Saturday, January 22, 2011
I have to pay a higher interest rate because of a delay in closing, who's responsible?
Today we have a couple of questions answered by New York City based Real Estate Attorney Keith Schuman, about the closing process on your coop, condo, or loft. After the deal is struck, your attorney and broker will work to get it closed. The road is often smooth, but issues can arise. Having the right representation can really help keep a deal on track.
If a Purchaser must pay a loan extension fee or a higher interest rate as a result of a delay in closing, is the Seller liable for these expenses?Closings are delayed for many reasons. A Seller has no control over how quickly the Purchaser obtains financing or the timing of the Board's review of the Purchaser's application and the Seller is not responsible if the delays cause the Purchaser to incur additional financing costs. Often, closings are delayed because a Seller has exercised its legal right to postpone the closing or a transfer agent is not available. All of this should be properly explained to a Purchaser at the beginning of the process so that a Purchaser understands and is prepared for the possibility of a delayed closing. This is particularly important as it relates to interest rate locks. Purchasers frequently lock in their interest rate prematurely and may incur additional bank fees if they do not understand that closings are commonly delayed.
What Due Diligence should a Purchaser's Attorney Perform?Prior to signing a contract, the Purchaser's attorney should review the underlying documents relating to the Coop or Condo. For a Condo purchase, the lawyer should examine the offering plan and all amendments; the bylaws, the rules and regulations of the building (sometimes called the House Rules) regarding pets, guests, alterations, repairs, sublet policies and home occupations, the board's minutes and the financial statements for at least the previous two years. Although there are no financial statements or board meeting minutes available for new condominium construction, the offering plan will outline the potential risks for the buyer and describe the closing fees and procedures. For an existing coop or condo, the Purchaser's attorney should review the materials described above and read the Board minutes and interview the property manager. The attorney's role is to thoroughly investigate and analyze the Coop or Condo's underlying documents as well as the physical and financial condition of the building to uncover any serious issues which would be important to the Purchaser to be aware of when making a decision to purchase in a particular building. Of particular importance are potential or current special assessments to raise additional capital, pending maintenance increases, discussions of the need for capital improvements or other necessary repairs to the building, lawsuits involving the building, and quality of life issues with neighbors or neighboring buildings such as problems with noises, odors and leaks.
About the author: Keith A. Schuman, Esq. is the founder of Schuman & Associates, LLC, a full service real estate firm that provides legal services to its clients, through all aspects of their transactions. Keith is a frequent contributor to comitini.com. Contact him at firstname.lastname@example.org or phone 212.490.0100.