REAL ESTATE FAQ


REAL ESTATE TRANSACTIONS: ANSWERS TO THE QUESTIONS MOST OFTEN ASKED

TABLE OF CONTENTS
II. THE ROLES INVOLVED IN A RESIDENTIAL REAL ESTATE TRANSACTION
III. THE OFFER AND ACCEPTANCE
IV. THE PURCHASE AGREEMENT
V. FINANCING
VI. TITLE INSURANCE, TITLE OPINIONS AND TITLE ISSUES
VII. THE CLOSING
VIII. POSSESSION OF THE HOME
IX. REAL ESTATE TAXES AND SPECIAL ASSESSMENT ISSUES
X. HOW TO HOLD TITLE TO YOUR PROPERTY

I. DEFINITIONS

Abstract of Title: A condensed historical summary of the ownership of a piece of property showing all recorded documents that affect the land including transfers of ownership and any right that persons other than the owner might have in the land.
Addenda: Separate writings that become part of the purchase agreement.
Appraisal: The estimate of value made by an impartial expert.
Arbitration: The process in which a dispute is decided by an arbitrator, whose decision is binding.
Assessment: Basis for the levy against the property as determined by a local assessor.
Assumable: A mortgage the responsibility of payment for which can be taken on by a buyer.
Broker: A person or entity licensed to represent buyers or sellers in the purchase or sale of real estate.
Cancellation of Purchase Agreement: Can be accomplished by a written agreement between all parties to the purchase agreement. 
Closing: The meeting for the sale of property at which the transfer is finalized.
Closing Statement: An accounting of funds to the buyer and the seller at closing. (Also called a settlement statement or "HUD-1").
Conciliation Court: Small claims court where parties can have claims valued at $5,000.00 or less decided quickly and inexpensively.
Condominium: Individual ownership of separate parts of a building plus joint ownership of the common elements.
Construction Loan: A loan where money is advanced as construction takes place.
Contingency: A future event or action which must occur before the purchase agreement is valid.
Contract: A legally enforceable agreement to do or not to do a certain thing.
Contract for Deed/Land Contract: A contract that allows a buyer to take possession of property in exchange for monthly payments until the balance is paid off. The seller keeps legal title to the property until the final payment is made, at which time the seller conveys the land to the buyer.
Conventional Loan: Real estate loans that are not insured by the FHA or guaranteed by the VA.
Counter Offer: An offer made in response to an offer.
Dual Agency: Representation of two or more parties in a transaction by the same real estate agent or broker.
Earnest Money: Money paid by a buyer to show the buyer's good faith in making an offer to purchase property.
FSBO: For Sale by Owner (pronounced "fizbo").
Listing Agreement: A written agreement allowing a real estate agent to sell a homeowner's property.
Litigation: A lawsuit.
Loan Origination Fee: The fee a lender charges for processing a mortgage application.
Maintenance Fees: Fees paid by a property owner to the owner's association for upkeep of the common elements.
Mortgage: The pledge of real estate as collateral in exchange for a loan.
Mortgage Discount Points: Prepaid interest on a loan; one mortgage discount point equals 1% of the total mortgage loan.
Note: A written promise to repay a debt.
Purchase Agreement: A contract for the purchase and sale of real estate.
Quit Claim Deed: A deed that transfers to the buyer the rights of the seller in the land without promising that the seller has full title or that there are no liens against the land.
Special Assessment: Costs charged against property for public improvements that benefit the property.
Survey: A mapping of land boundaries and improvements and easements on real property.
Title Insurance: An insurance policy purchased for protection against most title defects.
Warranty Deed: A deed in which the seller promises that the title to the land is good and complete.

II. THE ROLES INVOLVED IN A RESIDENTIAL REAL ESTATE TRANSACTION

1. WHO ARE THE PARTIES LIKELY TO BE IN MY RESIDENTIAL REAL ESTATE TRANSACTION, AND WHAT ROLE WILL EACH PARTY PLAY?

Generally speaking, the parties involved in a residential real estate transaction, and their respective roles, are as follows:

A. THE LISTING REAL ESTATE AGENT -- The listing real estate agent (or seller's agent) is a licensed real estate salesperson who, acting on behalf of a real estate brokerage company for which he or she works enters into a Listing Agreement with the owner of a house. In a Listing Agreement, the listing agent agrees to assist the owner in selling the house and the owner agrees to pay the listing agent for his or her efforts. Compensation to the agent usually takes the form of a commission which is paid if and when the sale of the house closes, and it is calculated as a percentage of the purchase price of the home. Generally, although a seller will deal with an individual agent, the agent is acting on behalf of a real estate brokerage company, and the Seller's agreement is with the company, not the individual.

The listing agent's role is to assist the seller in marketing the house, showing the house to possible buyers, finding a buyer at a price and terms acceptable to the seller, and facilitating the closing of the sale and the transfer of possession and occupancy from seller to buyer. The listing agent may participate in the negotiation of sale price and terms between buyer and seller, and may prepare a purchase agreement and related documents from standard forms. The listing agent is not allowed to provide legal advice to any party, unless the agent is also a licensed lawyer.

The listing agent, and the brokerage company for whom he or she works, owe the following duties to the seller:
  1. Loyalty - to at all times act only in the best interest of the seller
  2. Obedience - to carry out all of the seller's lawful instructions
  3. Disclosure - to tell the seller all material facts which might affect the seller's decisions
  4. Reasonable Care and Skill - to use reasonable care and skill in representing the seller
  5. Accounting - to account to seller for all money and property he or she receives as the seller's agent
The listing agent and his or her brokerage company may not also represent the interest of a buyer unless the agent obtains a written agreement from the buyer and has obtained the buyer's and seller's written consent after making a full written disclosure to seller of the conflicts of interest involved in representing both parties, and the resulting limitations on the agent's ability to represent the seller's interests. At times, a listing agent may assist a buyer in limited ways as necessary to finalize a sale, but that does not make the listing agent the buyer's representative or advocate; the listing agent still represents only the seller unless a specific agreement for dual agency has been entered into.

B. THE BUYER'S REAL ESTATE AGENT -- The buyer's real estate agent is a licensed real estate salesperson who, acting on behalf of a real estate brokerage company, enters into an agreement with a person seeking to buy a house under which the agent agrees to assist the buyer in finding and purchasing a house. The buyer's agent may be compensated by the buyer directly or may agree to share in the commission paid by the seller to the listing agent at closing. As is the case with the listing agent, the contract for the services of a buyer's agent is generally with the brokerage firm for whom the agent works. The buyer's agent and his or her brokerage firm owe the buyer the same duties of loyalty, obedience, disclosure, reasonable care and accounting as the listing agent owes the seller. As with the listing agent, the buyer's agent may assist in the negotiation and preparation of a purchase agreement and related documents from standard forms, but may not give legal advice unless he or she is a licensed lawyer. The buyer's agent and his or her brokerage firm may not also represent the interests of a seller unless the agent first obtains a written agreement from the seller, and also obtains the buyer's written consent after making a full disclosure to the buyer of the conflicts of interest involved in representing both a buyer and a seller, and the resulting limitations on the agent's ability to represent buyer's interests.

C. THE LAWYER FOR THE BUYER/SELLER -- Either the buyer or the seller, or both, should hire a lawyer to represent their interests in the purchase or sale of a house. In some cases, the terms of a lawyer's representation, including the scope of his or her work and the fee for that work, are set forth in a written agreement between the lawyer and the client; in others it is not. A lawyer's role can be as broad as his or her client wishes it to be, and can include review and/or preparation of the client's agreement with the real estate agent and the purchase agreement and closing documents, as well as a review of the abstract of title, commitment for title insurance, or other evidence of title to ascertain that title to the property is acceptable. At closing, a lawyer can assist in making sure that all necessary documents are properly executed and delivered and that the sale proceeds are properly paid out and accounted for. With telephone and fax technology, lawyers can often "participate" in a closing without being physically present. If a transaction fails to close, a lawyer can advise his or her client as to the client's rights and remedies.

A lawyer's fee is not dependent upon the successful closing of the transaction. 

A lawyer is ethically bound to competently and thoroughly represent the interests of his or her client only, and is also obligated to keep confidential all communications with his or her client relating to the purchase or sale. In New York State it is not appropriate or advisable for the same lawyer to represent both the buyer and seller of a house. 

D. THE TITLE INSURANCE COMPANY -- In almost all cases where the buyer is obtaining financing by a mortgage loan from an entity other than the seller, the buyer's lender will require that it be provided with a policy of title insurance from a title insurance company. The policy insures that the lender's mortgage interest called a "lien", is valid and not subject to title defects. In many cases, whether or not a mortgage lender is involved, the buyer may also wish to have a title insurance company provide buyer with a policy of title insurance which insures buyer's ownership interest against defects in title. In some cases, both a lender's and an owner's policy of title insurance are purchased; in some cases only one or the other. The title insurance company collects separate premiums for the owner's and lender's policy. The buyer is generally required by the lender to pay the premium and other costs involved in issuing title insurance to the lender. However, the buyer does not receive title insurance for its ownership interest unless buyer also pays an additional premium for owner's coverage.

The title company will issue a document called a "Commitment for Title Insurance" which indicates (a) what requirements must be complied with at or prior to closing as a condition to issuing its insurance and (b) the matters affecting title which will not be insured against if they are not taken care of at or prior to closing. 

E. THE CLOSERS -- A closer is a person, generally an attorney or attorney’s paralegal, who administers some element of the closing. There may be more than one closer at a closing. When a lender is involved, its closer will see that all the mortgage loan documents are properly signed and that the documents transferring title to the buyer are properly signed and delivered. The buyer will usually pay the fee for this service. The seller may also have a closer act on seller's behalf at closing. Typically, a seller's attorney acts as seller’s closer and will assist with obtaining information necessary to pay off existing liens and mortgages, preparing a warranty deed and bill of sale to transfer title to the house and personal property, and accounting for the payment and application of the sale proceeds.

Closings in Chautauqua, Cattaraugus and Allegany Counties are generally done “through the mail” and do not require attendance at the County Clerk’s Office. 

F. THE MORTGAGE LENDER -- Mortgage lenders provide buyers with financing for the purchase of a home.

G. THE MORTGAGE BROKERS -- Mortgage brokers work on behalf of mortgage lending companies and borrowers. They line up people seeking loans with companies making loans. They generally get paid by lending companies on a commission basis, and by borrowers based on written fee agreements. Mortgage brokers are similar in many respects to insurance brokers, except that the "product" they sell is mortgage financing, not insurance. A mortgage broker may work only for one lending institution, or it may be independent and offer financing options from many different lenders.

III. THE OFFER AND ACCEPTANCE

1. IF AN AGENT BRINGS ME A PROSPECTIVE BUYER FOR MY HOME, DO I HAVE TO AGREE TO SELL MY HOME? DO I HAVE TO PAY A COMMISSION TO THE AGENT AND HOW MUCH OF A COMMISSION MUST I PAY?

You are not bound to sell your home to anyone until you sign a purchase agreement. Each purchase agreement presented to you is only an offer to buy your house on specific terms. You have no obligation to accept any offer. If, however, you have signed a listing agreement with a real estate agent and you refuse to sell your home to a "ready, willing, and able" buyer on the terms that you specified in your listing agreement, you could be breaching that agreement by refusing the sale and be liable for payment of a realtor’s commission. 

2. IF I THINK I AM GOING TO GET TWO PURCHASE OFFERS AT ABOUT THE SAME TIME, CAN I WAIT TO ACT ON THE FIRST ONE UNTIL I RECEIVE THE SECOND ONE?

Yes, but if the first offer has an "acceptance deadline," the offer could expire before you act. Many factors affect simultaneous ("contemporaneous") offers. You should consult with both your attorney and realtor about how to proceed.

3. EVERYONE SAYS THAT I HAVE TO SIGN THE PURCHASE AGREEMENT IMMEDIATELY. CAN I WAIT AND CONSIDER THE OFFER FOR A FEW DAYS?

You do not have to sign a purchase agreement immediately. Take the necessary time to talk with your real estate agent and your lawyer and become comfortable with your decision. Remember, however, that the other party may withdraw the offer or accept a different one. The purchase agreement might also include an acceptance deadline which requires you to make a decision by a certain time. If that deadline passes, the offer expires. If you do decide to take more time, it is important that you move promptly to resolve any concerns you may have.

4. I AM GOING TO SELL MY HOUSE BUT IF I SELL WITH A LAND CONTRACT I DO NOT WANT TO SELL TO PEOPLE WITH LOTS OF CHILDREN (BECAUSE THEY MIGHT WRECK THE PLACE) OR TO PEOPLE ON WELFARE BECAUSE THEY MIGHT NOT BE ABLE TO MAKE THE PAYMENTS DOWN THE ROAD). CAN I REFUSE TO SELL TO THOSE PEOPLE OR TO ANYONE?

You may not discriminate against any person because of race, religion, gender, national origin, familiar status, mental or physical disability, public assistance, sexual orientation, color, or creed. However, on a sale by contract for deed, a seller may require evidence that the buyer is credit-worthy and can make the payments. If the buyer's apparent intended usage of the property whether rental, commercial, vehicular, or residential, is a source of legitimate concern to seller, then, prior to signing the purchase agreement, an appropriate restriction must be drafted and agreed upon for inclusion in the contract for deed. You should consult a lawyer about such a provision.

IV. THE PURCHASE AGREEMENT

1. I WAS TOLD THAT I DO NOT NEED A LAWYER TO DRAFT OR REVIEW A PURCHASE AGREEMENT BECAUSE REAL ESTATE AGENTS USE STANDARD FORMS AND ARE EXPERIENCED IN COMPLETING THESE FORMS AS PART OF THEIR JOB. IS THAT RIGHT?

There are many pre-printed purchase agreement forms used in the real estate industry and, although frequently referred to as "standard," their terms can vary widely. The Jamestown Bar Association has, however, created a purchase agreement designed to be well-balanced in reciting the respective obligations of buyers and sellers and to highlight issues for negotiation. Remember that when using any pre-printed form, the pre-printed language is for convenience only; all of the terms in the documents are negotiable. As with any contract, you should carefully review its terms and make sure that you understand the legal effect of each of those terms before you sign the agreement. A lawyer can help you with all of this and may be consulted before you sign any form of a purchase agreement. 

2. I FOUND A HOUSE I MAY WANT TO BUY BUT IT IS "FOR SALE BY OWNER" AND THE SELLER'S LAWYER HAS ALREADY DRAFTED A PURCHASE AGREEMENT. DO I NEED MY OWN LAWYER TO HELP ME?

Yes. The seller's lawyer represents only the seller's interests, and what may be in the seller's best interest may not be in yours as a buyer. The seller's lawyer has no ethical or contractual obligation to protect your interests. Remember, you can negotiate all of the terms of a purchase agreement up until the time that both you and the seller have accepted the terms by signing the agreement. Your lawyer can advise you on whether the proposed terms are in your best interest and can suggest appropriate additions or modifications to better protect you.

3. HOW DO I BUY A HOUSE THAT IS "FOR SALE BY OWNER"? DOES THE SELLER OR THE BUYER PREPARE THE PURCHASE AGREEMENT?

The first step is to contact a lawyer who can advise you about reasonable and achievable terms in a transaction. The next step is to contact the owner and discuss these terms. Either you or the seller can then prepare a purchase agreement, and your lawyer can help you with this process to ensure that your interests are protected.

4. IS A PURCHASE AGREEMENT A CONTRACT OBLIGATING ME TO BUY A HOME, OR IS IT JUST PART OF THE NEGOTIATION LEADING UP TO AN ACTUAL CONTRACT TO BUY A HOME?

Once the purchase agreement and any attachments to the agreement are signed by both the buyer and the seller, these combined documents become a binding, enforceable contract to buy and sell a home. All negotiations as to the terms of the purchase agreement will take place before both parties sign the agreement. 

5. SHOULD I HAVE A LAWYER REVIEW MY PURCHASE AGREEMENT BEFORE OR AFTER I SIGN IT?

As with any contract, you should have your lawyer review your purchase agreement before you sign it so that any changes or modifications needed to protect your interests are made before you sign the document. Once you sign the agreement, it is generally too late to make any changes. Although it may greatly reduce your bargaining power, one alternative is to include a contingency provision in the purchase agreement that allows your lawyer to review the contract and approve or disapprove of the contract after you sign it; any changes that might be necessary after your lawyer reviews it will then be negotiated. The specific language of this contingency can be obtained from your realtor or your lawyer to ensure that you do not lock yourself into a deal that you are not prepared for.

6. WHAT SHOULD I LOOK FOR IN A PURCHASE AGREEMENT TO PROTECT ME AS A BUYER?

Each purchase of a home involves unique circumstances that should be addressed in the purchase agreement. To adequately represent and protect your interests, your lawyer should review with you any information that pertains to the house itself, your personal needs and expectations, your intended use of the home, your choice of financing and the dates you want for a closing and for taking possession of the house. This review should include any disclosure forms on the condition of the home, as well as any other documents that the sellers may have provided to you. The following is just a sample of what your lawyer can do for you:

a) Make sure that the property described in the purchase agreement is truly the property you intend to purchase
b) Help you determine the type of title that you are willing to accept from the seller
c) Make sure there are adequate protections for you against liens and encumbrances on the property
d) Determine if there are any contingencies to your purchase that need to be included in the purchase agreement
e) Determine if the price and terms of your financing are correct and acceptable
f) Determine if there is any risk of exposure to environmental liability claims
g) Help you determine if the physical condition of the property is acceptable to you
h) Help you determine an acceptable date of closing and date of possession
i) Determine who should pay the many different categories of taxes and special assessments on the property and when
j) Determine the length of time that your offer should be left open to the seller
k) Advise you as to the likelihood of closing on time and necessary arrangements for changing utilities and scheduling movers
l) Establish escrows for repairs or for water and septic inspections and corrections if inspections fail
m) In some instances arrange for “early entry” or “post closing occupation”

7. IF THE BUYER'S MORTGAGE IS DENIED CAN I KEEP THE EARNEST MONEY?

Whether you can keep the earnest money or not is completely controlled by the terms of the purchase agreement. Your lawyer can review the purchase agreement and any documents related to it and advise you on what your rights are with regard to the earnest money. Generally, however, the earnest money is refunded if a mortgage is not obtained.

8. WHAT DOES IT MEAN IF WE HAVE "CONTINGENCIES" IN OUR PURCHASE AGREEMENT? DO WE HAVE AN AGREEMENT OR NOT?

Even with contingencies, a purchase agreement is valid and binding on the parties who sign it. A contingency simply means that your closing is dependent on an occurrence that you may, or may not, control. If the specified occurrence does not happen, the purchase agreement terminates and cannot be enforced by either the buyer or the seller. As an example, a buyer may need to obtain a mortgage loan before buying a house. A financing contingency would be included in the purchase agreement so that if the buyer could not obtain an acceptable mortgage loan, the purchase agreement terminates. Other contingencies might require that a buyer sell her current home or obtain an acceptable home inspection before closing the sale and purchase. Before signing a purchase agreement, it is important to evaluate whether or not you need any particular contingency to protect your interests.

9. IS SELLING OR BUYING A CONDOMINIUM OR TOWNHOUSE ANY DIFFERENT THAN SELLING OR BUYING A SINGLE FAMILY HOME?

The sale of a condominium or townhome involves a few more documents than the standard residential home sale. A seller must provide a buyer with the condominium or townhome association by-laws, articles of incorporation, covenants and other relevant documents for review. In addition, the Association may need to be notified of a new purchaser and, in some instances, the Association may need to approve the sale. Because the condominium and townhome documentation governs the actions and rights of residents in those developments, buying a condominium or townhouse requires, in addition to resolution of the customary purchase issues, a thorough review and analysis of that documentation.

10. SHOULD I GET A QUIT CLAIM DEED OR A WARRANTY DEED FROM THE SELLER AND WHAT IS THE DIFFERENCE?

A quit claim deed transfers the seller's interest in and ownership of the property from the seller to the buyer. A warranty deed does the same thing, but it includes statutory warranties that title to the property is clear and no liens or encumbrances exist against the property. A warranty deed may, and frequently does, include exceptions to these warranties.

V. FINANCING

1. CAN I TALK TO THE BUYER'S LOAN OFFICER TO DETERMINE HOW FINANCING MATTERS ARE PROCEEDING?

While nothing legally prohibits you from calling a buyer's loan officer, the loan officer may not be able to discuss matters with you because of confidentiality obligations. One way to avoid this confidentiality claim is to have the buyer agree in the purchase agreement that he or she waives any financing confidentiality protections and gives you permission to speak with his or her loan officer.

2. WHAT CAN I SAY TO THE APPRAISER WHEN HE COMES TO LOOK AT THE HOUSE? CAN I GIVE HIM SOME OTHER COMPARABLE SALES IN THE AREA TO BE SURE HE APPRAISES THE HOUSE AT OUR SALE PRICE?

Generally, you should not offer information gratuitously. If you have comparable sales data for the area indicating that your sale price is reasonable, you may certainly provide that to the appraiser. Unless you are experienced in this area, however, what may seem to be comparable to you may not be to the appraiser. Some appraisers may also tell you that any involvement on your part brings into question the independence of their appraisal.

3. MY PROSPECTIVE BUYER IS GETTING A "VA" MORTGAGE. ARE THERE ANY DIFFERENCES IN CLOSING COSTS THAT I WILL HAVE TO PAY AS COMPARED TO THE COSTS I WOULD HAVE TO PAY IF HE WAS GETTING A CONVENTIONAL MORTGAGE?

The Veterans Administration ("VA") does not allow veterans to pay certain closing costs. As a seller you may have to pay these costs at your closing. 

4. WHAT HAPPENS IF THE HOUSE I AM SELLING (OR BUYING) IS APPRAISED FOR LESS THAN THE SALE (PURCHASE) PRICE AND WHAT ARE MY ALTERNATIVES AT THAT POINT?

The options available if the house appraises for less than the sales/purchase price depend upon the terms of the purchase agreement. Purchase agreements are made contingent upon the buyer obtaining a mortgage, and the availability of a mortgage will depend on the house appraising at a certain value (not necessarily the purchase price). The buyer will generally be entitled to terminate the agreement and obtain the return of the earnest money. You can either ask the appraiser to look at additional information in an attempt to convince him or her to amend the appraisal or you can have a different appraiser look at the house. Remember also that, in such a case, a buyer and seller are always free to renegotiate the purchase agreement. If the purchase agreement does not have a contingency regarding financing or appraised value, a low appraisal will not release the buyer from the obligation to purchase.

5. I AM SELLING MY HOUSE AND THE BUYERS NOW HAVE A PROBLEM WITH THEIR FINANCING. THEY WANT TO MOVE IN IMMEDIATELY AND CLOSE LATER WHEN THEIR FINANCING IS FINAL. IS THIS ADVISABLE AND WHAT DO I NEED TO PROTECT MYSELF?

Generally, you do not want to rent to your buyers because there are many risks to doing so. If, for example, they do not obtain financing, your sale may fall through. You may then need to cancel the purchase agreement and, because the former buyers would be in possession of the property, you might need to wait up to 60 days before the contract can be canceled and you regain possession instead of the typical shorter cancellation period. After that time frame, if the people do not leave voluntarily you will need to bring an eviction action in a local court to remove them. Both scenarios are expensive and time consuming and you should talk with a lawyer for further advice and a strong lease agreement if you decide to proceed with a rental arrangement.

6. I AM BUYING A HOME AND THE SELLERS WANT TO KEEP POSSESSION OF IT FOR A WHILE AFTER THE CLOSING. WHAT SHOULD I BE CONCERNED ABOUT?

A seller remaining in possession of a home after the closing raises several issues that you need to think about and address in your purchase agreement. These issues include determining a fair rental amount for the period of time that the sellers remain in the property, and addressing who pays for any wear and tear on the property after the closing (for example, damaged doors or who pays to fix a furnace that fails after closing but while the sellers are still in possession of the home). Since each situation will be different, you should consult your lawyer to help you prepare a post closing agreement terms that will protect both you and your new home.

VI. TITLE INSURANCE, TITLE OPINIONS AND TITLE ISSUES

1. WHAT IS THE DIFFERENCE BETWEEN TITLE INSURANCE?

Title insurance refers to an insurance policy that is purchased from a title insurance company. Title companies will review the status of title to a piece of property and issue a "commitment" for issuing you a policy of title insurance. This commitment will give you the terms on which the title insurance company will issue insurance coverage to you. The commitment will also list exceptions and specific exclusions to their proposed insurance coverage. The exceptions raise issues that you and your attorney should review to determine if they can and should be deleted from the final title insurance policy (such as mechanics' liens or mortgages placed on the property by your seller). As the names suggest, a "lender's policy of title insurance" is issued for and protects a lender and an owner's policy title insurance is issued for and protects property owners.

It is very important to keep in mind that a title insurance policy relates to past transactions and issues affecting title, not future transactions. If you do not understand any portion of either a title insurance policy you should always ask for an explanation.

2. AS A BUYER, AM I REQUIRED TO BUY AN OWNER'S POLICY OF TITLE INSURANCE?

You may be required to purchase a lender's policy of title insurance at your closing, but you are not required by law to purchase an owner's policy of title insurance. A buyer should, however, have title insurance to reveal defects, liens and encumbrances that affect the property. Whether or not you buy an owner's title insurance policy, a lawyer is important in the process because she or he can review the title commitment and look for concerns that need to be resolved before or at the closing. In today’s legal climate, and considering the size of your investment, an owners’ title policy is advisable.

3. WHAT IS AN "ABSTRACT"? WHEN DO I GET ONE AND WHO KEEPS IT?

"Abstract" is a shortened reference to an "Abstract of Title". This is simply an historical digest of the documents filed in the county property records that affect the title to a particular piece of real property. An Abstract does not insure that title to a piece of property is clear, but instead notifies anyone examining the Abstract of claims and interests that affect the property. You should receive an Abstract from your seller upon final execution of your purchase agreement which is generally an expense of the seller. The Abstract, usually updated by a title company to reflect all documents affecting the property and recorded through the date of your purchase agreement, should be examined by your attorney or title company to determine if any documents referenced in the Abstract could affect your interest in the property. Unless you are buying on a Land Contract or the seller is holding the mortgage, you keep the Abstract after the closing. Because Abstracts can be very costly to replace, it should be kept in a safe place such as a bank deposit box or with the title company in its storage vault.

4. I AM BUYING A HOUSE AND THE SELLER IS GOING TO PAY FOR MY OWNER'S TITLE INSURANCE POLICY INSTEAD OF PROVIDING ME WITH AN ABSTRACT OF TITLE. HOW WILL THIS AFFECT ME IF I WANT TO LATER SELL THE HOUSE?

The cost of an Abstract of Title typically ranges anywhere from $500.00 to $1,000.00 or more. In New York, an Abstract is considered to be the principal means of evidencing title. If you accept a policy of title insurance in lieu of an Abstract, you may be requested to provide an Abstract to your buyer when you sell the property. Ideally, you should have an Abstract of Title provided to you that a lawyer could examine. You and your lawyer can then discuss your options with respect to any title problems and title insurance.

5. I BOUGHT AN OWNER'S POLICY OF TITLE INSURANCE WHEN I PURCHASED MY HOME. DOES THIS MEAN THAT TITLE TO MY PROPERTY WILL BE CLEAR WHEN I SELL THE HOME? WHAT TITLE PROBLEMS MIGHT SHOW UP AND WILL THE TITLE INSURANCE COMPANY AUTOMATICALLY FIX THOSE PROBLEMS?

The fact that you bought title insurance does not mean that title to your property was clear when you bought your house. The title company may have excepted some defects from coverage or insured over other defects. The title company's obligation is to pay you for any actual loss that you suffer as a result of any title problems the policy insures you against. Some situations may also require the title company to defend your title for you (at the title company's cost) and protect your interest in the property. You need to note also that: (a) your title policy does not cover title defects that arose after you bought your property such as liens, judgments or documents mistakenly recorded against your property, and (b) the title insurance policy that your lender requires you to purchase for the lender's benefit does not protect or insure your interest in the property at all. 

6. DOES IT MAKE A DIFFERENCE WHICH TITLE COMPANY I CHOOSE TO PROVIDE ME WITH TITLE INSURANCE?

While the quality of their service varies from company to company, the pricing offered by title insurance companies is determined by New York State. As a consumer, you have the right to select any title insurance company, lender or other service provider in the real estate purchasing process. It may be logical to use the title company recommended by your lender or real estate agent if that company can do the work more efficiently or at less cost than another company, but it is always in your best interest to shop and compare title services.

7. WILL I GET MY TITLE INSURANCE POLICY AT THE CLOSING?

The owner's policy of title insurance will be mailed to you some time after the closing. The exact time will depend upon when the county office returns closing documents to the title company. You should call your attorney if you haven't received your owner's policy of title insurance after four (4) months from the date of closing. You should have your lawyer review the policy when you receive it to verify that its contents reflect the assurances given to you at closing. Upon request at closing, the closer, acting as agent for the title insurance company, will mark up the title insurance commitment so that it reflects all of the conditions, exceptions and terms to which the final policy will be subject.

8. IF I HAVE TITLE PROBLEMS, IS THAT SOMETHING MY LAWYER WILL HANDLE AS PART OF THE CLOSING PROCESS? WILL THERE BE EXTRA CHARGES INVOLVED?

It is the seller's responsibility to clear title prior to closing. Each lawyer charges differently for services.
 
9. A MORTGAGE COMPANY IS PROVIDING ME WITH FINANCING FOR MY HOME PURCHASE. IS IT TRUE THAT I DO NOT HAVE TO WORRY ABOUT TITLE ISSUES ON THE PROPERTY BECAUSE THE MORTGAGE COMPANY WILL FIX THEM?

You need to look at title issues for your own protection and should not rely on the title review performed by your mortgage company. Mortgage companies and banks seek to make money and do not necessarily protect your interests in the process. Mortgage companies will generally order and obtain a lender's policy of title insurance (at your cost), but this coverage only protects the lender against defects in title. The property may have title issues that could be very important to you, but of no concern to your lender. 

10. MUST A SELLER PROVIDE A SURVEY OF THE SELLER'S PROPERTY IF ONE IS REQUESTED BY A BUYER?

No. The parties to a purchase agreement can always negotiate whether a survey will be provided and how the costs of any survey will be paid. Home buyers may want information or assurances relating to several issues, including boundary lines of, and easements on, a piece of property. If so, a buyer can make a purchase agreement contingent upon the satisfactory results of a survey and the parties can determine the details of obtaining that survey in the purchase agreement. 

11. MY NEIGHBOR AND I SHARE A DRIVEWAY THAT CROSSES BOTH OUR PROPERTIES. WE HAVE BEEN SPLITTING COSTS UNTIL NOW, BUT WE DON'T HAVE A FORMAL MAINTENANCE AGREEMENT. WHAT HAPPENS IF EITHER OF US DECIDES TO SELL AND THE NEW OWNER DOESN'T WANT TO SHARE?

Generally, a new lender will require an easement which includes maintenance obligations pertaining to the driveway. It should be drafted to be binding on subsequent purchasers of both parcels of land.

VII. THE CLOSING

1. CAN I GET A BREAKDOWN OF MY PROSPECTIVE CLOSING COSTS?

Federal law gives buyers the right to inspect the closing statement one business day before the closing. The closing statement (called a "HUD-1") itemizes all the costs that you will be charged at closing. Be sure to let your attorney know well in advance that you want to inspect the HUD-1 the day before closing.

Buyers and sellers can negotiate as to who will pay which costs. Customarily a seller's costs may include:

  1. Updating Evidence of Title – generally between $500.00 and $1,000.00, but possibly more
  2. State Deed Tax - $2.00 per each $500.00 of the purchase price
  3. Recording Fees - these fees range from $50.00 per document for the first page (.50 for indexing) and $5.00 for each additional page
  4. Real Estate Commissions - commissions vary depending upon what you negotiated with your listing agent but they are generally between 6% and 10% of the purchase price
  5. Assessment Searches - $25.00
  6. Unpaid Real Estate Taxes - customarily these are prorated as of the date of closing; the seller pays all taxes before the date of closing and the buyer pays all taxes after that date
  7. Seller-Paid Points - to be paid by seller if obligated to do so by the purchase agreement
  8. Payoff of Existing Liens - the seller will usually be responsible for paying the balance of existing liens at closing
  9. Clearing Title - if title defects exist the seller may be obligated to clear these at the seller's expense and these costs can vary widely
  10. Attorneys’ Fees – these fees will vary based on the amount of services provided
  11. Miscellaneous Costs - any other costs that the seller agreed to pay in the purchase agreement
  12. Recording discharge of mortgage - $50.50 for first page, and $5.00 for each additional page
  13. Assessment form - $125.00 to $250.00
  14. Capital Gains Tax Affidavit – $5.00
  15. Mortgage Tax – 1.25% of mortgage amount
  16. Tax Certificates - $10.00 to $50.00
A buyer's closing costs typically include the cost of financing the purchase. If a buyer is giving a lender a mortgage on the home, the lender will be required to provide the buyer with a "Good Faith Estimate" of costs so that the buyer can anticipate the costs involved with the financing. In addition to these financing charges, a buyer will usually have to pay title insurance premiums, title examination costs, recording fees, mortgage registration tax, closing fees, attorneys' fees and any other costs that the buyer has agreed to pay in the purchase agreement.

VIII. POSSESSION OF THE HOME

1. THE BUYERS WALKED THROUGH THE HOUSE JUST BEFORE CLOSING AND THEN REFUSED TO CLOSE, SAYING THE HOUSE WAS NOT IN THE SAME CONDITION IT WAS IN WHEN THEY MADE THEIR PURCHASE OFFER. WHAT CAN I DO?

Your course of action will depend on the nature and extent of the condition that is unacceptable to the buyer. There are a range of options starting from negotiating between you and the buyer for correcting or restoring the condition, to canceling the purchase agreement, either by mutual agreement or statutory cancellation. You may also be able to initiate litigation for specific performance (forcing the buyer to purchase the property and "perform" under the purchase agreement) or for damages. Because there can be serious consequences in any avenue that you choose, you need to be properly advised by a lawyer as soon as possible.

2. WE HAVE A PRIVATE WELL ON OUR PROPERTY THAT WE USE FOR DRINKING WATER. WHEN WE SELL OUR HOME, DO WE HAVE TO HAVE THE WATER TESTED BY A TESTING LABORATORY, OR WILL THE BUYER'S LENDER DO THIS?

State law requires a seller to provide water quality tests on any well used for drinking water. However, some lenders, parties to the purchase agreement, or municipalities may require testing prior to sale. You should always check this issue with your particular municipality before entering into a purchase agreement.

3. WHAT IS A RADON TEST? DO I HAVE TO HAVE ONE DONE BEFORE I CAN SELL MY HOUSE?

A radon test is a measurement of the level of radon gas emitted from the ground into your home. You do not have to have this test performed before you can sell your house, but there are radon issues in Chautauqua County and a test is recommended. Your home inspector will perform the test.

4. IF A LENDER REQUIRES REPAIRS TO A HOME BEFORE THE CLOSING, WHO MUST PAY FOR THOSE REPAIRS? CAN I CANCEL THE DEAL IF THE REPAIRS WOULD COST MORE THAN I WANT TO PAY?

Who pays for pre-closing repairs depends again on the terms of the purchase agreement. Whether you can cancel the purchase agreement for this reason also depends on its terms. Often, purchase agreements will set a "cap" on the amount of repairs that either party is required to perform and, if the costs of the repairs exceed that amount, the parties can terminate the purchase agreement or can agree in writing as to who will pay for the additional costs of the repairs. A well-drafted purchase agreement will address these issues and provide solutions for them. 

IX. ASSESSMENT ISSUES

1. WHAT WILL MY ASSESSMENT BE?

Most municipalities in Chautauqua County assess property at 100% of market value. This means, that sooner or later, your property assessment will be increased or decreased to the purchase price. If the purchase price is less than the assessment you should contact the assessor immediately and provide the assessor with proof of the purchase price to get the assessment lowered You can grieve your assessment by filing a grievance with your assessor by the 4th Tuesday in May.

2. HOW DO I GET STAR BENEFITS?

New York State allows all property owners having an income of $500,000.00 or less who occupy a home as their primary residence to claim a STAR exemption which is roughly $600.00 per year depending on the school district and the municipality. Additionally, those over 65 (one or more if jointly owned) having incomes of less than a specified amount (approximately $83,300 in 2015) who claim the property as their residence may be entitled to an additional $600.00 or so. STAR applications must be made by March 1st with annual applications required for enhanced STAR and one time applications for basis STAR.

X. HOW TO HOLD TITLE TO YOUR PROPERTY

1. I AM BUYING A HOUSE WITH A FRIEND. WHAT HAPPENS IF ONE OF US WANTS TO LATER SELL THE HOUSE AND THE OTHER DOES NOT?

Before buying the home, you and your friend should enter into a co-ownership agreement which addresses division of expenses, buy-out provisions, sharing of work, death of an owner, and any number of other issues which could arise as problems as time goes by. This is a complex agreement and you should consult your lawyer.

2. MY PARENTS OR SPOUSE ARE CO-SIGNING A MORTGAGE WITH ME SO THAT I CAN QUALIFY FOR MY LOAN. DOES THIS MEAN THAT THEY HAVE TO GO INTO TITLE WITH ME? HOW DO I GET THEM OFF OF MY TITLE AFTER CLOSING SO I SHOW UP AS THE SOLE OWNER? WILL THE LENDER OBJECT TO THIS? IF I HAVE MY PARENTS GIVE ME A QUIT CLAIM DEED YEARS AFTER THE CLOSING, DO I HAVE TO GO THROUGH A FORMAL ASSUMPTION WITH THE LENDER? IF MY PARENTS ARE ON THE TITLE WITH ME DOES THAT MEAN I WILL NOT GET FULL HOMESTEAD TAX BENEFITS?

It is not legally necessary for "co-borrowers" (your parents or spouse) to go into title in order to sign the promissory note for your loan. However, some mortgage companies may require co-borrowers to take joint title to the property and sign the mortgage as a matter of policy and procedure. If required to go into title with you, your parents or spouse can quit claim their interest to you after the closing. A lawyer can provide you with guidance through this process to make sure your rights are protected.
Dale C. Robbins
Burgett & Robbins, LLP
15 E. Fifth Street
Jamestown, NY 14701
Telephone: 716-338-4845
Fax: 716-483-3765
Melissa J. Komula, Legal Assistant
Burgett & Robbins, LLP
15 E. Fifth Street
Jamestown, NY 14701
Telephone: 716-338-4845
Fax: 716-483-3765
Share by: