Real Estate Contracts in New York

The Process from Contract to Closing

The purchase or sale of their home can be one of the most stressful things that a client undertakes.  That is especially true in today’s market where multiple offers are common and houses may sell quickly above the listing price.  Here is a basic set of questions and answers to help you navigate the process successfully.

Who prepares the contract of sale?

Contracts for sale of real estate are typically prepared by the real estate agent representing the buyer.  If no real estate agent is involved, then the contract would likely be prepared by the attorney for the buyer.

Are there standard forms for real estate contracts?

Yes. There is a standard form for real estate contracts, which sometimes can vary based on what county you are in. 

What are the general terms of the contract?

The contract covers all the terms you would expect to see, including the price, financing, title issues, taxes, inspections, cost prorations, attorney approval, and perhaps most importantly – the timelines.

What are the key timelines?

The key timelines include: when the deal will close, how long the attorneys have to review the contract, when financing will be confirmed, and when the inspections take place.

How long does it take to close the deal?

Typical real estate contracts take 60 to 90 days from initial contract to closing the title.  With the current real estate market, however, many deals are atypical.  In an effort to appeal to a seller in a situation where multiple offers may be made on the same property, buyers today may offer to close in an expedited manner, i.e. in 30 to 45 days.

When do the attorneys review the contract?

The attorneys review the contract after both parties sign it. This is what is known as the attorney review period, which typically lasts three to five days.  During that time, the attorneys have an opportunity to request changes or clarifications to the contract.  Such changes and clarifications are subject to approval, rejection, or modification by the other attorney.  Once the negotiations are concluded, the attorney approval period is considered “closed”.

How does financing play a role?

Most people need to obtain a mortgage to buy their home.  As a result, contracts generally have a mortgage contingency, which states that the buyer must seek and obtain a mortgage within a particular time frame.  Usually, the time frame is approximately 30 days.  It is understood that if mortgage commitment is delayed, that deadline can be extended.

Are all contracts contingent on financing?

No. In fact, in today’s competitive real estate market, more deals are “cash deals”, meaning the buyer is not conditioning their purchase on their obtaining a mortgage.  In those cases, the buyer either has the actual cash in hand or has independent access to financing that they can rely on, i.e. an existing home equity line of credit.

What happens if the buyer cannot get a mortgage?

If the contract is conditioned on obtaining the mortgage, the buyer would be able to get out of the contract if they cannot obtain the financing they need.  This is somewhat uncommon.  In fact, many buyers come to the process armed with a pre-qualification letter from their bank confirming they have the ability to obtain a mortgage up to a certain amount.

Can a purchase be conditioned on the sale of another home?

The purchase contract can be conditioned on the sale of the buyer’s current home.  In that case, the buyer is presumably using the funds from that sale to purchase their new home.  If the seller is willing to agree to such a condition, they may ask that it be lifted if a second buyer approaches them to purchase the home without such a condition in place.

What is involved with a title search?

Title searches are customarily done in advance of the closing.  A title search company will review the current and prior deeds to confirm that the seller owns the property they are selling.  In addition, the title search will address whether there are any liens against the property that must be resolved before closing.  Liens can exist if the seller has any judgments against them, if there is a mortgage against the property, or if there are any unpaid property taxes.

What happens if liens are found?

If liens are found against the property, then they would have to be paid off at closing.  For example, if the seller did not timely pay their property taxes, those back taxes would have to be paid off at closing out of the money the buyer brings to the table.

What type of inspections are typically done?

Inspections are typically done for the structural condition of the home, pests, mold, radon, and water and septic issues.  If any of these inspections reveal a problem, then the buyer would have the opportunity to either get out of the contract or potentially renegotiate the purchase price.  In response to a request to renegotiate, the seller can refuse and take the position that the sale is an “as is” sale and not agree to lower the price.

Are inspections always required?

No.  Given the current competitive real estate market, some buyers are willing to forgo inspections in an effort to make their offer more appealing to the seller.  In that case, the buyer obviously takes the risk that there are defects in the home that will require attention after they buy it.

What happens at closing?

At closing, the buyer pays the seller for the home and receives a deed in exchange.  If mortgage financing is involved, the buyer signs the mortgage, and it is recorded in the County Clerk’s office along with the deed.  The closing date set in the contract is generally an “on or about” date, meaning that the closing will not necessarily occur on that particular date, but generally within a week or so of it.

The real estate closing process can be stressful for buyers and sellers.  It is advisable to obtain the services of an experienced real estate attorney to ensure that your rights are protected, and that the process goes as smoothly as possible.  To those prospective buyers out there – happy house hunting and good luck!

Matthew J. Dorsey, Esq. is a Shareholder with O’Connell and Aronowitz, 1 Court Street, Saratoga Springs, NY. Over his twenty-seven years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at (518)584-5205, mdorsey@oalaw.com and www.oalaw.com.