My offer to purchase an apartment has just been accepted. What are the next steps?
Hire a real estate attorney licensed to practice law in New York and experienced in representing home buyers. Your attorney should perform “Due Diligence” that includes reviewing the Offering Plan, all Amendments to the Plan, the By-Laws, the Proprietary Lease (for co-op apartments) and the financial statements for the building. In addition, your attorney should review the corporate board minutes of the co-op or condominium and speak with the building’s property manager to ascertain, among other things, any physical or financial problems with the building. If you are financing your purchase, and have not already done so, you should contact a Lender to obtain a loan pre-qualification letter.
Who prepares the Contract of Sale?
It is customary for the Seller’s attorney to prepare the contract. Your attorney will review it with you and negotiate any necessary revisions with the Seller’s attorney. After the contract has been fully negotiated, you will sign and return four copies of the document to your attorney along with a check for the downpayment.
How much is the downpayment and who holds it?
The downpayment is typically 10% of the purchase price and is held by the Seller’s attorney in a special bank account called an escrow account or attorney trust account. Unless you are purchasing from a Sponsor or Developer, the money is generally held in a non-interest bearing account. The downpayment may be paid by personal check.
What if I change my mind about purchasing the apartment after signing the contract? Can I get my downpayment back?
Generally, you cannot cancel a contract after it has been countersigned, but most contracts contain provisions that allow the Purchaser to cancel the contract and recover the downpayment if certain events occur. These contract provisions are called “Contingencies”.
What are the typical contract contingencies?
If you are purchasing a co-op apartment, approval of your purchase by the building’s board of directors is a standard contingency. If you are purchasing a condominium apartment, your obligation to purchase will be contingent upon receipt of a waiver of the condominium board’s right of first refusal to purchase the apartment. Your contract may also contain a financing contingency that allows you to cancel the contract and recover your downpayment if you are unable to obtain a loan to finance the purchase.
What is the next step after I have signed the contract and submitted a loan application?
If you are purchasing a co-op apartment, you must complete and submit a purchase application (also known as a “Board Package”) to the managing agent for the building. The purchase application generally requires personal and business references, a statement of assets and liabilities, income tax returns and recent bank statements. After the co-op board reviews your purchase application, you will be required to submit to an interview by the board. If you are purchasing a condominium apartment, the application is generally far less extensive and no board interview is required. If you are working with a real estate broker, your broker will review your application prior to its submission to the managing agent.
What happens after I obtain a loan commitment?
You should give your real estate broker and your attorney a copy of the loan commitment letter along with any correspondence from your Lender’s attorney and discuss any loan conditions with your mortgage company or Lender. If you are financing your purchase, you may not submit your purchase application until you have received a loan commitment letter. If you are purchasing a co-op apartment, you will also be required to sign and deliver to the building’s managing agent or your real estate broker a document called a “Recognition Agreement” (also known as an “AZTECH Form”), which you will receive from your Llender shortly after you receive your loan commitment letter. You will also need to sign an authorization to permit your Lender to pre-file a lien against the apartment you are purchasing. The lien is filed by means of a form called a UCC Financing Statement. Once signed, the pre-filing authorization should be returned to the attorney representing your Lender who will make arrangements to file the UCC Financing Statement in the New York City register’s office prior to closing. A closing cannot be scheduled until the UCC Financing Statement is recorded.
What is the difference between a lien search and a title report, and who orders it?
For co-op purchases, a lien search is required to determine if there are any judgments or liens against you, the Seller or the co-op building. The Seller is required to remove any judgments and liens prior to closing. For condominium purchases, a title report serves the same function as a lien search but it also insures, by means of a title insurance policy, that the Purchaser has received clean title to the apartment. The lien search or title report is ordered by your attorney shortly after the contract is signed.
What is a closing and when does it occur?
A closing is a meeting between the Purchaser and Seller along with all of the necessary parties to the transaction. At closing, the Purchaser obtains the proceeds of his or her loan from the Lender, pays the Seller the balance of the purchase price and becomes the new owner of the apartment. It is very important to be aware that although the contract will state a specific closing date, the closing date in the contract is simply a target date, due to the many variables and numerous tasks that must be accomplished between the signing of the contract and the closing. The closing is not scheduled until all of the conditions in the loan commitment letter have been satisfied, the UCC Financing Statement has been recorded, the Purchaser’s application has been approved (for co-op purchases), the waiver of the right of first refusal has been issued (for condominium purchases), the Seller has cured all title issues and arranged for the payoff of his or her mortgage, if any, and after your attorney, the Seller’s attorney, the title company (if a condo purchase), the managing agent and the Lender’s attorney have arrived at a mutually agreeable closing date, time and location.
Can I postpone the closing if I am not ready to close?
The law in New York allows either party to postpone the closing for a reasonable period of time (generally up to 30 days) beyond the closing date set forth in the contract.
What can I expect my closing costs to be?
Closing costs will vary depending on the type of property purchased and the type of loan you have chosen. Generally, closing costs for a single-family house or condominium apartment will be greater than those for a co-op apartment. Purchasing an apartment from a Sponsor or Developer of a co-op or condo building may also substantially increase your closing costs. After you submit your application for financing, your Lender will send you a document called a “Good Faith Estimate” which will give you an estimate of your closing costs. You should consult with your attorney to insure that the estimated costs conform to your understanding of the costs of purchasing and financing.
This page is intended to provide general information about the purchase of residential cooperative and condominium apartments in New York. Every real estate transaction is unique. Always consult with a lawyer before signing a contract of sale.