The Cost Of The Title Search
Buyers pay for the cost of a title search because they are the ones who need to know that they are getting a clean title. The seller is going to give you a deed saying they’re getting a clean title, but the only way you can get assurance of this is if you have a title report and title insurance. Therefore, you as a buyer have to purchase a title report, and title insurance.
Without a title report, you cannot be assured you will have a clean title, and you will not know of whatever actions may be needed to take to make the title clean and clear. The title report also includes a tax search that tells you what the taxes are on the property, if back taxes have been paid, and whether there are any sewer and water charges owed on the property.
Surveying The Property
As a buyer, you should always have a survey performed. One of the benefits of having a current survey done is that you know that it will guarantee the description of your property. Thus, you know where you can put your fence lines. It also shows you if a neighbor is encroaching upon those lines. This means no one else is claiming any interest in part of your property.
Many lenders also require either a survey update, or a survey inspection at the very least. To do this, a survey company essentially creates a report using an old survey. This will provide you and your lender with a good idea of the property’s condition, but it is not guaranteed. In contrast, an original survey is a guarantee for you and the title company.
Checking The Numbers
Of course, any property will be sold for a certain amount of money, but there are additional costs involved with every sale or purchase…
As a buyer, you’re going to figure out how much money you need to close, which is done in conjunction with your lender. For example, say you are being loaned $100,000. After we take out all the costs for the bank’s attorney fee, any points that they might be charging, credit report fees, appraisal fees, and other fees that the lender has imposed, you may only have $90,000 left to utilize toward your purchase.
Your attorney takes that remaining $90,000 and asks, “Okay, what are your expenses?” Your expenses are what you are responsible for covering yourself. So, if it’s a $200,000 purchase with a $100,000 loan, and we only have $90,000 left, you have to provide $110,000 plus the costs of the title search, title insurance, and any additional searches involved, and your attorney’s fee.
Once your attorney knows what all those numbers are, your attorney will provide them to you, the buyer. Your attorney would also provide this information to the lender and the seller, making sure that everything is in total agreement after adjustments.
These adjustments can also include taxes and/or fuel because fuel is also something that gets adjusted for. For example, if you have oil in your tank, and there are 200 gallons left and it’s $3 a gallon, the buyer would have to pay $300 to the seller. Thus, your attorney will figure out all similar adjustments.
Property Disclosure Credit
In New York State, we have something called a Property Disclosure Credit. You can either fill out the property disclosure form with 40 questions or give $500 of credit at closing. Almost every real estate attorney in the State of New York will advise you to give the $500 because we are an ‘as is’ state.
This means that if you give a buyer the $500 credit instead of the 40-question form when you close, and the house falls down the day after you close, it’s the buyer’s house that fell. The seller is not responsible for the house’s collapse.
However, if you’re a seller and you fill out that 40-question form rather than give the $500, you extend the statute of limitations for six years on everything on that form. What that means is, if you said the roof was good, but two years after the house’s sale to the new owner, the roof starts to leak, the new owner may have a cause of action against you for a leaky roof.
Most people will not complete the 40-question form but pay the $500. The 40-question form or $500 credit is part of the adjustments that your attorney will be making during the pre-closing phase.
Transfer Documents: Types Of Deeds
In New York State, transfer documents include the deed, and there are several different types of deeds…
The Quick Claim Deed: The Quick Claim Deed is where a seller transfers only what they have to the seller. Whatever current title the seller has, that is the title that is transferred to the buyer.
The Specialty Deed: If you are buying from an estate, then you would get an executor’s deed, in a foreclosure, you may get a better deal
The Warranty Deed: If you are buying vacant land, you will get a Warranty Deed.
A Bargain And Sale Deed: A bargain and sale deed is the typical deed provided by a homeowner in a residential sale.
You have to make sure the seller prepares the correct kind of deed based on the particular circumstances and the transfer tax forms.
Transfer Tax Forms
In New York State, the seller must prepare an equalization form, this form takes the tax bill out of the seller’s name and puts it into the buyer’s name.
A Residential Property Purchase
Typically, there are two different transfer tax forms. There’s the TP584, which is a form where you pay the tax in New York based on the sale price of the home. If a home is sold for $500,000, you pay $2 per $500 of consideration for that transfer. Then, if the home is a residential property worth more than $1 million, you also must pay a mansion tax. This mansion tax is 1% of the sale price of the home. If the property is in the pine barrens of Suffolk County, there is also a land preservation tax. This is paid by the purchaser.
A Commercial Property Purchase
In a commercial transaction, the seller provides you with a bill of sale for any property that’s being sold along with the real property. Additionally, they will give you a bill of sale or a bulk sales tax form if they’re selling the entire business as well as the real property. If it’s a bulk sales tax return, that has to be done 10 days before closing so that you get back a sales tax form and the sale can go through.
With the guidance of a skilled attorney for Real Estate Law Cases, you can have the peace of mind that comes with knowing that we’ll make it look easy. For more information on Real Estate Law Cases in New York, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (631) 585-4343 today.