The prospect of buying a home in New York is exciting for many individuals and families. However, the process can also be complicated and nerve-wracking. Buyers must consider their ideal neighborhood and home configuration, search for matching listings, attend open houses, negotiate over price, and then weed through complex sets of laws and regulations before closing.
Although the steps involved in buying a home are similar regardless of where you live, New York's real estate laws and practices are unique in some respects—particularly if you are looking to buy a co-op or condo. It is crucial that you know your rights and understand the legal issues involved in residential real estate transactions, such as disclosures, purchase contracts, potential title defects, zoning issues, and taxes—before the process begins.
With proper preparation, careful choice of a real estate agent, and prudent use of other qualified professionals, buying a home in New York can be a positive experience. This article will focus on some key topics for consideration and of legal importance.
Before buying a home in New York, it's prudent to speak with a real estate agent. A real estate agent is someone experienced in working with buyers who can help you find your home and handle many of the complex procedures involved with the purchase. Be sure the agent you choose has experience representing buyers, good references, and qualifications to meet your needs. For example, some agents have particular areas in which they specialize (such as residential homes in Brooklyn or condos in Manhattan) or tend to work on transactions of a certain monetary size.
Some of the benefits of using a real estate agent include the agent's:
Your real estate agent should also help you locate other professionals to assist you in the home-buying process, including mortgage brokers and home inspectors. Agents will often have longstanding relationships with these entities, saving you time and work.
The good news is that working with a real estate agent will not ordinarily cost you anything. It is common in the industry for the home seller to pay the entire real estate commission (typically 5% to 6% of the sales price, split between the seller’s agent and yours).
Before choosing an agent, obtain references from other home buyers and check customer reviews on sites such as Zillow and Trulia. You can find licensed New York real estate agents at the New York Department of State’s Licensee Info Search. You can also search for Realtors on the New York State Association of Realtors website.
New York State law requires real estate agents to advise potential buyers with whom they work of the nature of their relationship and your respective rights and obligations. (This information is available on the New York State Division of Licensing Disclosure Form for Buyer and Seller).
For more information on working with a real estate agent, see the New York State Department of State's guide, entitled Looking to Buy, Sell or Rent Property in New York State? Know Your Rights.
State law in New York (specifically New York Real Property Law Section 462) requires that sellers provide buyers a disclosure form, which includes details on the property's existing defects. Such defects might include:
Disclosures must be on a Property Condition Disclosure Statement form established by the New York Department of State. A seller who fails to provide the disclosure form will need to credit the buyer $500 at closing. Certain types of properties (such as newly built homes and cooperatives) are exempt from state disclosure rules in New York.
In addition to state-required disclosures, sellers of houses built before 1978 must comply with federal Title X disclosures regarding lead-based paint and hazards. See the lead disclosure section of the U.S. Environmental Protection Agency's website for details.
Seller disclosures are important for you as a buyer, since just looking at a property may not be enough to tell you what problems its owner encountered with it while living there.
For more details on seller disclosures, see Considerations Before Selling a House in New York.
Buyers should not rely solely on the seller's disclosures, however. After all, a seller might not be aware of every physical defect in their home, or might even intentionally attempt to hide such a defect.
Buyers should hire an independent home inspector to verify the information from the seller's disclosure. Many buyers make their offer contingent upon a satisfactory inspection report to be sure no material defects exist and to identify drainage, noise, or odor problems; conditions that could lead to mold; foundation and structural integrity; and the condition of all major systems (heating, cooling, electrical, plumbing); and other problems with the property.
Further useful information about inspections can be found on the website of the New York State Association of Home Inspectors.
A purchase agreement is a legal document that contains the material terms and conditions of your real estate transaction. It must be in writing and signed by the parties (buyers and sellers) to the contract, and include (i) an offer to sell or purchase; (ii) an acceptance of the offer; (iii) the sale price, down payment, and other financial terms; (iv) who pays for what settlement or closing costs; and (v) an adequate description of the property.
In New York, attorneys commonly assist with purchase agreements, as they are significant and binding contracts. Both buyer and seller typically hire their own attorneys (see below) to advise on their respective legal rights.
A buyer should always obtain a title search from a title company before purchasing a home. The title company searches public records and other sources for any liens, easements (such as the utility company’s right to access part of the property), or other encumbrances or title restrictions that may affect the property. If the title search locates problems, the buyer should require the seller to correct those problems as a condition to closing.
You should also consider purchasing a title insurance policy to protect the title to the property against adverse claims by third parties, or any clouds on the title missed by the title search. Mortgage companies usually require buyers to purchase a title insurance policy in connection with obtaining a mortgage.
Unlike many states, New York requires buyers to involve a lawyer in the house-selling transaction. (N.Y. Jud. Law Section 484). Among other tasks, your attorney will assist in ensuring that the mortgage documents are in order, such as a mortgage commitment letter, good faith estimates of closing costs, escrows, and proper calculation of lender's fees; review the title report and work to resolve any issues, such as liens on the property; prepare all the closing documents, such as the deed; and calculate how much money is owed to whom at the closing of the deal, and assure that all payments are accurately made.
Financial realities are often the first area of concern for buyers. Fortunately, there are many government-provided resources to help prospective buyers assess their financial capacity and borrowing ability. (For example, the U.S. Department of Housing and Urban Development offers a full website devoted to New York-specific financial resources).
For detailed information on every phase of buying a home, from figuring out your needs and what you can afford to doing the final walk-through and attending the closing, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart.
