Representation for Buyer and Seller in the Purchase and Sale of Houses, Coops and Condos in New York
- Qualify Yourself
- Research your Market
- Real Estate Brokers
- Roles of Attorneys and Brokers
- Real Property Tax Considerations
- Types & Forms of Property Ownership
- Forms of Ownership
- Home Inspection Services
- Typical Contract Clauses
- Financing/Mortgages or Co-op Loans
- Typical Closing Costs
Our Firm has extensive experience in assisting Buyers and Sellers of Residential Real Estate. When considering either the purchase or sale of a home, there are many factors to consider, especially for the potential buyers. A Summary of the factors follows:
The first step is to qualify oneself as a buyer by obtain "Pre-approval" from a bank. This enables the buyer to know the amount they can afford, and provides proof of your ability to purchase. The Pre-Approval will give you an advantage in dealing with brokers and sellers as you will have proof of your financial strength.
RESEARCH YOUR MARKET
Whether you are buying or selling, reading the NY Times will give you an insight into the working of the local real estate market. The articles on the local real estate market are not the only resources available to you. The house and apartment listings will give you an indication of the brokers who are active in the area you have an interest. There will also be advertisements from banks and mortgage brokers, which will give you an idea of the loan market, although www.bankrate.com may be best for this purpose. Lastly, the Times also has a section on recent sales values, which gives a buyer the opportunity to determine the local market by looking at recent sales.
REAL ESTATE BROKERS
Real estate brokers come in different varieties. There are Brokers and Salespersons, and there are ALSO buyer’s brokers and seller’s brokers. Generally, a person who is licensed as a Broker has more experience and education in the real estate market than a salesperson. As for Buyer’s and Seller’s brokers, there is little difference between them. A particular broker could be a seller’s broker on one deal and a buyer’s broker on another deal.
ROLES OF ATTORNEYS AND BROKERS
It is the role of the role estate broker to negotiate the terms of the deal. The attorney’s role is to draft or negotiate the legal terms of the contract. In coop and condo transactions the broker also assists the buyer with Completing & Submitting the Board Application. The attorney reviews the offering plan, financials and board minutes for and with the buyer.
REAL PROPERTY TAX CONSIDERATIONS
If you are buying real estate, you must consider the real estate taxes assessed against the property. The amount of the taxes could be contested in a ‘Tax Certiorari’ proceeding, but this does not diminish a buyer’s obligation to gauge impact of the present taxes on the cost of ownership. Also, success in such proceedings can never be guaranteed.
TYPES & FORMS OF PROPERTY OWNERSHIP
- homeowner's association
- condos, co-ops or condops
The difference between a condo and a coop is that a condo is actually a three-dimensional subdivision of land. The buyer of a condo unit receives their own deed. Condo owners also are individually taxed (Real Estate Tax) on the value of the unit. A coop is different. A coop is one building, which is taxed as a single unit, so a owner does not receive an individual real estate tax bill. The cooperative corporation receives such tax bills. Also, a coop is not formally considered an interest in realty, as the ownership of a coop is in the corporate stock and the proprietary lease.
The coop structure results in a lower closing cost for the buyer, as there will not be a real estate tax adjustment with the seller or real estate tax escrow with the bank. Also, as a coop is not an interest in realty, the buyer will avoid mortgage tax, which is 2% in New York City. The buyer will also avoid the necessity of title insurance for an additional savings.
FORMS OF OWNERSHIP
- tenancy by the entirety, including co-ops provides survivorship between spouses and protection against creditors
- joint tenancy provides survivorship between joint owners
- tenants in common, when there is no survivorship
HOME INSPECTION SERVICES
When buying a home, the buyer should always obtain a termite and wood destroying pest inspection as well as a home inspection from a licensed home inspector. Independent from an inspection service, a buyer should obtain either a representation from the seller as to the condition of the property, or a credit of $500.00 in lieu of the representation.
The day before a closing, there should be a second inspection to insure that the condition of the house or apartment has not changed from the date of the contract. If there is a post-contract defect, it must be addressed at the closing, otherwise the buyer will probably be deemed to have waived the defect.
TYPICAL CONTRACT CLAUSES
MORTGAGE OR COOP LOAN CONTINGENCY CLAUSE, states that the contract deposit will be refunded to the buyer if the buyer does not obtain mortgage or coop loan financing. This type of clause is not in every contract, and even if included in a contract, the clause is limited. There are usually notice requirements, and an obligation to apply for financing timely and a breach of a notice requirement or failure to timely apply could risk the loss of the protection of this clause.
CONTRACT DEPOSITS are usually 10% of the contract price, and are held in escrow by the seller’s attorney. This deposit is the money which is protected when there is a mortgage contingency clause in the contract.
FINANCING/MORTGAGES or CO-OP LOANS
There are many different types of mortgages or loans available to finance the purchase of realty, homes, condos or coops. However, when purchasing a coop, it must be remembered that even if the bank approves a buyer for a coop loan, the coop board must also approve both the buyer and the type of financing obtained. Coop boards usually have maximum financing limits; typically a buyer is allowed to finance no more that 75%-80% of the purchase price, however there are some boards, which have more strict requirements. Real estate, homes and condos do not usually have such restrictions on financing.
CONVENTIONAL financing is non-government sponsored financing. Conventional financing includes VARIABLE financing, which typically has interest rate adjustment periods of 6 mos.; 1 yr. or 3 yrs; NON-INCOME VERIFICATION & NON-DOCUMENTARY LOANS which loans can be approved, for a slightly higher interest rate, without the usual income and asset verifications. This type of financing can result in 100% FINANCING for homes or condos but never for co-ops.
TYPICAL CLOSING COSTS:
Typical closing expenses include
- BUYER'S ATTORNEY'S FEE
- TITLE INSURANCE+
- MORTGAGE TAX (2% in NYC)+
- RECORDING FEES-(deed, mortgage & condo powers)+
- TITLE CLOSER+
- MANAGING AGENT'S FEE AND LIEN SEARCH#
- BANK ATTORNEY'S FEE
- BANK POINTS if charged
- PREPAID INTEREST FOR BANK - from the date of closing to the end of month of closing*
- TAX ESCROW FOR BANK*+
- ADJUSTMENTS WITH SELLER*
- HOMEOWNER'S INSURANCE*;
+House and Condo costs