We're getting back to basics again today with a post that first time buyers will find very helpful. Real Estate Attorney Keith Schuman reviews for us the process and considerations of 'going to contract' on a home in New York City. He defines the terms and contingencies which you'll need to think about and negotiate. Its a long post, with a lot of information, made just a bit longer by my introductory comments here.
As Keith points out, the process often starts with someone like me helping to identify a home, then submitting an offer, and advocating for your interests. Right now the market complexion has shifted to a buyer's market in Manhattan, and a changing market is the most difficult kind to bring about a meeting of the minds between the principals. Both parties are often overreaching. Many sellers are in denial about how their home values may have changed. Yet many buyers are equally unrealistic and hesitant in their approach to negotiating a deal. There are some good reasons to be a buyer right now which I covered in my post Reasons to buy an apartment in Manhattan in 2009. Low interest rates, incentives, and in many cases, some real horse trading are driving the deals.
I read a lot lately from real estate market pundits, and the press, about the macro economic environment in which the deals are happening. It does, of course, have bearing. Like everyone, I listen carefully and read the data. I even cover some of it here too. It may sell newspapers and influence Web site traffic, but I sell property. I'm hired to do transactions, not economic trend analysis. The devil is in the details. The value of a broker's experience on your deal is more granular and personal. It's like constantly twittering the question, "What's the best deal for my client on a specific parcel of property?" Neighborhoods, buildings and the individual apartments within them, can have significant differences. I've not seen a marketplace that is changing as rapidly as this one. The guidance is crucial for closing the most successful outcomes, and there is little substitute for market knowledge that comes from having feet on the ground, and one's sight set ahead of the generally lagging indicators of sold and closed sales.
Keith's piece follows; feel free to email us with questions or leave a comment below.
Once you have found the home that you would like to purchase, you will be ready to submit your offer.
If you are working with a real estate broker, he or she will submit your offer and will usually be involved throughout the negotiation process. Many purchasers feel more comfortable negotiating through a real estate broker rather than dealing face-to-face with the seller.
In most cases, the seller already has stated an asking price. You do not have to accept this price. In fact, the seller typically expects some negotiation of the price and the other terms of the contract. Usually a contract is determined though a series of offers and counteroffers until both parties agree on the price, the closing date, the loan amount, if any, and the length of time to obtain a loan if the seller has agreed to a financing contingency (defined below), any repair work, the condition of the property, and the inclusions or exclusions of personal property within the home. Once the seller accepts your offer, you should immediately inform your attorney.
Contract of Sale
A real estate contract is written evidence of the agreement between a purchaser and a seller. The contract will specify all of the terms and conditions of the transaction and will describe the parties’ respective rights and obligations. The contract also will contain contingency provisions and representations of the purchaser and seller that describe what will happen if things do not go exactly as stated in the contract. As soon as your offer is accepted, the seller’s attorney will prepare the contract of sale and forward it to your attorney. Your attorney will explain your rights and obligations under the terms of the contract and will negotiate any necessary changes to the contract with the seller’s attorney. After all of the terms in the contract are agreed upon, your attorney will send you four copies of the contract for you to sign and return to his or her office along with a personal check for the down payment as specified in the contract. This check will be deposited by the seller’s attorney in an escrow account until the actual closing date.
Basic Terms and Contingencies
The contract will identify the purchaser and seller, their attorneys, the house or apartment to be sold, the party who will hold the contract deposit (usually the seller’s attorney, also referred to as the escrow agent), the names of the real estate broker(s), the current real estate taxes (if a condo or house), common charges, or maintenance fees, and any assessments that may be levied against the coop or condo apartment, whether or not there is a flip tax (transfer charge levied by the cooperative corporation), and the party who is responsible for making this payment. The contract also will state if the purchase is contingent on the buyer obtaining a loan (i.e., the financing contingency), and if so, the amount of the loan. The contract will identify the proposed occupants of the home and if there will be any pets.
Following are definitions for several key terms which typically will appear in the contract: