I’ve countersigned an offer to purchase. What are the next steps?
Generally, the offer to purchase or “binder” contains an inspection clause which allows the Purchaser to retain, at Purchaser’s expense, a licensed home inspector who tests water potability (and flow rate for well water), the sanitary disposal for a septic system, the home’s structural integrity and its major systems (heat, plumbing, electric), and checks for elevated radon levels and pests. Depending on the results of the inspection, Purchaser may ask for relief, in the form of Seller-financed repairs or a credit from Seller against the purchase price, or Purchaser may cancel the offer without penalty. Once inspections have been done and any issues identified, Seller’s attorney drafts a contract of sale (“Contract”) that contains a provision outlining the relief – repairs or credits – to which the parties have agreed, and sends it to the Purchaser’s attorney.
Should I give the purchaser a Property Condition Disclosure Statement (“PCDS”)? Is there a penalty if I don’t?
Many attorneys discourage Sellers from completing a PCDS, which must be given to Purchaser with the proposed Contract (or beforehand, but never after). (See a sample PCDS in the Sample Forms link.) The reason is that Sellers can inadvertently omit information, mischaracterize a condition or forget a past repair – yet such innocent oversights may create a liability for Seller that survives months and years after the closing. To prevent such liability, a Seller can give Purchaser a $500.00 credit at closing “in lieu of a PCDS.” This alternative is not only permitted by the Real Property Law, but it is consistent with the longstanding rule of “Buyer Beware” followed in New York. Under this rule, designed to bring closure to a transaction, the burden is on a Purchaser to satisfy himself or herself as to the condition of the property, so that no ongoing liability follows the Seller for a condition of the property after the deed is delivered and title passes at the closing.
What if I get a better offer before the contract is fully signed?
The question whether an offer to purchase binds the Seller is answered differently by different attorneys, and a lot depends on the language of the offer to purchase. We strongly urge our clients – both Sellers and Purchasers – to include language in the offer to purchase that states the offer is “subject to attorney approval within three (3) business days,” thereby affording the client a brief window for consultation with us. We also urge Sellers and Purchasers alike to include language in the offer to purchase that explicitly states a formal contract of sale is to follow. Until you have a fully-executed Contract, not just an offer to purchase in anticipation of a Contract, you do not have a firm deal, and you could take another offer before you sign the Contract.
The purchaser’s home inspection shows some items that need repair. Do I have to make them? Do I breach the contract if I refuse to make them?
The offer to purchase is subject to “satisfactory inspections,” a standard open to lots of interpretations. An inspection may reveal a variety of cosmetic faults, substantive problems, or a combination of both the Purchaser deems unsatisfactory. A Seller can say “tough luck” and refuse to do anything without breaching the offer to purchase. As a practical matter, however, findings of substantive problems – unpotable water, septic deficiencies, elevated radon levels or a leaking underground fuel storage tank, to name a few – are problems a Seller will want to remedy regardless of the transaction with this Purchaser. The Contract specifies that the premises will be delivered in the same condition as when inspected, reasonable wear and tear excepted. If a Contract is in place that identifies issues arising out of the inspections Seller has agreed to eliminate or remedy, it will be Seller’s responsibility to fix them or risk breaching the Contract.
I’ve heard that a seller does not need to attend the closing if he/she pre-signs all the necessary paperwork for closing. Is that true?
With some extra coordination and expense, we can send the Seller in advance of the closing all the necessary closing documents – deed, transfer tax form, Equalization & Assessment form, Seller affidavits, among others – for him/her to sign, get notarized, and return to us along with photo identification (a copy of driver’s license or passport photo). (See a sample deed, etc., in the Sample Forms link.) Also, we need to make advance arrangements for delivering the sale proceeds to Seller after the closing, either by secure mail or by wire transfer. Regardless of Seller’s attendance, if an existing mortgage must be paid off, Seller must authorize his/her lender to email or fax us a “payoff letter.” It prescribes the amount needed to pay off the mortgage as of a specified date, to which the title company, using a per diem (per day) interest amount specified in the letter, will add a few days after the closing to allow the lender to receive and process the payoff payment. The title company also takes responsibility to deliver securely and timely the payoff proceeds and to file with the county clerk the satisfaction of mortgage (document that says the mortgage lien has been paid). The title company’s customary fee for this service is approximately $150.
What exactly are the taxes and recording fees I’ll be responsible for at closing?
Seller is responsible for paying a transfer tax, calculated at $4 per $1,000 of sales price ($100,000 sales price yields a $400 tax), payable to the County Clerk together with a $5 filing fee. If the Seller has a mortgage to pay off and satisfy, there may be a separate $50.50 filing fee, unless it is has been included in the total amount due recited in the payoff letter.
Do I pay the Purchaser’s broker’s commission as well as my broker’s commission?
This depends on the circumstances, but normally the Seller pays the full amount of his/her listing broker’s commission – often 6% of the net sales price – pursuant to an agreement with that broker, who may in turn list the property with the Multiple Listing Service (MLS) or other platform and agree to pay a percentage of the total commission to the selling broker, the person who brings the offer to the Seller. Seller’s agreement with the listing broker will clearly spell out the nature and extent of the Seller’s responsibility for payment of broker commission(s), and for that reason, we always ask for a copy of the listing agreement when we take in a new sales file.
How much do you charge?
Every real estate transaction is unique, and as such our fees and expenses are tailored to the scope and extent of your specific transaction. Call us for a free consultation at 845 338 5058. With answers to a handful of basic questions, we can give you a quote on the spot. When you decide to retain us, we will send you a retainer agreement outlining our mutual responsibilities. As for expenses, only non-routine and necessary charges will be billed and payable at closing. Such expenses include express or certified mailings and high-volume photocopying (more than 75 pages in a single session, @ $.10 per page). Routine postage, telephone and photocopying expenses will not be charged.
How long will the entire process take?
In the best of worlds, a transaction should close within sixty (60) days, give or take a few weeks, depending on many variables, chiefly whether the Purchaser is financing the purchase with a bank. If it is an all-cash deal with no inspection or title or survey issues to resolve, the deal should close comfortably within the 60-day mark; by contrast, if Purchaser is obtaining a mortgage, then much depends on how quickly the lender’s underwriters are able to process the loan, which in turn depends on how quickly the Purchaser can turn around the bank’s requests for additional information, and if there are inspection and/or title problems, then additional time may be needed to resolve them. The cumulative effect of these variables can put a closing on the other side of the 60-day mark.