Real estate closing is the final step of a home purchase and sale, with the closing attorney playing a crucial role in the process. It is when the title to the property is transferred from the seller to the buyer. This process includes many steps that must be completed to ensure the seller has a clean and clear title to transfer and that the buyers can occupy the property without interference. This is known as “title insurance”.
The first step is the Buyer making an offer to the Seller. This offer is typically subject to various contingencies such as the Buyer obtaining financing or selling their current home. In New York, it is customary for both parties to hire a real estate attorney to draft and review the contract of sale. The Attorney will ensure that all terms are consistent with local law and enforceable. In addition, the attorney will verify that the Seller can convey title to the property and that the property is in compliance with all local requirements such as zoning. This is accomplished through a search of the county records and a title survey. A closing attorney ensures that all these legal processes are carried out diligently.
Once the contract has been negotiated and agreed upon, it is signed by both parties. Then the next steps take place. The buyers’ attorney will order the title report. This will include a search of the records to verify that the Seller has good and marketable title to sell. This will also include a review of liens and easements that may affect the Buyer. The Buyer’s attorney will also coordinate with the Seller and their attorney to arrange a survey of the property. A closing attorney can play a key role in this phase, facilitating communication and ensuring all necessary steps are taken.
Title fees are due at closing to cover the cost of transferring legal ownership of the property. The attorney will also prepare the deed and mortgage documents for recording. The Buyer will need to prepay a portion of the year’s property taxes and the Seller will pay the base transfer tax and, if the purchase price is over $1 million, will be responsible for the additional “mansion” transfer tax that starts at 1 percent and increases as the purchase price rises. In this phase, the closing attorney assists in calculating and verifying that all fees are paid accurately.
At closing, the Attorney will be present to explain the various documents to the Buyer and to manage the transfer of funds and signing of all documents. The Attorney will also handle the transfer of the keys to the Buyer. A closing attorney ensures that this part of the process goes smoothly, making sure that all documents are properly explained and executed.
Once all outstanding issues are resolved and the attorneys have prepared their closing statements, the closing will be scheduled. The Buyer and Seller should be prepared to close with sufficient cash or certified funds to cover all of the closing costs. The Attorney will advise the Parties as to what checks to bring to closing or which wire transfers to initiate on the day of closing. A closing attorney is vital at this stage, providing necessary guidance to ensure that all financial transactions are conducted properly. Post-closing, the Attorney will provide each party with a “closing packet” in paper and/or PDF format that is an organized and comprehensive collection of the Closing Documents. This will help Buyers and Sellers keep track of all the documents that they have received and reviewed, with the closing attorney ensuring that everything is in order.
Cooperative apartments in New York offer a less expensive alternative to single-family homes and condos. However, they still have to deal with the same issues of maintenance, taxes, and mortgages that other residential properties do, necessitating the involvement of a closing attorney to facilitate the transaction process.
When a buyer purchases a share (unit) in a cooperative, the sponsor prepares an offering plan that describes the physical aspects of the property. The offering plan must comply with the Attorney General’s regulations, Article 23-A of the Real Estate Finance Law, and other applicable laws. The sponsor must also disclose any known defects in the building. While the law does not require that these defects be corrected, it is important for a prospective purchaser to understand what conditions exist and whether they might be significant problems for them or their family. In such cases, a closing attorney can provide invaluable guidance, helping the buyer to navigate the complexities of co-op apartment purchasing.
Once the board approves a contract to purchase, both attorneys will prepare and execute the documents for closing. The buyer’s attorney will also order a lien search of the title to the unit, and this usually takes two to three days. The attorney will also request copies of all documents from the seller’s lawyer, and these typically take seven to ten days to receive. A closing attorney ensures that all necessary legal documents are prepared accurately and in a timely manner for a smooth closing process.
The buyer and seller will each be required to pay transfer taxes – 1.4% of the sale price in NYC for units under $500,000 and 1.825% above that. The purchase price plus these taxes will be the sum paid to close. The buyer will also pay a real estate broker’s commission to their broker which typically runs around 5-6% in NYC. In such financial transactions, a closing attorney plays a vital role in ensuring that all fees and taxes are calculated and paid correctly.
Another significant cost is the maintenance fee for a co-op. The maintenance fee is a percentage of the corporation’s total income and is based on the number of shares owned by the buyer. Co-ops also have the right to raise the maintenance fee for specific projects such as broken elevators or to do a major renovation of a common area like a lobby, gym or hallways. A closing attorney can help in understanding these fees and ensuring that the buyer is aware of potential future costs.
In New York, real estate transactions are subject to specific laws and regulations, necessitating the involvement of a closing attorney. Real estate closing attorneys have a deep understanding of these requirements, and they ensure that your real estate transaction complies with them, preventing legal disputes or costly penalties. Additionally, closing attorneys ensure that your real estate transaction satisfies the state's tax obligations, such as transfer taxes and property tax prorations.
Step 1 -- Real Estate Purchase or Sale
The first step in a real estate transaction is finding the property that you want to buy or sell. You may make a verbal offer, but you should consult with a Real Estate Attorney before putting anything in writing, as a written contract is required for any real estate transaction. Your real estate attorney will review your offer and help you understand all the obligations and risks associated with the sale or purchase of the property. Moreover, involving a closing attorney at this stage is crucial as they can help to ensure that all the legal aspects are covered.
When you're ready to move forward, you and the seller will agree on a contract. There are standardized, pre-printed forms that can be used, but your Real Estate Attorney will include any special terms that you need in the contract by way of a rider. For example, a common rider is to set forth the buyer's and seller's cancellation rights in case either party cannot close within a reasonable time of the "on or about" date specified in the contract.
Most residential contracts in New York are contingent on a purchaser being able to secure a mortgage loan commitment from their lender. In the event that this contingency is not met, the purchaser can cancel the contract without penalty, and the deposit they made to the seller will be refunded. A closing attorney will play an important role in this stage to manage and oversee the legal documentation and process.
Step 2 -- Title Work
After the contract is signed, your attorney will perform a complete title search on the property to ensure that it is free of any liens and judgments. This can take several weeks to complete, and if any issues arise, you will have to resolve them prior to closing. Issues might include an unpaid property tax bill, a lien for contractors' work that is not fully paid, or a zoning violation. A closing attorney is indispensable during this step, ensuring that the title is clear and resolving any issues that may arise.
Step 3 -- Closing
Once you've resolved any outstanding issues, it's time for the closing. This usually takes place within 30 to 60 days of the signing of the contract. It takes place at the office of your attorney or the registry of deeds, and typically includes the purchaser's agent, their attorney, the buyer's mortgage broker, and a notary public. The role of a closing attorney here is to guide you through the final steps, explaining all the closing documents, and ensuring that all necessary funds have been transferred.
Your attorney will explain all the closing documents to you and ensure that all of the necessary funds have been transferred to pay for the purchase. The keys are then exchanged, and you become the owner of the property. In the meantime, you should hire a home inspector to verify that all known defects have been disclosed, so you are not surprised by any unexpected issues after you move in. Having a closing attorney at this final stage ensures that everything is in order and that you are protected legally as you take ownership of your new property.
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