Real Estate Closings and Mortgage Refinancing
Real estate closings provide some of the more joyous and prideful moments
to people looking to purchase or sell residential and commercial properties.
As is often the case with first time home buyers, the purchase of a home
may seem a daunting and mind-numbing task, especially when faced with
the prospect of having to review the contract of sale, secure necessary
financing and make other arrangements to close the deal. For more experienced
home owners, the purchase and/or sale of a current home may present equally
daunting yet exciting opportunities. In either case it is imperative that
all those involved have a well-grounded understanding of the process so
as to make the process as enjoyable and rewarding as possible, while ensuring
that their rights and responsibilities are adequately protected.
Purchase or Sale of a House:
When a buyer for a house, condominium or cooperative apartment has been
located and the seller and buyer have agreed upon a sale price, the first
substantive step is for the seller's attorney to prepare a contract
of sale and have the same forwarded to the buyer's attorney for review
The contract of sale will contain all of the pertinent terms of sale, including
- but not limited to - sale price, amount of the down-payment, amount
to be financed or mortgaged by the buyer, "on or about date"
when the closing is to take place and a host of other rights, responsibilities
and requirements which are to be imposed as a necessary conditions of the sale.
Although homes are normally sold "as is", it is highly recommended
that prospective purchasers retain the services of an engineer or professional
home inspector in advance of signing the contract so that the buyer can
be alerted to any potential defects, hazards or other problems. Generally,
the cost for an engineer is relatively inexpensive, anywhere from $500
to $1,000, but it is money well spent and can save countless thousands
of dollars for buyers who might otherwise over-pay for a home which turns
out to be not quite as trouble free as they had anticipated.
Traditionally, the attorneys for the seller and buyer negotiate the terms
of the contract after consulting with each of their respective clients.
Negotiations are normally accomplished over the telephone or by letter,
but may sometimes involve an actual "sit-down" contract signing
where the parties and their attorneys meet to negotiate the terms face
to face and, hopefully, walk away with a signed contract.
Along with the signing of the contract, the buyer customarily tenders a
down-payment in a pre-determined amount (i.e. 5, 10 or 20 percent of the
contract price), which sum will be held in escrow by the seller's
attorney pending closing.
Once a contract of sale has been signed the buyer is usually afforded a
sufficient period of time to secure the necessary financing. Often, banks
processing mortgage applications require at least 90 days to process the
paperwork and decide whether or not the buyers qualify for a mortgage
in the amount requested. Where buyers are seeking a mortgage in excess
of the appraised value of a particular property, a bank may be reticent
or unwilling to make the loan since there is too much risk involved and
the bank may not be able to recover its money should the buyers default
in paying the mortgage and the bank is forced to foreclose on the property.
If a buyer's mortgage application is submitted in a timely and appropriate
manner, but the loan is rejected by the bank, a buyer may be permitted
to cancel the deal to purchase the house if there is a mortgage contingency
clause in the contract of sale.
In that event, the seller is normally obligated to refund the buyer's
down-payment and - at seller's option - cancel the deal, grant buyer
an extension of time to secure financing or make some other arrangements
to enable the deal to proceed.
If a buyer is successful in obtaining a mortgage and there are no encumbrances,
liens or other clouds on title to the property, a closing may be scheduled.
Traditionally, the closing occurs somewhere on or about the date set in
the contract, although other considerations may come into play such as
the expiration of the buyer's mortgage commitment which might hasten
the scheduling of a closing.
Purchase or sale of a condominium or cooperative apartment
A condominium is defined as a parcel of real estate in which each of several
participants owns title in to his or her own unit or apartment and through
a condominium association owns an individual percentage share of the common
elements or areas such as hallways, recreation areas, roads, etc.
A condominium differs from a cooperative apartment in that cooperative
apartment dwellers do not own their apartment unit themselves but rather
have shares of stock to a specific apartment within the premises owned
by a cooperative corporation. A proprietary lease or some other occupancy
agreement grants a cooperative shareholder rights to occupancy of his
or her particular unit for a fixed term, generally in excess of 50 years.
Therefore, a cooperative apartment is not considered real property, but
rather personally by virtue of there being shares of stock in a cooperative
corporation allocated to an apartment.
While the purchase or sale of a condominium closely mirrors that of a house,
transactions involving a cooperative apartment must be tailored to and
encompass a different set of terms and conditions relating to the transfer
of personally (i.e. shares of stock) rather than real property. Other
documents such as offering plans and related cooperative corporation documents,
maintenance charges and financial statements for the building in question
must also be carefully reviewed.
The attorneys and support staff at Rayano & Garabedian, P.C. have extensive
experience handling real estate closings, both residential and commercial.
Our knowledge of the procedures and forms, as well as the pertinent statutory
and case law, will necessarily facilitate and make less daunting the tasks
facing buyers and sellers of single family homes, condominiums and cooperatives
when dealing with mortgage applications and refinancing.