What will our firm do
for you as your Representative?
| Property Sale/Purchase/Transfer Price | Attorney Fee |
| Up to $50,000 | $350.00 minimum |
| $50,000.00-$100,000.00 | $550.00-$650.00 min. |
| Over $100,000 | $750.00 minimum |
Do I need a lawyer? I can buy an automobile or 100 shares of stock without a lawyer. Why not a one or two family home?
Buying a home
Buying a home is not only the most significant and largest purchase you will make, it also involves the law of real property which is unique and has special problems. A lawyer is trained to deal with these problems and often has the most experience to deal with them. This applies to people selling a home or buying a home.
In the typical home purchase transaction the seller enters into a brokerage contract with a real estate agent, which is usually in writing. When the broker finds a potential buyer, negotiations are conducted through the broker, most often acting as an intermediary. Once an informal agreement is reached, buyer and seller enter into a formal written agreement. The buyer then obtains a commitment for financing. Title is searched to satisfy the lender and the buyer. And finally the property is transferred from the seller to the buyer and the seller receives the purchase price bargained for in the contract. Seems simple and uncomplicated. But, without a lawyer, the consequences may be more disastrous than purchasing a car that turns out to be a lemon or a stock investment that was unwise.
What are some of the reasons why you need a lawyer for a home purchase or sale?
1. A seller without the advice of a lawyer, may sign a brokerage agreement that does not deal with a number of legal problems. The seller may become liable to pay a brokerage commission even if a sale does not occur or to pay more than one brokerage commission. For example, does the agreement offer the seller the right to negotiate on his or her own behalf; what is the effect of multiple listings; what are the broker's rights if the seller withdraws the property from the market, or can't deliver good marketable title; how long should an exclusive listing last? The seller should have the advice and guidance of an attorney with respect to a brokerage agreement. Even if the agreement is a so called "standard form", its terms should be explained to the seller and revised, if necessary. An attorney is also necessary to determine if the agreement was properly signed.
The buyer and seller may have to consult with a lawyer to answer important questions, such as the tax consequences of the purchase or sale.
2. Even though a lawyer may not be needed during the course of negotiations, the buyer and seller each may have to consult with a lawyer to answer important questions, such as the tax consequences of the purchase or sale. To a seller, the tax consequences may be of critical importance. For example, what are the income tax consequences of a saleÉparticularly if you have a large profitÉif you are over 55 or buy another home within two years.
Aside from the tax consequences, the buyer and seller may have questions about the date set for closing, issues of occupancy; fixtures and personal property; and loss due to fire or other casualty. These are some of the many questions that may need to be considered during the negotiation stage in order to avoid disputes when a written contract is prepared.
An attorney is helpful in explaining the nature and amount of closing costs.
3. The formal written contract for the sale and purchase of a home is the single most important piece of paper in the transaction. Its importance can not be overestimated. Although printed forms are useful, a lawyer is once again necessary to explain the form and make changes and additions for a particular transaction to reflect the understanding of the buyer and the seller. There are many issues that may need to be addressed in the written contract. For example, how should title be taken; individually, as tenants in common, joint tenants or tenants by the entirety. What happens if someone dies before title is transferred? The answers to these questions require the training and knowledge of a lawyer.
There are numerous other legal questions that must be addressed in the contract, including the following. If the property has been altered or there has been an addition to the property, was it done lawfully or may what is planned for the property by the buyer be done lawfully? What happens if a buyer has an engineer or architect inspect the property who finds termites, asbestos, radon or lead based paint? What if the property is proximate to a hazardous waste dump site? What are the legal consequences if the closing does not take place and what happens to the down payment? Will the down payment be held in escrow by a lawyer in accordance with appropriately worded escrow instructions? How is payment to be made? Is the closing appropriately conditioned upon the buyer obtaining financing? These are only a few of the many questions that arise with respect to a contract.
4. Most buyers finance a substantial portion of the purchase price for a one or two family home with a mortgage loan from a bank or other lending institution. The contract should contain a carefully worded provision that it is subject to the buyer's obtaining financing. Printed contract forms are generally inadequate to incorporate the real understanding of the buyer and seller without changes being made. In addition, there is now an extensive and often confusing menu of mortgages that may be available. Fixed rate mortgages versus adjustable rate mortgages and the complexities of each require the knowledge of an attorney who is familiar with current mortgage lending practices. Mortgage loan commitments and mortgage loan documents are also complex. Lawyers are necessary to review and explain the importance of these various documents. Buyers should know when and if they can prepay their mortgages; what happens if they make a late payment; how is interest computed; how much insurance does the lender require; how are real estate tax payments computed and collected and the answers to a myriad of other questions that may arise. Moreover, when dealing with the lender, although there is little room for negotiation, there is a need for the general assistance of a lawyer at the very least to explain what is happening and its consequences.
5. After the contract is signed it is necessary to establish the state of the seller's title to the property to the satisfaction of the buyer as spelled out in the contract. Generally, a title search is ordered from an acceptable abstract or title insurance company. However, in some areas of New York State, title insurance is not obtained. In such cases an attorney is essential to review the status of title and render an opinion of title in lieu of a title policy. Assuming you are in an area where title insurance is customary, who will review the title search and explain the title exceptions as to what is not insured? Is the legal description correct? Are there problems with adjoining owners or prior owners? What is the effect of easements and agreements or restrictions imposed by a prior owner? Can I build a swimming pool or tennis court? Can I conduct a business in a spare room? Will there be any legal restrictions that will impair my ability to sell the property? Can the utility company build a high tension transmitter in the back yard? It should be clear that the guidance and advice of a lawyer can avoid a very costly mistake.
A lawyer's advice and guidance is essential from the time you decide to sell or to buy a home until the actual closing.
6. The title search does not tell the buyer or seller anything about existing and prospective zoning. Does zoning prohibit a two family home? Does the deck you are planning violate zoning ordinances? There are invariably some questions that will require you to call upon a lawyer for the most direct and efficient response to your inquiry.
7. Finally, there is the necessity of having a survey map of the property, which is a necessary adjunct to a title search. A lawyer is trained to review this survey, which may give rise to future problems. For example, your neighbors' fence or driveway may encroach upon your property or vice versa. A garage may have been built on a municipal street. Should you accept title? Will a lender give you a mortgage with these encroachments?
8. The closing is the event which is the "moment of truth" of the purchase and sale transaction. The deed and other closing papers must be prepared. Title passes from seller to buyer who pays the balance of the purchase price. Frequently, this balance is paid in part from the proceeds of a mortgage loan. A closing statement should be prepared prior to the closing indicating the debits and credits to buyer and seller. An attorney is helpful in explaining the nature and amount of closing costs. Final documents including the deed and mortgage instruments are signed. An attorney is necessary to assure that these documents are appropriately executed and explained to the various parties.
The closing process can be confusing and complex to the buyer and seller. Those present at the closing often include the buyer and seller, their respective attorneys, the title closer (representative of the title company), attorney for lending institution and real estate broker. Documents need to be recorded; various transfer taxes need to be paid, and provisions for insurance and other incidents of ownership need to be concluded. There may also be last minute disputes about delivering possession and personal property or the adjustment of various costs, such as fuel and taxes. Here a lawyer's advice and guidance is essential.
9. Special mention needs to be made about condominiums, cooperatives and homeowners associations. These involve forms of ownership that are treated as securities under New York State law and require special documents that are complicated and should be reviewed by an attorney. Condominium declarations, proprietary leases, and by-laws are but a few of the complex documents confronting buyers of these forms of property ownership. The tax deductions and consequences with respect to the purchase of a condominium or cooperative also need to be explained by a professional that is familiar with these common ownership forms.
A lawyer's advice and guidance is essential from the time you decide to sell or to buy a home until the actual closing. It is obvious that throughout the process the interests of the buyer and seller will conflict. The broker generally serves the seller and the lender is obtained by the buyer. The respective lawyers for buyer and seller will have no such conflicting loyalties and will serve only their clients' best interests. That's why you need a lawyer.
This information, which is based on New York law, is intended to inform, not to advise. No one should attempt to interpret or apply any law without the aid of an attorney.
Nearly everyone, at some time in life, faces the problems of buying and selling real estate. The purchase of a home is probably the largest single investment a person will ever undertake and, therefore, careful consideration should be given to the technical difficulties involved in the transfer of real estate before any action is taken.
Contracts
Once you've found the house you'd like to buy and have agreed on the price, you will probably be asked to sign a paper and pay a deposit. This paper may be called a binder, receipt, purchase offer or agreement and is usually prepared by the seller's agent (that is, the seller's real estate broker or attorney).
Any one of these papers may constitute a binding contract requiring you to purchase the house. Before signing it, you should consider seeking legal advice. Remember that once a contract has been signed, your rights and obligations are fixed concerning the transaction and your attorney may not have the opportunity to structure the contract to meet your objectives.
Whether you are seller or buyer, you should understand the contract terms and how they affect you. The other parties to the contract may not be under any obligation to tell you what the contract means and you may not understand the legal meaning of much of the terminology.
So, if you are going to have an attorney represent you in the transaction, the time to consult one is before you sign any papers.
The contract of sale should state the parties, the purchase price and how it is to be paid, an adequate description of the property being sold, the kind of deed to be delivered, the quality of the seller's title to the property, a description of personal property included in the sale, the date you are to take possession, and other clauses relating to the property and the parties' respective responsibilities to each other.
The contract should also permit the buyer to cancel the contract if financing can't be obtained and provide for the return of the down payment if the sale falls through. Or, perhaps the seller may want to retain possession of the property for some time in order to find new accommodations. If so, appropriate clauses can be included in the contract defining such rights.
These are only a few matters usually covered in the contract. However, they illustrate the variety of terms and conditions to be considered when you enter into such a transaction.
Plain Language
All contracts and mortgage documents for the purchase and sale of real estate costing $50,000 or less must be written in non-technical language and in a clear and coherent manner. This requirement applies only to real estate which is, or will be, personally used by the buyer or seller.
Title
The "title" to real estate is the right of the owner to its peaceful possession and use, free from the claims of others. Often, however, the exercise of that right is limited by the existence of other rights which are called easements. To obtain electricity, sewers, telephone, etc., an owner gives the municipality or public utility the right to run its lines or pipes across his or her property to the house. Other often encountered easements provide for drainage of surface water, or access rights of way such as for a jointly-used driveway. These easements must be recognized by the owner in the use of the property and considered by the buyer who is purchasing the property.
There are other ways in which the use of the owner's property may be limited. One is by restrictions in the deed; another is by local zoning law. Also, almost all land is subject to real property taxes, which if not paid, may result in the loss of title. Other debts owed on the property (for example, special assessments or levies) can also cause problems later on.
When you buy a home, you should be certain that you have the right to occupy it without interference and that you later will be able to sell or mortgage it without problems.
Title Searches
After the contract has been signed, you should satisfy yourself that the seller can convey a "marketable" title to the property to you as agreed upon in the contract of sale.
In different areas of the state, varying methods are used to make sure that the title received from the seller is marketable.
In some areas, your lawyer will make his or her own examination of the records and issue a certificate indicating the findings. In other areas, your lawyer may supply you with a written title opinion based on an abstract of title (which is simply a title history) prepared by a commercial abstractor. In still other areas, your attorney may take out a title insurance policy. Or, a combination of any of these methods may be used.
A word about title insurance - while it may give you protection against financial loss and the possible expense of defending your title in court, it does not lessen the importance of your lawyer's advice. Your lawyer can advise you whether and how to obtain title insurance and also on the terms, exceptions, and conditions of a title insurance policy.
Buyer's Duty to Inspect
Under New York law, the buyer of a house that is not newly constructed has a duty to inspect the condition of the house and land. The buyer should carefully look over the property and is also urged to consider hiring a home inspector to perform a professional inspection, preferably prior to signing a contract of sale. Alternatively, the contract of sale should be conditioned on receipt of a satisfactory inspection. The buyer also has a duty to ask questions about any conditions observed. Buyers of newly constructed houses are protected by a statutory housing merchant implied warranty under General Business Law § 777-a.
Form of Deed
In residential transactions there are two generally used Forms of Deed. The first is called a "Warranty Deed", which assures the buyer that the title is good against anyone who may claim a superior title. The second commonly used Form of Deed is the "Bargain and Sale Deed With Covenant Against Grantor's Acts." This deed assures the buyer that the seller has done nothing to affect the title to the property through his or her own acts or omissions. In both instances, if the title is insured by a title insurance company, the buyer will look to the title insurer for protection against claims even though the buyer may make claim against the seller.
A "Warranty Deed" assures the buyer that the title is good against anyone who may claim a superior title.
Representation
Remember one important point - the seller, broker, and bank in the transaction may have an attorney representing each of their interests. An attorney representing any of these parties (even though you may be charged with a fee, as in the case of a bank), is not your attorney. It is your own responsibility, as the buyer, to seek the professional advice of an attorney to protect yourself and to be sure that you get precisely what you are legally entitled to receive.
Closing
The "closing" of the purchase of your home is the transaction in which you receive all the documents required to convey the title of your home.
At the closing these documents are reviewed to be sure that the conditions and promises of the purchase contract are fulfilled. Also at this time, the balance of the purchase price is paid to the seller.
Arrangements are made at the closing for the time when you will occupy the home. Normally, when the full purchase price is paid, the keys to the house are delivered to the buyer, who then has the right to move in immediately. However, your purchase agreement may also specify that you move in at a later date.
The important thing to remember is that buying a home is a major investment. It usually involves making payments over a period of years. In the long run, it's likely to be more economical to have competent professional advice - your attorney's advice - in making the purchase than to risk the trouble and expense that could result from not having that advice in the first place.
This information is based on New York law and is intended only to inform, not advise. No one should attempt to apply or interpret any law without the aid of a trained expert. This is particularly true of real property law. You should consult a lawyer before making decisions in this area. Produced by the NYSBA Public Relations Committee in cooperation with the Real Property Law Section.