time of the closing, the title company and the lender are going to insist that those are paid at the closing. In addition, there is a legal fee for your attorney and there are recording fees to record the mortgage and the deed with the county clerk.   You should keep these costs in mind before you make an offer on a property and well before the closing date.

The standard contract of sale in New York State has a mortgage commitment contingency, which means that the buyer’s obligation to move forward with the contract is contingent on obtaining a mortgage commitment from a lender, but it does not mean that it is contingent on the lender actually funding the loan and providing the money. It is always a risk for the buyer to make sure that they review their commitment very carefully and look at all the conditions to make sure that they are positive they can meet all the conditions.  Your attorney should assist you to review your mortgage commitment and the conditions in the commitment.

Should I Use A Standard Listing Agreement or Have A Customized Agreement Drafted By An Attorney?

It is a good idea to have your attorney review the listing agreement but most of the time, an attorney will not need to draft one from scratch as the real estate agent will have a standard contract to provide to you. Often, it is a good idea to make changes to the listing agreement. I recommend making it clear that the brokerage commission is due only if the sale of the property successfully closes. I also recommend that the agreement states that the broker will not get a commission (or get a lowered commission) if the seller finds a buyer directly without any aid from the real estate agent. It is always a good idea to at least have your attorney review and negotiate the terms of the listing agreement before it is signed because once it is executed, you are locked into those specific terms and conditions.

For more information on Preparing for A Real Estate Transaction In NY, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (800) 619-3570 today.