Real Estate

real estate imagePurchasing and selling property can be exciting, confusing and even complicated. Let Schulman & Kissel’s more than 30 years of real estate transaction experience lead you through the process. Our highly proficient real estate team is among the best in Rockland County and Orange County New York as well as in Bergen County New Jersey.

Frequently Asked Questions

What is the role of my attorney in a real estate transaction?

A real estate transaction is a major financial and emotional step for most people. For this reason, stress levels  are high and what should be a pleasant experience can be a difficult time. We believe that stress levels can be minimized for buyers and sellers if they are educated about the process and enter into transactions in good faith. Through education by your attorney, the parties will have realistic expectations of what happens in a real estate transaction.

Both parties to a transaction benefit from an atmosphere of good faith. Not blind faith, good faith. We protect our clients legally and we are firm when necessary. The problem with many transactions, however, is that the parties (and sometimes the attorneys) assume, usually incorrectly, that the “other side” is motivated by malice. They lose sight of what is important. We do not believe in turning minor issues into major ones. We have found that this can poison the climate for resolving important issues.

What is the legal fee for my transaction?

Real Estate transactions are billed at a flat fee to you. There are no hourly fees. The fee is dependent on the location of the premises, the type of transaction (condo, co-op or single family home; purchase, purchase of short sale premises, purchase with/without mortgage, sale; sale of short sale premises, liens on the premises,etc.), and the complexity of the transaction. You will be advised of the fee at the beginning of the transaction process.

What is the purpose of a home inspection?

Through a home inspection, the buyer can discover the deficiencies – and efficiencies – in the home that were not previously apparent. The buyer can request consideration for legitimate surprises, and become familiar with future necessary replacements and the maintenance needs of the house.

A New York law “requires” a seller to complete a Property Condition Disclosure Statement (“PCDS”) and provide it to a buyer before the buyer signs the contract. It is a declaration of certain information and conditions (i.e. environmental, structural and mechanical) about the property. If a seller does not provide a PCDS, the seller must give the buyer a $500 credit at closing. Ironically, we (and most real estate lawyers) encourage sellers not to provide the PCDS because of the possible liability for an inaccurate disclosure.

A professional home inspector, often an engineer, charges about $400 to conduct a thorough examination of the home. At least one of the buyers should accompany the inspector. In addition to identifying defects, the inspector indicates what requires periodic maintenance or replacement. Please request that a copy of the written report be provided to Schulman & Kissel.

For additional fees, most inspectors will check for wood-destroying insects and radon gas. A wood-destroying insect report, often called a termite report, is required by lenders for all houses, other than new construction. Wood destroying insects include termites, powder post beetles, carpenter ants, and carpenter bees. While easily eradicated, they can literally eat a house if left alone. Most sellers will treat for any active infestation and repair any resulting damage.

What is the purpose of the contract?

The contract defines the entire transaction. A deal is not binding between a seller and buyer until the contract is signed by both sides. Once signed, it is a blueprint for the transaction. Among the more essential clauses in the contract are: the sales price; the down payment; the estimated closing date; the list of personal property included in the sale; and the mortgage contingency. The seller’s lawyer will prepare the contract. The buyer’s lawyer will review it and often propose changes to it. Once the final form of the contract is agreed to, the buyer will sign it and write a personal check for the down payment and then the seller will sign it. We will be happy to answer any questions that you may have regarding the contract.

How final is the closing date?

The closing date generates more disputes and disappointments than any other facet of a closing. Education and mutual fair dealing can eliminate most problems associated with closing dates. Both parties must be flexible. In almost all cases, the closing date in the contract is a target date. This is so regardless of whether it is expressed as “on,” “on or about,” or “on or before,” with the exception of the magic words “time of the essence.” Unless time is of the essence, the date stated in the contract is merely a projected date.

How, then, can one force a closing? Once the contract date passes, either party can make time of the essence by giving reasonable notice. What is reasonable notice depends on the particular circumstances. It is usually between two to four weeks. Making time of the essence is a two-edged sword. It means that both parties must close; a party who does not is in default.

A candid dialogue as early in the transaction as possible allows both parties to plan their affairs based on the realities of the situation. We are convinced that almost all differences concerning the closing date can be resolved by frank negotiations and mutual give-and-take . Many problems are caused when one party has a hidden agenda regarding the closing date. The longer the agenda remains a secret, the more the other party commits to a mistaken belief of when the closing will take place.

Some clients, anxious to close, ask whether a penalty clause is possible. Such a provision would penalize the other party for each day that the closing is delayed beyond a particular date. It is rare for the buyer or seller of an occupied house to agree to a penalty clause. It is common, however, where the seller is a builder, relocation company, or foreclosing bank. These types of sellers are carrying a vacant house. Time is money to them. Therefore they often insist on a contractual provision for a penalty for each day that their buyer delays the closing beyond a specified date. In these circumstances, we try to negotiate a grace period, as low a penalty as possible, and exceptions for delays that are caused by circumstances beyond the buyer’s control. We also request, but usually don’t get, the other side of the coin: a financial incentive for closing before the penalty date.

A closing date can be fixed once the deal becomes firm, which is generally when the buyer obtains a mortgage commitment and meets all of its pre-closing conditions, and the lender advises that the file has been cleared for scheduling. The buyer, seller, their attorneys, and the lender’s attorney (if the buyer’s attorney is not closing for the lender) attend the closing. Lenders typically require three to five business days’ notice to schedule the closing.

Sometimes a buyer wants to close before a seller is ready to vacate. A common reason is that the buyer’s mortgage commitment is expiring. Both the buyer’s desire to close and the seller’s need to remain in possession, can be accommodated through a possession agreement. It provides for the seller to remain in the house after the closing and compensate the buyer for the use of the house during the period of possession. The amount of compensation is usually the per diem interest on the buyer’s mortgage and real estate taxes, with an added penalty if the seller does not timely move. In addition, the seller deposits money in escrow to ensure a timely exodus and that the house will be in the proper condition. Possession agreements are generally for a short duration, three to seven days, but can be longer.

How much is a down payment?

People often use the term ‟down payment” to refer to different things. A hypothetical example: The buyer pays $1,000 on signing a binder to purchase property for $200,000. They pay an additional $19,000 upon signing the contract, bringing the total paid to 10%. Finally, they pay $20,000 more at closing, to make up the difference between the amount owed to the seller and an 80% mortgage of $160,000.

How much is the down payment? It depends on who you ask, and when you ask them. In the example, we have heard it referred to as $1,000, $20,000, and $40,000. We prefer to use it to describe the total amount paid on the contract — $20,000 — and we use it that way in this guide.

The customary down payment at contract signing is between 5% and 10% of the purchase price. If the buyer defaults under the contract, the seller may retain the down payment.

What is a Mortgage Contingency?

In general, most contracts have mortgage contingency clauses. It is just what the name suggests: the entire transaction is contingent on the buyers obtaining financing. If they do not, they may cancel the contract, and the down payment will be refunded to them.

From the sellers’ perspective, a contract without a mortgage contingency is better for the seller because it is more secure. Nevertheless, the overwhelming majority of buyers need financing and, with good reason, require a mortgage contingency. We minimize the risk when representing the seller by screening the buyer’s creditworthiness. If necessary, we speak directly with the lender. While pre-approval is not a substitute for a commitment, it is a step in the right direction. Though we cannot guarantee that the buyers will obtain a commitment, we do what we can to minimize the risk that they will not.

There are many kinds of mortgages. The interest rate, of course, is of paramount concern. The information below will help explain some of the common choices facing home-buyers.

Fixed or adjustable rate? A fixed interest rate provides certainty of future cost, but an adjustable rate starts (and may continue) at a lower rate. A rule of thumb is that an adjustable rate may be indicated if the house will be sold within five years. A risk-taker may opt for an adjustable rate mortgage with a view towards refinancing when fixed rates are lower. Buyers with marginal incomes find that adjustable rate loans are often easier to obtain.

Buying down the rate of a fixed mortgage for the first few years accomplishes the same goal. If you are considering an adjustable loan, be sure to ask your lender about the index, margin, negative amortization, and caps on rate and payment changes.

Points, sometimes called origination fees or discount fees, are each 1% of the mortgage amount. Points have an inverse relationship to the interest rate. In other words, the more points paid, the lower the rate. Points are tax deductible (if paid in connection with the purchase of a residence). While each situation varies, the five year rule of thumb is often applied to points: If the loan will be paid off within five years, it usually is not wise to pay points to lower the rate.

There are special programs for buyers with small down payments. Federal agencies, the FHA and VA, insure loans to applicants with small down payments. Buyers should understand the cost and role of mortgage insurance, which is charged in most cases where the mortgage is more than 80% of the purchase price. Mortgage insurance is often called “PMI.”

What do I need to know about the mortgage application process?

The application process begins with submitting the application and culminates with a mortgage commitment. The application requests basic personal information and a great deal of financial data, such as length of employment, earnings, other sources of income, liquid and non-liquid assets, and debts.

Once you submit the application, the lender verifies your income (with your employer), your assets (with your banks), and your tax returns (with the IRS). The lender will also obtain a credit report and an appraisal of the property.

In most cases, the lender will request additional information or documentation from you. You must act on these requests promptly, or there will be delays. It is much easier to comply with such requests than to try and convince the lender that they are unreasonable – even if they are. If you cannot provide the requested information, or if it would involve a legitimate hardship, call us. In some cases, the lender’s concerns can be satisfied with more accessible information.

Please do not sign the commitment until it is reviewed by your attorney. We look for two things in particular: the terms and conditions. We want to be sure that the financial terms are correct. Also, we carefully review the conditions to confirm that they can be met.

What is a title search?

A title search is the predicate for title insurance and is essential. The buyer’s lawyer orders a title search. When we represent a buyer, we order a search as soon as contracts are signed to avoid any unwanted delays in closing. If the transaction does not close, the charge is the actual out-of-pocket expense for the searches, which is typically about $350.

The title company searches the County Clerk’s records to confirm that the seller owns the property, and to determine whether there are any liens or other encumbrances on the property. In many cases, there is a mortgage lien, which is satisfied at the closing.

Easements and restrictions are encumbrances. An easement is a person’s right to use another’s property. Many, if not most, properties are ‟encumbered” by utility easements. These typically are within 15 feet of the boundaries and are given to the utility, phone, and water companies to run service lines and pipes. Other common types of easements are for drainage or underground sewer lines.

Restrictions are just that. They restrict one’s use of property. Those found in connection with residential development are intended to enhance property values. Some examples: minimum ‟set-back” distances between lot lines and houses; minimum square footage for houses; and prohibitions against commercial trades, noxious odors, and excessive noise.

We will alert you if your property has any easements or restrictions that interfere with its residential use, or that otherwise should be brought to your attention.

Title insurance rates are set by the State Insurance Commissioner. They are one-time charges based on the purchase price, and, to a lesser degree, the mortgage amount.

A ‟market value rider” may be purchased for owner-occupied residential property. In the unlikely event of a complete failure of title, it would cover market appreciation. It does not cover appreciation based on improvements. We will alert you if we believe that you should consider getting the market value rider.

Will I need a survey?

A survey is a sketch of the property boundaries, showing the locations of improvements, such as the house, deck, shed, pool, driveway, etc. The survey often shows the locations of easements, if any.

New surveys are required for new construction. Surveys are not required for condominiums or coops. For resales, an existing survey, updated by the title company doing a personal inspection of the premises, is generally sufficient.

New surveys now cost about $700, plus at least $200 for property corner marking. A personal inspection costs about $150. We try to locate an existing survey to avoid the expense of a new survey.

Will I need a certificate of occupancy?

Certificates of occupancy — CO’s for short — are just what the name suggests: the local building inspector certifying that a structure may be legally occupied. By requiring these, municipalities ensure that dwellings are safe and conform to the local zoning code. Zoning codes regulate a building’s placement on a lot, as well as its size and use.

Houses that were built before zoning laws were enacted are usually ‟grandfathered,” meaning CO’s are not required. Most houses, however, were constructed when zoning laws were in place, and have CO’s.

It is important that a house not only have a CO for its initial construction, but that it also have a CO for any improvements that require it. Although building departments vary regarding what improvements require CO’s, we can make some generalizations: Certificates of occupancy are needed for additions, renovations that involve structural, plumbing or electrical work, fireplaces, rebuilding or enlarging a deck, in-ground swimming pools, and some sheds.

How does a buyer know whether the house complies with building codes and zoning laws?

The title company does a CO/violation search, which costs about $300. It requests the local building department to provide copies of all CO’s on file and to report on whether there are any violations. Some building departments simply consult their files, while others make on-site inspections. Of the latter, some only view the exterior of the house, and others do an interior inspection.

The seller must obtain a CO for any improvement that requires it. Depending on the particular improvement and building department, this can be quick and simple or long and complicated.

What can I expect at the closing?

We find that the closing can be a smooth and enjoyable event when the lawyers and clients are properly prepared. Schulman & Kissel, P.C. will provide you with a set of specimen closing documents with explanations in advance of the closing. Therefore, if you wish, you can be familiar with the closing documents in advance of the closing. When possible, we try to coordinate the closing so the buyers can close their mortgage, which involves a considerable amount of paperwork, before the sellers arrive. We have found that this expedites the closing.

Buyers must inspect the house shortly before the closing by doing a walk through. The real estate broker usually arranges for this. If there are any problems, contact our office immediately.

Both buyers and sellers must bring photo identification, such as a valid driver’s license. Sellers should bring the keys, garage door openers, and alarm codes. Buyers should bring the original homeowner’s fire insurance policy and original paid receipt, if we do not already have them. Buyers should also bring any original documents that the lender requires, such as an original termite certificate, original gift letter, etc.

How much money do I need to bring to closing?

The buyers should bring one or more certified or cashier’s checks. Although we usually do not have exact figures until the closing (or sometimes shortly before), we will tell you how much to bring (and to whom it should be payable) in advance of the closing.

In a purchase transaction, other than the “flat” legal fee, closing costs are directly related to the purchase price and amount of mortgage funding. During the meeting to sign contracts, closing fees are discussed in detail. Purchaser’s closing costs include all lender fees (including appraisal fee, credit report fee, prepaid interest, escrows); legal fee to attorney for the lender; mortgage tax, title insurance for purchaser and lender; title search &departmental search fees; recording fees; and tax adjustments to the seller.

In most sale transactions, the seller does not need to bring any funds to the closing. All seller closing costs are deducted from sales price and seller gets net proceeds at closing. The fees are: realty transfer tax, $4.00 per thousand dollars of sale price; real estate commission-as negotiated with realtor; legal fee; and, if applicable, title closer pick up fee for each mortgage or home equity line of credit payoff. If the net funds to cover closing costs are more than the sales price, the seller will need to bring funds to the closing.