Our List of Frequently Asked Questions1 for NYC Residential Real Estate Transactions
Q: Do I have to provide a financial “binder” or “good faith deposit” when I make an offer on a property?
A: “Binders” are not customary when making offers on real estate properties in New York City. Typically, a buyer’s real estate broker will submit an offer. If the offer is accepted, the buyer’s attorney will conduct due diligence and negotiate a contract of sale. Upon signing the contract of sale, it is customary for a buyer to provide a deposit equal to 10% of the purchase price, to be held in escrow by the seller’s attorney.
Q: Does the contract deposit have to be paid by certified or official bank cashier’s check?
A: Usually, an ordinary personal check is acceptable.
Q: I’m ready to sign the contract today, but my funds for the deposit are tied up in stocks and it will take about a week to transfer them to a checking account. If I provide a check, will the seller’s attorney wait about a week to deposit it?
A: The seller may not agree to this. Typically, sellers won’t countersign a contract until the buyer provides a deposit check that could be immediately deposited. In the future, you should have the deposit funds in a liquid checking account so that you can access the funds.
Q: I’m buying a co-op apartment in a building that has about 250 apartments. Do I need to hire a professional inspector to inspect the apartment?
A: You can do a professional inspection, but the larger the building, the less common it is. Most buyers probably don’t want to spend the money to have an inspector check the building systems and common areas (such as the boiler, roof, etc) because if there are issues with something like that, it is usually the building’s (co-op or condo) responsibility to repair. So, an inspection of an apartment in a large building would be mostly about the apartment and most buyers don’t feel that inspection fees are warranted just to look at a small apartment. However, if you’re buying a townhouse or a unit in a very small building (for example, a building consisting of six units), then a professional inspection is very advisable.
Q: My broker told me that purchases in New York are generally on an “as-is” basis. What does that mean?
A: New York is a “caveat emptor” state, which in Latin means “buyer beware.” This means that it’s up to the buyer to make sure that the property is in acceptable condition. With very limited exceptions, the standard residential real estate contract in New York says that the buyer is purchasing the property in “as-is” condition, meaning that at closing it must be in the condition that it was at the time that the contract was signed. So, if there was a scratch on the floor when you signed the contract, you must accept the property with that scratch at the closing. The only way to get around this is to put language into the contract that makes the seller responsible for this. Of course, the seller would have to agree to this.
Q: The seller just accepted my offer. Is this legally binding?
A: No. In New York, a deal is not legally binding until the buyer signs a contract, provides a contract deposit (usually 10% of the purchase price) and the seller countersigns and delivers the fully executed contract.
Q: The seller accepted my offer. My lawyer worked very hard to complete due diligence and contract negotiation in three days. I ran to his office after work to sign the contract and provide the deposit. My lawyer then sent the contract to the seller’s lawyer for countersignature. After waiting three days, the seller’s lawyer returned an unsigned contract and my deposit check with a note that the seller decided to go with another buyer. Can the seller do this? Can I hold the seller responsible for the money and time that I spent on this?
A: Unfortunately, there’s not much you can do. In New York, the deal is not legally binding until the seller returns a fully executed contract. That’s why it’s important for buyers to hire a real estate attorney who can quickly and efficiently conduct due diligence and negotiate the contract.
Q: I just signed a contract to buy an apartment and it says that the closing date is at 10 a.m. on February 28, 2015. Should I schedule my movers for that time?
A: No! The closing date in a New York contract is just an estimated date – regardless of whether it’s preceded by the words “on,” “on or about,” or even “on or before.” The actual closing date is scheduled by the parties’ attorneys when everything is ready (such as board approval, loan clearance, etc.) The only exception to this is when the following language appears after the closing date: “time being of the essence.” “Time of the essence” language is almost never used in residential contracts because there are too many factors beyond the control of the parties. However, this language does often appear in contracts involving new construction purchases, but even in those cases, there are grace period provisions.
Q: If I sign a contract to buy a co-op apartment, do I have to provide all of the information required by the co-op board? Isn’t it ridiculous that they want 10 recommendation letters?!
A: Unfortunately, once you sign a standard co-op contract, you are required to provide the information required by the co-op board. That’s why it’s important that you take a look at the application BEFORE you sign the contract to make sure that you will be comfortable providing all of the required information and materials.
Q: I heard about the intrusive information required by New York co-op’s. So, I told my broker to look for condo’s only. Will I have to provide any such information to a condo?
A: Maybe. Almost all New York condominiums have a right of first refusal to buy an apartment instead of a perspective purchaser. This right is almost never exercised, but in order to decide whether it wants to exercise it, a condo board may request information similar to that requested by a co-op board (such as financial statements, reference letters, etc.) Therefore, if you are reluctant to share such information, you should take a look at the condo application BEFORE you sign the contract.
Q: I was in contract to buy a co-op contract. I submitted all of the information and materials that the board required. I believe that my financials and reference letters are stellar. I attended an interview and thought it went well. Despite all of this, I just found out that the board rejected the sale. Do I have any recourse?
A: Probably not. The only recourse you would have is if you could prove that in rejecting the sale, the board violated city, state or federal anti-discrimination laws. The burden would be upon you to prove this in a court of law. Aside from this, a New York co-op board can reject the sale for any or even no reason. In fact, they don’t even have to respond at all. Some co-op boards that don’t want to approve a sale will not respond for months and just wait until the deal dies and the parties go away.
Q: I just attended my board interview. I really didn’t like the board members. Can I get out of this deal?
A: Unfortunately, no. A standard New York co-op contract states that the deal is terminated if the board rejects the sale, but it does not give the buyer a right to cancel the deal if the buyer doesn’t like the board.
Q: I’ve been in contract to buy a co-op apartment for four months. I submitted my full board application three months ago. Despite numerous requests for a status update, the board is not telling me anything and won’t even schedule an interview. My rate lock is about to expire and it will cost me thousands of dollars to extend it. Do I have any recourse against the board?
A: Unfortunately, no. A New York co-op board has no legal duty to respond within any time frame, or even at all. That’s why you need to be very careful in locking in a loan rate. Speak to your broker to see if he/she or anyone else that he/she knows has closed a transaction in this particular building recently. That might provide you with the best estimate of how long this particular board takes to respond to an application.
Q: My lease is expiring and I’m desperately trying to schedule my closing for the earliest possible date, but my mortgage banker is telling me that the earliest I can close is 10 days from now. Why can’t I close tomorrow?
A: If you applied for your residential loan on or after October 3, 2015, then the loan is subject to new regulations which require that final closing figures are communicated to the borrower at least 3 days prior to closing. To comply with these regulations, many lenders require receipt of final closing figures at least 10 days prior to the scheduled closing. This may be further delayed because in New York, we often rely on several parties to provide closing figures. For better or worse, the logistics and delays created by these new regulations must be considered when planning the scheduling of the closing.
- Disclaimer: The answers provided herein are not to be deemed legal advice and provide general information that is usually applicable to residential real estate transactions in New York City. Every transaction is unique and it is highly advisable for a reputable attorney to be consulted regarding the specifics of each transaction.