General Closing Procedures
SIn the New York City real estate market, apartments can close quickly- sometimes, before the seller is even prepared! Here is a detail of what the typical closing process is like, as well as what sellers should expect as they approach closing.
General Closing Procedures
What is a closing?
A closing is when a buyer gives a seller money in exchange for ownership and title to a particular property. This exchange transfers ownership and title of the property and requires the seller to sign over other documents including a deed. This is typically done at the bank attorney’s office. The parties present will be the seller, bank attorney, real estate brokers, seller’s attorney, buyer’s attorney, and title closer.
General Closing Costs Defined:
Additional Fees: Sometimes borrowers are required to pay additional fees. Some of these including Wire Fees, Tax Service, Survey Costs, Flood Certification, Settlement Charges, Messenger Fees, Sub-Escrow Fees, and Transfer Tax. Ask your broker to explain these fees.
Appraisal Fee: Fee charged which estimates whether or not a property is worth enough to support a loan. A qualified appraiser will look over the property and produce a report.
Attorney Fee: Fees paid to attorney representing you in real estate purchase (some closes require you to pay bank attorney fees or with condos, sponsor fees for sponsor attorney maybe required. Fees vary according to the type of property and $ value of the property.
Escrow: (Taxes, Insurance) – In this case money figured into a mortgage for certain conditions like taxes and insurance etc.
Origination Fee/Points: Depending on the type of loan and the rate a mortgage seeker chooses, he/she may pay points. 1 point equals 1% of the total loan amount.
Prepaid Interest: This amount pays the interest due from the date of funding to the end of the current month.
Recording/Transfer Fees: This covers the costs of changing the property title in official county records.
Title Insurance and Search: Fees that are charged for a title search and insurance fees. A title search is used to verify that the seller is the true owner of the property being sold and that the seller has the right to sell it. Title insurance protects a lender in the event of a lien or other problems with the title for the property in question, that was not disclosed at the time of sale.
Time Until Closing: Generally sales take between 3-5 months to close depending on various factors. The most common factors affecting closing include mortgage & financing, condo/coop board approval, and negotiation.
Contract of Sale: is a legally binding agreement between a purchaser and a seller in which each party gives consideration, (bargains for an exchange) to define the terms of the sale.
NOTE: Sometimes there are other fees that may be charged. This generally occurs when the property is a condo or coop. Our brokers will be happy to discuss these with you.
The contract is typically the most important part of a real estate transaction. At this point, the seller and buyers’ attorneys will negotiate the best terms for their client. While the seller’s attorney prepares the contract of sale, the buyer’s attorney will exercise due diligence by asking for certain key paperwork from you or your managing agent. These typically include:
- A statement of the building’s audited financials
- The building’s by-laws
- Proprietary lease or offering plan and amendments.
With the approval & agreement of the buyer’s attorney, the contract of sale is signed by the buyer. At the signing, the buyer typically presents a deposit of 10% of the sale.
The contract and deposit are forwarded to your attorney who will obtain your signature.
The buyer’s deposit is usually held in your attorney’s escrow account until the closing date. Normally, any interest earned follows the principal.
Your real estate agent presents the buyer with the building’s board requirements and application forms, which may include:
- Tax Returns
- Bank Statements
- Brokerage Statements
- Bank Financing Documents
- Signed Financial Statements
- Contract of Sale
- Professional Reference
- Personal & Financial Letters of Reference
The buyer’s agent compiles the board package and then sends it to your agent. They will review it prior to submission to the building’s managing agent, who will present it to the building’s board of directors. Upon review, the board may or may not ask for additional information. A Co-Op may turn down a buyer. If not, the board will arrange to interview the buyer. Generally, condominium buyers are not interviewed.
With the board’s approval, the final step is the closing. This usually occurs in the office of your building’s managing agent or seller’s attorney office. All parties involved will agree upon a set date. It is best to allow for a potential delay of up to 30 days from the closing date specified in the contract. On the day of the closing you will be expected to provide a photo ID and evidence of ownership: proprietary lease/stock certificate (cooperative) or deed (townhouse or condominium).