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THE LEGAL ASPECTS OF BUYING AND SELLING REAL ESTATE

RONALD D. WEISS, P.C.
Attorney at Law
734 Walt Whitman Road, Suite 203
Melville, New York 11747
(631) 271-3737
E-mail: weiss@fresh-start.com
http://www.fresh-start.com - http://www.longislandbankruptcy.com - http://www.ny-bankruptcy.com

The General Legal Aspects of a Real Estate Transaction

A. Pre-Contract
A real estate transaction where one party (the "Seller") sells real property to another party (the "Buyer") will typically involve several major steps. First, a Seller will place his or her property for sale on the market. Often, the Seller will engage a real estate broker to assist in finding potential Buyers for his or her property. Once the Seller or a real estate broker on behalf of the Seller, has found a willing Buyer to purchase the property for an agreed upon price, both the Seller and Buyer will each engage separate attorneys to represent them in the transaction. Prior to entering into a Contract, it is recommended that the Buyer do a home/engineer's inspection and a termite inspection, so that the Buyer can determine the condition of the property. If the Buyer is satisfied with the condition, then all parties may proceed to the contract stage.

B. Contract
Upon notification by the Buyer's attorney that the Buyer is ready to proceed to the contract stage, a Contract of Sale will be prepared by the Seller's attorney and sent to the Buyer's attorney. The Contract of Sale is an important document that sets forth the names of the Buyer and Seller, the property for sale, the purchase price, and various terms and conditions of the sale. The Contract of Sale will outline the duties of both parties, the time limitations within which they must act in good faith, and default provisions if they fail to do so. The attorney for both the Buyer and Seller seek in the Contract of Sale to protect their client's rights as well as convey their client's expectations. The Contract of Sale should be carefully drafted and negotiated by the attorneys for both parties because it is the first place that the parties and a Court of Law will look to find the intentions of the parties. When both parties are satisfied with the terms, the Buyer signs the Contract and encloses a check for the down payment which is forwarded to the Seller's attorney for deposit in an escrow account until the closing. The Contract becomes binding when the Seller's attorney receives the down payment check and both parties have fully executed (signed) the contract. Once the Contract becomes binding, both parties must fulfill their obligations to each other within the limitations set by the Contract. It should be noted that all promises made in the Contract become null and void (unless specifically preserved) after the transfer of title to the Buyer. When the Buyer has successfully obtained financing for the purchase and is ready to close, the Buyer's attorney will contact all relevant parties and schedule the closing.

C. Closing
The closing is where the Buyer, the Seller, their respective attorneys, the title closer, the bank attorney (if any), and the real estate agent/broker (if any) complete the sale of the property. The title to the property is transferred from the Seller to the Buyer, the Buyer gives the balance of the purchase price to the Seller, all taxes due at that time are paid, adjustments are made for taxes, fuel, and water and the mortgage and deed are sent for recording to the County Clerk. The Buyer then obtains the keys and is now the new owner of the property.

Particular Concerns for Sellers of Real Estate

A. Preparation of the Contract
In order to allow a tentative agreement between the Seller and a willing Buyer to move forward, the Seller should immediately engage an attorney. The Seller needs to inform the attorney what fixtures (Items attached to the property) will be specifically excluded from the sale so that the attorney can remove such items from the Contract. Otherwise, the assumption is that everything that is attached to the property, as well as all appliances, are being sold with the property. The Seller should be aware that in virtually every Contract, he or she is obligated to ensure that the plumbing, heating, and electrical systems are in working order. Often, the Contract will also state that any appliances remaining on the property be in working order. These promises must remain effective until the day the Seller gives the Buyer possession of the property. After that day, the Seller has no further obligations with regards to the above matters.

B. Dealing with Potential Issues for Sellers
 The standard Contract also states that at the time of closing, the premises will be given free of all liens, judgments and governmental violations, that the premises will be legal as it exists and delivered vacant and broom clean. The Buyer will order a title report that will show any judgments, outstanding taxes, liens, bankruptcies, building code violations, and parking violations against the Seller and the property. Based upon this report and the terms of the Contract, the Seller may or may not have to take any action to clear title to the property. An attorney can assist in clearing the title and/ or proposing acceptable alternatives if that is not possible. Also another issue for Sellers is the date by which they must vacate the premises. Often the Seller's attorney needs to draft a fair possession agreement which gives the Seller enough time to leave, and which also gives fair compensation to the Buyer for the Seller's stay after closing.

C. Review of Seller's Closing Expenses
The Seller's expenses at the closing generally include the following: the payment of New York State transfer taxes and New York City transfer taxes (if applicable), paying off a mortgage (if applicable), as well as any recording fees to record a satisfaction of mortgage (if applicable), real estate broker's fees, and attorney's fees. If the property for sale is a co-op or condominium unit, there may be additional fees that are given to the governing bodies for these buildings.

Particular Concerns for Buyers of Real Estate

A. Applying for Financing
Buying property is often a more involved process than selling property primarily because the Buyer usually has to obtain financing in order to have sufficient funds to purchase the property. The most important legal issues that face Buyers in getting financing is the requirement that they pursue the obtaining of a loan in good faith and with due diligence for the amount stated in the Contract and that they either procure this loan by the deadline stated in the Contract or show that they have failed to do so after complying with the above requirements. Once a Buyer gets a commitment letter for the loan from a bank, they must diligently and in good faith supply all the items required by the bank in order to get the loan. Many Buyers find it helpful to employ a Mortgage Broker who can expedite this process for them.

B. Reviewing Inspection Reports
 Aside from financing issues, the Buyer should also protect themselves by doing a home/engineer's inspection and a termite inspection of the property. It is best to take care of these inspections before the Contract so that the Buyer minimizes the risk of buying a damaged property, and maximizes his/her ability to negotiate at the Contract stage. The standard Contract will also allow the Buyer to do a final inspection of the property prior to closing. The Buyer must be aware that the law in New York puts the burden on Buyers to inspect the property, because other than the basic guarantees mentioned earlier in the Seller's obligations, the Buyer takes the property "as is," meaning in the same condition as when they originally saw it at the time of the Contract signing. The Seller does not have to do any repairs unless they are specifically put into the Contract. Thus, the importance of the home inspection is indeed a crucial stage in the purchase of property.

C. Reviewing the Title Report
 After the Contract has been signed by both parties, the Buyer's attorney orders a title search on the property for sale. Upon receiving the title report, the Buyer's attorney has to make sure that the Buyer will receive "marketable" title (good title that can be insured and sold) to the property free of all liens and that the property is in accordance with local building department regulations.

D. Review of Buyer's Closing Expenses
 It is difficult to give an exact figure for closing expenses that a Buyer will incur in the purchase of a property because they will fluctuate according to many factors. The general estimate is that a Buyer's expenses, other than the purchase price, typically total between 5% to 8% of the total mortgage amount. The following is a non-exhaustive list of common expenses: bank expenses, mortgage tax, real estate tax escrows, homeowner's /hazard insurance, title insurance, recording of deed and mortgage, attorney's fees, and adjustments for fuel, taxes, and/or water.

Why Should I Use an Attorney in a Real Estate Transaction?

It is human nature to assume that everything you expect and anticipate will go according to your plans. However, reality sometimes can take a different path. An experienced real estate attorney can:

For many Buyers and Sellers, a real estate transaction is one of the more significant financial transactions in which they may become involved. Therefore, it is prudent to have proper legal representation. The Law Office of Ronald D. Weiss, P.C. has experience in the real estate field. We strive to diligently represent our clients and give them the information and assistance they need throughout their real estate transactions. Ronald D. Weiss, Esq. is a member of the Suffolk County Bar Association, the Nassau County Bar Association, and is admitted to practice in the State of New York, the State of Connecticut, and the federal courts for the Eastern and Southern Districts of New York. Mr. Weiss graduated from the New York University School of Law in 1988 and has published several law journal articles. Mr. Weiss' past experience includes having been a law clerk to the Honorable Prudence B. Abram, a federal judge in the Southern District of New York, and having practiced law at several large Manhattan law firms. CALL FOR A FREE CONSULTATION

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RONALD D. WEISS, P.C.
Attorney at Law
734 Walt Whitman Road, Suite 203
Melville, New York 11747
Phone: (631) 271-3737
E-mail: weiss@fresh-start.com
http://www.fresh-start.com
http://www.longislandbankruptcy.com
http://www.ny-bankruptcy.com

This information is a brief overview of real estate law and practice and is intended only to give general information and not to give legal advice.
This information was prepared by and is for the exclusive use of the Law Office of Ronald D. Weiss, P.C.
Copyright (c) 1997 by Ronald D. Weiss, P.C. All rights reserved.
 
© 1993-2003 Long Island Bankruptcy - New York Bankruptcy - Ronald D. Weiss. All Rights Reserved.
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