Attorneys at Law
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One Old Country Road · Carle Place, NY
11514
Phone: 516.248.4000 | Fax: 516.877.8010 | email:
staff@hmms-law.com
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This section of our web-site is meant to provide a general overview for the purchase and sale of residential property. It is not meant to serve as a replacement for legal counsel, but merely as a basic outline or reference to follow when entering into what is, for most people, the single largest investment they will ever make.
The most important thing to remember, whether you are buying or selling a home, is that the binder agreement you sign may be construed as a contract since it contains all of the essential terms upon which the parties agree, among them the selling price, the down payment, the mortgage amount and the closing date. It is recommended, therefore, that if at all possible, you consult with counsel prior to signing a binder the purchase or sale of your home.
Top THE ENGINEER’S OR HOME INSPECTION REPORT
Remember, most purchasers are not experts in home construction. It is important, therefore, that prior to entering into a contract to purchase a home to get at least a verbal report on the integrity of the structure and all of the systems therein. A competent home inspector will not only assess the current condition of the home, but will alert the Purchaser to anticipated repairs and/or the useful life of appliance, the roof, and plumbing, heating and electrical systems, amongst others. An inspection can disclose a major defect or the presence of a hazardous condition such as asbestos or lead paint which can lead to a decision not to purchase a particular or can be used as a bargaining tool in seeking a reduction in the price of the home from the Seller.
As a Seller, it is advisable not to ask your attorney to draw a contract of sale until after an inspection has been completed. In this way, the time and expense of drawing the contract is saved if an inspection reveals a condition that will impede the sale of your home.
Top For the purchaser, an approximate estimate of the closing expenses you will incur can be gotten by calculating about five percent of the purchase price. These expenses include the cots of obtaining your mortgage, your title insurance search and policy, your Homeowner’s Insurance Policy, Mortgage Tax and escrow deposits for real estate taxes. See the following checklist as an example of closing costs for a $400,000.00 home.
ESTIMATE FOR CLOSING COSTS–PURCHASER Purchase price $400,000.00 Mortgage amount $320,000.00 Premium for fee (owner) title insurance for benefit of purchaser $1,923 Simultaneous premium for mortgage title insurance for benefit of lender $380 New survey (if lucky, bank will accept old survey with inspection update $55 - 475 Municipal departmental searches $150 Miscellaneous riders and endorsements to policy (generally requested by lender) $75 Recording of mortgage and deed $125 Fee for filing accompanying Equalization and Assessment Report (see revised form, which must be signed by grantor and grantee) $25 Mortgage tax @ 1.75% of mortgage amount (less $25 deduction for one-or two-family dwelling) for NYC property (Lender pays additional 1/4%) Additional city of Yonkers mortgage tax of .0050% is imposed on Yonkers borrower, raising total mortgage tax on Yonkers closing to 1.25%, less $25 deduction Real estate tax escrow picked up by lender at closing $3,500 [If loan is above 80% of purchase price, bank will also escrow for PMI mortgage insurance.] Fuel adjustment for oil remaining in tank $672 Premium for one-year homeowner’s insurance policy naming bank as loss payee (Bank may also insist on escrow for future homeowner’s insurance) $1,230 Prepaid interest on new mortgage loan $605 Bank’s attorney’s fee (depending on bank fees, range from $325 to 1/2% loan)Points or origination fee can vary from 0 to 5 percentage points of loan (usually required to be paid to bank with certified funds) $545 - 4000 Mortgage application and processing fees including house appraisal and credit checks $450 Utility security deposit $250 Counsel fees varies TOTAL ESTIMATED CLOSING COSTS varies Note: While the transfer tax is generally payable by the seller, there are two exceptions: (1) city of Mount Vernon transfer tax–if purchase price is $100,000.00 or more, then the buyer pays 1 percent over the first $100,000.00; and (2) mansions– if the purchase price is 1 million or greater, then the buyer pays 1 percent of the sale price, unless contracted over to the seller. In addition, the seller pays the normal transfer tax.
Top A Seller, in addition to paying off all mortgages and liens which encumber the property being sold, is responsible for the payment of New York State Real Property Transfer Tax and the Broker’s Commission if the services of a broker have been retained.
Please Note: If the property being sold is located within the City of New York or the County of Nassau, an additional transfer tax of one percent (1%) of the purchase price will be imposed upon the Seller.
Top When choosing an attorney, very often the first question asked is "how much do you charge". The price for representation varies with each transaction. The questions you as purchaser or seller need to ask is, "what am I getting for the fee that I’m paying?". There are many attorneys out there who charge a very low flat fee for representation. What you may not know is that very often what you are getting is the services of a paralegal until closing. As this may be the most important purchase of your life, it is important to choose an attorney with experience in the field and one that will personally attend to your needs throughout your transactions. While price may be a consideration, it shouldn’t be the only one.
Top Both the Purchaser and the Seller should be represented by independent counsel so that their respective interests are protected. Traditionally, it is the attorney for the Seller who prepares the Contract of Sale after obtaining all of the requisite information and documentation from the Seller. Once the Contract has been prepared, it can be decided whether or not there will be a "sit-down" contract signing, or if the contracts will be reviewed by the Purchasers and counsel and the amendments then negotiated by phone with the Seller’s attorney. Once the norm, sit-down contracts are now few and far between given the difficulty of coordinating schedules so that everyone can meet together.
In preparing the typical Contract of Sale, in addition to the terms agreed upon in the binder, the Contract will represent and guarantee to the Purchaser that the plumbing, heating, electrical systems and appliances will be in working order, the roof and basement will not leak and that the home has certificates of occupancy for the structure as it presently exists. These guarantees will expire at the time of closing, unless the parties agree otherwise, so a Purchaser must re-inspect the premises prior to the closing to ascertain that everything is in working order. The Contract will also set for the time within which the Purchaser must obtain a mortgage commitment in the agreed upon amount. If at the end of that time (generally 30-45 days) a commitment has not been issued by a lending institution Contracts generally will provided that a Seller can extend an additional period of time within which the Purchaser may obtain the same. If the mortgage commitment is not obtained within the agreed upon period(s) then most contracts provide for the Seller’s attorney, who has been holding the contract deposit in a trust account, to return the deposit to the Purchaser whereupon the contract will be deemed canceled.
Top Deciding upon which type of mortgage to choose can be a time-consuming and often confusing and frustrating process. It is suggested that Purchasers begin their hunt for a mortgage even before a contract is fully signed. There are many factors to be considered in deciding which mortgage is the best one for you. Do you want a fixed rate or adjustable rate mortgage? Do you want a 15 or 30 year terms? How many points are being charged? What are the additional bank closing charges? Will the bank require an escrow account be established for the payment of taxes and homeowner’s insurance? You should consult with a reputable mortgage banker who can provide answers to all of your financing questions. If you still have questions that remain unanswered or if you are still unsure of how to proceed after meeting with your mortgage banker, consult your attorney prior to beginning the application process so that problems may be avoided at the outset.
Top Once the Purchaser has received at least a verbal mortgage commitment, the Attorney for the Purchaser will order a title search. This search will assure the Purchaser that the Seller does indeed hold title to the premises that is being sold, and will also reveal all of the mortgages and liens which must be satisfied by the Seller at the closing. Additionally, the title company will search the housing and building records of the town in which the premises is located, obtaining copies of the Certificates of Occupancy and also whether or not the premises is in violation of any of the town ordinances. At the time of closing, the Purchaser will also be required by the Lending Institution to purchase a policy of title insurance to insure the lender’s interest in the property. Simultaneously, the Purchaser will also purchase insurance for the Purchaser’s interest in the property. In reality, what the Purchaser is buying is one single policy of title insurance which insures the bank for the amount of the outstanding mortgage and the Purchaser for the amount of his/her equity in the premises. As the mortgage is paid down, the value of the Bank’s insurance will decrease and the value of the Purchasers’ policy will increase. The insurance policy insures the Bank and the Purchaser against any error made by the title insurance company in connection with the title search so that if a problem with title arises in the future (usually at the time of a refinance or sale of the premises) the Purchaser will have insurance that can be relied upon in such an instance.
Top Once the attorney for the lending institution is satisfied that a policy of title insurance in the form required by the lending institution can be issued by the Purchaser’s title insurance company, the Purchaser’s attorney will be ready to schedule the closing with the attorney for the Seller, the title insurance company and the attorney for the lending institution. The closing will generally take place at the office of the attorney for the lending institution. Just prior to the closing the attorney for each of the parties should send to their respective clients a pre-closing letter, which will advise the Purchaser and the Seller of the respective amounts they can anticipate paying or receiving at the closing. It should also advise the parties to arrange for a final inspection of the premises prior to the closing so that it can be ascertained that all of the items guaranteed to be in working order at the time of closing are in such a condition. The attorney for the Purchaser should also advise the Purchaser of the amount of any certified or bank checks that must be brought to the closing as well as the number and amount of personal checks they can anticipate needing at the closing. At the time of closing the Purchaser must also produce a homeowner’s insurance policy naming the lender as loss payee, together with a receipt from the insurance agent indicating that the premium for the first year has been paid in full.
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ADVICE & DISCLAIMER
All of the information contained on this web site is not meant to be advice, nor should it be followed. This is meant merely as a helpful tool and as a starting ground for a purchaser or seller who is in need of direction. Each case and matter is different. We highly suggest the retention of counsel before engaging in any of the matters discussed. This firm does not represent nor warrant the accuracy of any of the information contained herein, nor should it be relied upon. Please feel free to contact this office by either e-mail at staff@msesqs.com or by phone. We are eager to help you.
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