INTRODUCTION
The law offices of Pun & Associates provide legal representation to individuals or entities that are looking to sell residential real estate. In this context, residential real estate means a property that is classified by the municipal building department to be occupied by one to three families. Potential sellers of residential real estate may be looking to sell property that was a primary residence, a seasonal home, or was strictly an income generating investment property. The reasons to sell a residential property vary. One reason may be that the property may no longer fit one’s needs in that it is too small or too large to live in. Another reason may be that the seller received an offer to sell that was too good to refuse. Another potential reason may be that the property is too costly to maintain or that it is on the verge of being foreclosed by a lender under a note and mortgage or by a municipality for unpaid taxes or water charges.
Whatever the reason may be to sell a residential property, the law offices of Pun & Associates takes pride in providing quality legal services and representation to individuals or entities who are looking to sell residential real estate in the New York and New Jersey metropolitan area. The New York and New Jersey metropolitan area shall comprise of all five boroughs of New York City, Nassau and Suffolk counties in Long Island, Rockland and Westchester counties in New York State, along with all New Jersey counties.
If you are a first-time seller of residential real estate or if you have already sold residential real estate, Pun & Associates will represent you in the selling process. Our dedicated staff and experienced attorneys will help make selling your residential property as effortless and as stress-free as possible. You should know that from contract signing to closing, it is reasonable to expect the closing of the sale of your property to take anywhere between 1-3 months. Of course, this is not always the case in that some contracts of sale close more than 3 months after the signing of the contract. Contracts with a buyer or buyers who will need mortgage financing generally take longer to close.
As selling residential real estate is a complex transaction, it is always advisable that you obtain the representation of an attorney to safeguard your rights and clarify your responsibilities throughout the selling process. We, at Pun & Associates, will be with you every step of the way from the signing of the contract through to the closing of the property.
PRIOR TO SIGNING THE CONTRACT OF SALE
When selling a residential property, you may or may not use the services of a real estate broker. It is not necessary to hire a real estate broker to help you sell your residential property; however, more often than not, sellers choose to hire a real estate broker to help sell their property. The reasons for hiring a real estate agent relate to convenience. Most people do not have the time to show their property to any interested buyers or answer questions from interested buyers regarding the property because of daily activities such as work or running errands. As such, hiring a real estate broker allows an owner to delegate the tasks necessary to find a willing and able buyer of the property to be sold. The real estate broker will publicly list the property for all possible prospective buyers to obtain a general idea about the property and the selling price for the property. The real estate broker will communicate directly with any and all prospective buyers who are legitimately considering purchasing the property. The real estate broker will also set up viewing arrangements of the property for any and all prospective buyers who want to see the property in person. All of this can be done without the seller being present at the property. The cost of the real estate broker’s commission varies, depending on whom you choose. Brokers typically charge 2% - 3% of the sales price. You would likely need to do a little research on real estate brokers and see how past sellers reviewed their services.
In a situation where you personally know the buyer and you have a mutually agreeable price for which the property will be sold, then you may not need to hire a real estate broker. In such a case, you could save yourself thousands of dollars not having to pay a broker’s commission.
Once you have selected a prospective buyer and you have agreed on a sales price for the property, you will want to have the terms and conditions of the sale to be put in writing in the form of a contract of sale. Before you sign the contract of sale, have an attorney review the contract. The attorney will likely make revisions to the contract for your benefit. The attorneys at Pun & Associates can skillfully review and modify the contract of sale to make sure your interests are protected in the contract.
In addition, it is likely the buyer or buyers will conduct a home inspection of the property just before the contract is signed. Any repair or replacement requests made by the buyer or buyers as a result of the inspection results may be completely allowed by you or countered by you with a complete rejection or a partial agreement to do some repair or replacement or to provide a monetary credit to the buyer or buyers.
THE CONTRACT SIGNING
During the modification of the contract of sale, there may be multiple changes to the contract proposed by your attorney and buyer’s attorney. The experienced attorneys at Pun & Associates will provide you with the guidance that you need and will make whatever changes are necessary to the contract to protect your rights and interests. Our attorneys will not have you sign the contract until we are certain that the terms and conditions are fair to you. The office of Pun & Associates will then send the contract of sale to the buyer’s attorney’s office for the buyer’s signature and payment of the down payment.
Once the contract of sale and its modifications, if any, are signed by you and the seller, there is a binding contract between you and the seller. The buyer will have to pay the down payment, typically 10% of the purchase price. The down payment will be sent by the buyer’s attorney to your attorney. Your attorney will hold the down payment in an escrow account, only to be released to you upon a successful closing.
If the buyer is not using his/her/their own money to pay for the entire purchase price, then he/she/they will need to obtain a mortgage loan. Buyers are typically given forty-five (45) days to obtain a mortgage commitment from an institutional lender after the contract of sale is finalized. As a seller, you will have to wait at least that amount of time to see if the buyer or buyers obtain a mortgage commitment.
The alternative will be to not grant the buyer time to obtain a mortgage commitment. In such a case, it would be best to obtain a buyer who can afford to pay for the property in cash. However, there are not too many prospective buyers who are able to do that. Nonetheless, you could still insist on not having a mortgage commitment clause in the contract and if the buyer cannot get a mortgage commitment and, as such, are not financially able to close on the prospective contract closing date, the buyer may be considered in default on the contract and it is possible you could keep the down payment as damages.
In addition, the buyer’s attorney will order a title insurance commitment with a title insurance company. If the title commitment discloses issues with title that can be rectified by you, in most instances such title issues will be required to be cleared prior to closing. If the issues cannot be rectified and the buyer decides not to go forward with the purchase, then the contract will likely be terminated and the down payment is to be returned to the buyer.
CLEARING TITLE AND PREPARING FOR CLOSING
Assuming that title is clear or that whatever title issues there were are now clear, you, as seller, are ready to go to closing and sell the property. At least, theoretically you are ready. In addition to providing clear title to the buyer or buyers, if the contract calls for the property to be vacant at closing, you will have to provide the property vacant and in a broom clean condition. This means that you should have plans for moving into another property, provided that the property being sold was your primary residence. If the property was an investment property or was your primary residence with at least another residential unit being rented out, then you will need to have removed the existing tenants from the property prior to closing. We, at Pun & Associates, can negotiate on your behalf any extensions of time that you may need to deliver the property vacant at closing.
Not uncommon within contracts of sale are use and occupancy agreements. These agreements allow the seller of a property to stay in the property for a fixed amount of time (one week or one month or some other amount of time) after the closing. If the seller stays past the agreed upon date, the seller will have to pay an amount of money to the buyer or buyers for each day past the agreed upon date the seller stays at the property. Usually the per diem penalty amount is around $200.00. At closing, the seller’s attorney will hold a part of the purchase price for purposes of the use and occupancy agreement. If the seller leaves on or before the agreed upon date and has left the property vacant and in a broom clean condition, then the escrowed monies held by seller’s attorney will be released to the seller.
Provided that you can deliver the property vacant and in broom clean condition and the buyer is ready to close, then a closing date will be agreed upon between your attorney and the buyer’s attorney. Once a date and time is agreed upon, you should schedule a walkthrough of the property with the buyer and your real estate broker present at least 24 hours before the closing date. It is at that time that the buyer or buyers will advise you of any issues with the condition of the property and/or any system within the property that they would want fixed or given a credit for. These issues are to be negotiated prior to closing between the attorneys. Usually, walkthrough issues are remedied with the granting of a credit to the buyer in an amount that is reasonably expected to cost for repair or replacement of the issues.
CLOSING DAY
Assuming that the issues found in the walkthrough have been sufficiently addressed to your liking, the closing will happen within the next 2-3 days. At least three days prior to closing, your attorney and the seller’s attorney will communicate to determine financial adjustments for the closing and whether either you or the buyer or both, are entitled to any credits for taxes, water or sewage charges paid to date.
Your attorney will then inform the buyer’s attorney as to how the monies brought to closing by the buyer and the buyer’s lender, are to be distributed. Not all of the monies will be going to you at closing. You, as seller, have costs to pay at closing. If you have a real estate broker, you will have to pay for the broker’s commission which could be anywhere from 1% to 6% of the purchase price. If your property is mortgaged, then you will have to payoff the mortgage in full at the closing. Of course, you will have to pay your attorney. You will also have to pay transfer taxes on your sale of the property. If the property is in New York City, you will have to pay transfer taxes to both New York City and the State of New York. If the property is in Yonkers or Mount Vernon, like in New York City, you will have to pay state and municipal transfer taxes. If the property is anywhere else in New York State, then you will pay just state transfer taxes. If the property is in the State of New Jersey, then you will have to pay state transfer taxes.
On closing day, assuming any and all title and property condition issues have been cleared, you will provide the buyer or buyers with a deed upon the buyer or buyer’s tendering of the purchase price to you. Congratulations, the sale of your property is now complete!