The best manner for looking at a purchase of a Condominium is that you will be going through the following four (4) phases: (1) Due Diligence, (2) Contract Signing, (3) Approval Process, and (4) Closing. In sum and substance, a law in New York called the “Statute of Frauds” provides that until such time that a Seller signs or clearly consents to a Contract of Sale in which all the materials terms are agreed upon, there is no binding transaction between the parties. This of course means two things: first, you are not bound to honor the verbal offer to purchase the Condominium and, second, this also means that the Seller is not bound to accept your verbal offer. We will not deal here with the ethics and morals of a Seller informing you that you have a deal and then changing their mind because a higher offer comes in. People should of course honor their verbal commitments, but we are dealing with the law and as we all know, “the law” is not always what it should be. For a Purchaser, this is sometimes good news as this allows you to make certain that after the verbal non-binding offer you definitively want to move forward with the transaction and enter into the Contract of Sale. This system allows a Purchaser the opportunity of engaging in Due Diligence, which is the legal process of an Attorney making certain that what you think you visually saw and verbally agreed to is in fact what you are purchasing.
It is imperative at this point to have highly experienced legal counsel representing you. The Law Offices of Kishner & Miller, through their extensive years of legal experience, will guide you through this process. Due Diligence refers to the procedure in which an Attorney investigates various aspects of the Condominium corporation, finances, building, and unit. Through this process, the “financial health” of the Condominium may be ascertained, therefore empowering prospective Purchasers to make a far wiser investment. As a part of Due Diligence, an Attorney generally will analyze the following documentation before Purchasers sign a contract:
Location, size, amenities, and price are important factors to consider when purchasing a Condominium. This is for you, the Purchaser, to make a personal decision; can I live here? Is the space large enough? Do I like the Area? Nonetheless, focusing merely on these aspects would be misguided. Through Kishner & Miller’s Due Diligence, Condominium Purchasers can obtain the details pertaining to the Condominium which one cannot see just by having visually seen the Unit. All of the findings during this process of Due Diligence are directly and clearly explained to you. Only when the Purchaser has a complete understanding of the Attorney’s Due Diligence may one really make a determination of whether they wish to move on to the next phase (signing of a Contract of Sale.)
A Contract of Sale is a crucial document, as the terms of a Contract of Sale memorialize the agreement between the Seller and Purchaser. You may not use the excuse that you did not know what you signed. If you do not understand something, you must ask for clarification. Many years ago Attorneys had essentially agreed among themselves through custom in the industry, etc., that there would be one form of a Contract of Sale and all Attorneys would essentially use that form. Nowadays, there are many permutations of form Contracts of Sale, produced by a litany of distributors of form documents. As such, the Contract of Sale has become a highly negotiated document containing many terms, provisions, agreements, representations, contingencies, etc. On top of the many forms that are used by Attorneys, Attorneys add what is known as “rider” to the contract. Contract riders also have many terms and may be very confusing to a Condominium Purchaser. After all, it seems like such an easy concept; someone wants to sell and someone wants to purchase. The bottom line is that an experienced Attorney like Kishner & Miller will be able to inform you what should customarily is and is not included in a fair and equitable contract. As a Purchaser, if the transaction is not made in “all cash,” then the terms of a contract are crucial to protect you from the loss of your contract deposit. There are of course many other representations and protections that you are seeking.
Kishner & Miller will make certain that each and every term of the deal made between the parties is clearly contained in the Contract of Sale. There are a wide variety of common terms and conditions in a contract that need to be addressed in a Condominium real estate transaction. For instance, normally you purchase a unit in its “as is” condition. However, as a Purchaser, you may want repairs done or try to ensure that you are delivered a Unit in a certain physical condition. Kishner & Miller will try to ensure that the Contract of Sale explicitly enumerates each party’s respective responsibilities, if any, for making repairs that were mutually agreed upon. Furthermore, in some contracts, an Attorney must confirm that the Seller is delivering the agreed upon specified major systems of the unit, such as the heating or cooling systems, in working order. In other words, an Attorney may confirm which systems or appliances of the unit are guaranteed and which are sold “as-is.” Given the reality that condition of every Condominium may not be perfect, having an experienced Attorney like Kishner & Miller confirm these contractual matters is important for Purchasers of Condominiums.
While all of the terms and conditions explained thus far appear to be very straightforward, a typical real estate purchase contract is complex, densely written, and jammed with legal jargon. It is very possible to simply overlook or misinterpret a single clause that may result in a loss of thousands of dollars. There are, in fact, many Purchasers who for certain reasons may not have the linguistic competency to fully decipher the meaning of the terms and conditions in a Contract of Sale. Fortunately, Kishner & Miller will have the patience, critical analysis skills, and legal knowledge to thoroughly evaluate if the terms and conditions in a Contract of Sale are well tailored to protect the Condominium Purchaser’s interests.
The Purchaser’s protection is further ensured as Kishner & Miller may add a Purchaser’s rider to the Contract of Sale. With this rider Condominium Purchasers may obtain several protections, including the possible ability to void the Contract of Sale without penalty in cases where the Purchaser is unable to obtain financing on the terms specified in the contract after making a reasonable or good faith effort to do so within the time provided. Normally, this provision grants a Condominium Purchaser 30 to 60 days to obtain a loan commitment. In a very competitive Seller’s market, a Seller is more likely to not allow for a mortgage-contingency or a rider that deals with financing protections. If this is the case, Condominium Purchasers should be reluctant when signing a purchase contract as the absence of this clause might force Purchasers to finance a home purchase at a bad interest rate or may lead to the loss of your Contact Deposit. Kishner & Miller will take the time to explain and analyze all risks.
Usually, when the Purchaser signs a contract of sale they give a 10% down-payment to the Seller. The down-payment is supposed to be maintained in escrow by the Seller’s Attorney. The following items are some of the things that you should think about or look out for in the Contract of Sale:
In this category, think of the following:
All items must be specifically set forth in the Contract of Sale.
By the time you have reached Phase III of the process, you have reviewed Due Diligence with your Attorney and you are still interested in the unit enough to have entered into a fully executed Contract of Sale, in which you have agreed to all the terms contained in the Contract of Sale. As such, you are now seeking to do two things: (1) have the funds necessary to go the closing, and (2) obtain Board’s Waiver of The Right of First Refusal. These two items have been addressed in some manner in your Contract of Sale. The Contract of Sale most likely has specified a designated amount of time for you to have your funds available/obtain financing as well as how much time you have to submit your board application.
Following: (a) the approval of the Condominium Board application; (b) having, if necessary, the loan “clear to close,” and (c) knowing that your “title” is clear, a Purchaser can safely conclude that Closing day is near and must prepare to close. The closing statement and check instructions will likely be sent only just before the actual closing day. Though this can be aggravating, this is part of a typical real estate transaction in New York. When purchasing “all cash,” however, check instructions may be provided by Purchaser’s Attorney far earlier than if financing, assuming that the Seller’s attorney is cooperating and providing the necessary information to the Purchaser’s Attorney. The last minute instructions on how to write your checks are due to essentially two factors: (1) The Purchaser’s Attorney must wait for the Seller’s Attorney instructions on how the Seller wants their checks and in what amount each check should be; and (2) Purchasers must wait for the Lender’s Attorney to issue the “net proceeds” on the loan, which refers to the actual amount the bank brings to the closing. The bank will directly deduct its many fees from the requested loan amount. Therefore, the Purchaser should be prepared to bring multiple Certified or Official Bank Checks from a bank that is part of the NY Banking Clearinghouse. One last “walk-through inspection” of the unit is recommended to ensure that all appliances and plumbing fixtures are in the condition as contemplated by the Contract. If there is an issue during the “walk-through inspection,” it must be raised at the Closing, as once the Closing occurs it is difficult (if not almost impossible) to deal with these issues. Purchasers should make sure to reserve 2 hours for the closing process, which will normally take place at the Condominium management office. Lastly, there are many cases where the Seller will be purchasing a new property and may not be able to move out on closing day. A Condominium Purchaser can consent to allow the Seller to stay beyond the closing day and be compensated accordingly with rent deductions. This is known as a Post Possession Arrangement.
Items to be certain to bring to the Closing: