What Does a Real Estate Lawyer Do?
Buying a property is very risky nowadays. Do not hesitate and ask a team of real estate professionals for help. In this article we are going to let you know what part of work belongs to the real estate lawyer. Your lawyer must be licensed to practice and have experience representing foreign home buyers. A lawyer should have the experience and knowledge to recommend the optimal structure of real estate ownership.
Who is a real estate lawyer?
A real estate lawyer is an indispensable participant in a transaction for the purchase of housing by a foreigner. The lawyer advises on taxation issues, including the law on Taxation of Foreign Investments in Real Estate (FIRPTA), and also monitors compliance of the documents drawn up with the requirements of the city and state of New York, federal legislation and international agreements on the avoidance of double taxation. The lawyer also helps foreign clients at the preparatory stage, for example, with obtaining a taxpayer identification number, opening a bank account in the United States, applying for financing. A lawyer must be consulted before signing any documents related to the purchase of real estate.
The work of a lawyer at the stage of choosing an object
Before signing the purchase agreement, your lawyer should conduct a thorough check of the main documents. He must examine the certificate of ownership, by-laws, building regulations (regarding pets, guests, alterations, repairs, noise, sublease rules, etc.), minutes of board meetings, financial reports for the last four years, lease agreement, number of owner-occupants, number of investment apartments, availability of judicial claims and any other documents that may be relevant to the buyer or to the transaction. Studying these documents, as well as the physical and financial condition of the house will allow you to make the right decision regarding the purchase.
Lawyer's work with the contract
As soon as the seller accepts your purchase offer, the seller's lawyer will prepare the contract and send it to your lawyer. The contract will specify all the terms of the transaction and indicate the rights and obligations of the parties.
Your lawyer will study the contract with you, explain the terms of the transaction contained in the agreement, add conditions that further protect your interests, and provide you with an estimate of the costs for closing the transaction.
After agreeing on all the conditions, your lawyer will send you four copies of the contract, which you must sign and return to the lawyer's office along with a personal check for an advance payment (or confirmation of a bank transfer). The amount paid will be transferred to the deposited account of the seller's lawyer, where it will remain until the actual closing date of the transaction – at this stage it will be used to pay the purchase price.
Advance payment when buying property
At the conclusion of the purchase agreement, an initial payment of 10% of the purchase price is paid (15% when buying a new building).
If you attract credit funds, the initial payment and the amount for closing the transaction should come from your own savings. Money for these purposes is not allowed to be borrowed, credit cards or personal loans are not accepted. However, you can receive these funds as a gift. In this case, be sure to inform your lender about this in the loan application and present a gift letter – to convince the lender that you will not have to return the money that was given to you.
The work of a lawyer on loan approval
Your lawyer should send a copy of the signed contract to your loan officer or mortgage broker to process the loan application. After receiving a positive response from the bank, the lawyer will review the letter of commitment and explain its contents to you.
The specialist will also examine the documents for the ownership of the property and identify any encumbrances, including liens, which are listed on the seller or on the property. They must be withdrawn before or during the closing of the transaction. The lawyer will schedule the closing of the transaction as soon as all the terms of the title are clarified and you receive permission from your lender to close the loan. In some condominiums or co-op houses, in addition to obtaining permission from the lender, the buyer will also need the approval of the co-op or the condominium board.
The work of a lawyer to close a real estate deal
Once all the necessary approvals and permits have been obtained, your lawyer can schedule the closing of the transaction with the seller's lawyer, your lender's lawyer and the building's managing agent.
Your lawyer will prepare a preliminary financial report on the closure (preliminary closing statement). This is a list of all the expenses that the buyer and seller must make to complete the real estate transaction. It includes various fees, commissions, mortgage insurance costs, property tax.
The lawyer will be present with you at the closing to explain the essence of all credit and closing documents that you will need to sign. After closing, the lawyer will provide you with the final financial report on closing (final closing statement) and copies of all documents that you signed at closing.
What affects the timing of the purchase
Your real estate broker, lawyer and credit expert, as well as the broker and the seller's lawyer must perform a number of coordinated tasks to bring the process closer to closure.
If you take out a loan, after signing the contract you will need to apply to a loan specialist or mortgage broker. It will take time for him to process it and determine whether your request will be satisfied. The process can take from three to six weeks, during which specialists will also evaluate the house, check your credit history and the information you provided about income and property. After the loan is approved, you will receive a letter about the loan obligations.
Closing dates of the transaction
As a rule, it is possible to close a loan transaction within eight to ten weeks after signing the contract. The deadline for transactions without financing is two to three weeks. Of course, the buyer and seller can agree on closing at a later date, if it is more convenient for one of them. For example, if they want to wait until the end of the school year or if the seller's new home is not ready yet.
How does title insurance work and why is it needed
Title insurance is necessary for a quick, efficient and secure transfer of real estate. It protects buyers and creditors from ownership issues. Title insurance is necessary in order to protect buyers and creditors from problems with ownership. As a buyer, you want to be sure that the seller has a legitimate ownership right, and the object is not affected by lawsuits, errors in the registration of property acts and property rights, fraud or forgery of documents and he has no unknown heirs.
In fact, title insurance companies provide the following two services.
- Insurance that will protect you from title defects in exchange for a one-time payment of the insurance premium at the closing of the transaction.
- Underwriting, that is, an extensive title check to identify and eliminate defects, liens and other encumbrances. This process is often complex and time-consuming.
The underwriting process begins from the moment the buyer and seller sign the purchase and sale agreement. The buyer's lawyer immediately sends an order for title insurance to the insurance company.
The company instructs its auditor to carefully examine the land records in the registration office of the district in which the property is located. Then the expert prepares an annotation, which indicates the ownership of real estate, an accurate legal description of the land, as well as any collateral rights, mortgages and other circumstances affecting the ownership. The next step is for the title insurance company's lawyers to check the annotation and prepare a report on the title.
If defects are detected, the company's lawyers, together with the seller's lawyer, will deal with their elimination. Finally, when closing the transaction, the insurance company will request all the title documents and issue an insurance policy.
It will protect the new owner from any lawsuits directed against the insured title. Unfortunately, by searching and examining public records, it is not always possible to detect problems with the title. Therefore, it is very important that the property rights are insured.
What you need to do before closing a deal
The buyer is advised to be aware of all the details in order to close the transaction on time, reduce costs and sign only those documents with which he agrees. After signing the contract, it is recommended to do the following:
define the roles and responsibilities of each participant in the process;
develop a schedule or a closing plan to complete all the necessary tasks on time;
request an estimate of closing costs from the lender and lawyer;
get acquainted with the list of documents that must be submitted to the lender and the management of the building (when buying an apartment).
You and your team of professionals will have to perform many tasks from the moment your offer is accepted until the transaction is closed. The following table will help you keep track of exactly what you, your lawyer, mortgage broker and real estate broker need to do. Responsibilities may vary depending on whether you are buying an apartment or a house.
What happens on the day of closing the deal
After the loan is approved and the lender confirms that all the conditions for closing the transaction are met, your lawyer will set a closing date for the transaction. This is the moment when all parties involved in the process meet. At the time of closing the transaction, you pay the seller the remaining part of the purchase price, and the seller transfers ownership of the property and the keys to your new home to you.
You, your real estate broker, your lawyer, the seller, the seller's broker, the seller's lawyer, the lender's lawyer will be present at the closing of the transaction. In addition, there will be a representative of the title insurance company: he must make sure that you get a clean title and provide you with a certificate of title insurance.
During the closing, you will sign the bank's loan documents. The seller will sign all the documents necessary for the transfer of ownership to you. You will receive an act and a certificate of title insurance. The lender will provide you with the loan amount that will be paid to the seller. The seller will pay his part of the costs, including the payment of the commission to the broker. You will present the seller with certified bank checks for the remainder of the amount, that is, for the difference between the purchase price, the advance payment and the loan amount. This amount can be transferred in advance, by bank transfer. If the closure occurs near the end of the month, the condominium may additionally require you to pay utility costs for the upcoming month.
After closing the transaction, save all the documents that you may need to pay taxes, insurance, refinancing and subsequent resale. Your package should contain the following documents:
- final financial report on the closing of the transaction;
- credit documents;
- house data, drawings, floor plans and architectural records;
- report on the condition of the house at the time of purchase;
- insurance policy;
- assessment of the value of personal property that is transferred to the buyer along with housing;
- the current report on the improvements made in the house and the receipts confirming this are for calculating capital gains in the subsequent sale of real estate.