[blockquote class=blue]In an effort to provide our readers with interesting legal information River Journal offers a new column entitled Legal Eagle. Over the coming months we will address a variety of issues.[/blockquote]
I’ve chosen real estate transactions for this article, not only because the spring is a great time to buy or sell a home, but because it is a complex process that is often intimidating. My goal is to break down this process into simple terms. I obviously cannot cover all of the details in this brief article, but hope to provide you with a better understanding of the process.
Even before you find the right property or buyer, it is recommended that you start planning ahead, educating yourself on the process, and protecting yourself against inherent risks.
First, make sure your credit is good. You can utilize various on-line tools to check your credit ratings, or talk to your mortgage broker or bank to discuss your financial situation and obtain a pre-approval for a mortgage.
Next, talk to a lawyer. Buying or selling a home is one of the largest financial decisions you will ever make. Real estate transactions, even those involving residential property, can be very complicated. Ask your friends for recommendations and make sure you find someone who is capable and responsive, and willing to answer all of your questions along the way.
The first step is the contract of sale. This sets out the terms of the transaction, including the purchase price, the amount of cash that will be used, any personal property that is included, and a closing date. It also sets forth the conditions of the sale, such as a mortgage contingency, the requirement of a clean title, and any repairs or improvements that may need to be made. A purchaser will have to provide a down payment at the time of signing, usually in the range of 10%, which is at risk if the purchaser is unable or unwilling to close for a reason that is not stated in the contract.
Sellers will want to limit their potential exposure in the contract. For example, the seller will want to cap the amount of money he or she is required to spend to clear up any unforeseen issues with respect to certificates of occupancy, title and the like. Most sellers should also waive the New York requirement of providing a buyer with a warranty as to the current condition of the property.
Following execution of the contract, the purchaser will typically have about 30 days to obtain a mortgage and then another 30 or so days to close. With the current economic climate, banks are conducting much more detailed credit checks, giving much more conservative appraisals, and taking much longer to provide mortgage commitments.
During this time, the purchaser will also need to obtain a survey and quotes for homeowner’s insurance, which will need to be in place before the closing. If a recent survey is available, this may be acceptable and a good way to save money.
The “walk through” is performed within a day or two of the closing. This is the time when a purchaser visits the property to make sure the condition of the house is the same as when the contract was signed.
The closing can be nerve-racking for all parties, with a conference room full of people and a seemingly endless number of documents full of legalese. A good lawyer will make sure that all of the potential issues are identified and resolved before that day and that there are no surprises. He or she should provide you with an explanation of all of the documents that require signature and their ramifications.
If you plan ahead, you will have a much better chance of a smooth transaction. Best of luck.
[blockquote class=blue]Kenneth M. Bernstein, Esq. has a legal practice on Main Street in Irvington, specializing in many areas of law, He can be reached at firstname.lastname@example.org or www.kbernstein.com.[/blockquote]