Tommy Morelli – Kelly & Sellar Ryan Law

Getting to Contract

Congratulations! You’ve reached a major milestone: the exciting (and maybe a touch overwhelming) world of buying your first home. The journey of buying your first home is packed with questions, decisions, and, of course, the thrill of finding your perfect place.

Assuming you are not purchasing your first home for cash, your journey to homeownership typically begins with getting prequalified by a lender. The prequalification gives you a rough estimate of how much house you can afford and begins your relationship with a lender.

Once you know how much you want to spend on your home, the search begins. Most buyers first look for a realtor who will begin showing them properties. In our opinion, it is best to find a local realtor in the area where you plan to buy. We have found that realtors who live or work almost exclusively in the area you plan to purchase can provide the most informative guidance on the market.

While every market is different, most buyers will be shown many potential homes before making an offer. Once you have decided on a home, your realtor can guide you in making a competitive offer. Assuming your offer is accepted, you will then begin the process of closing the purchase.

The first step in closing the purchase is entering into a contract of sale. The process of entering a contract of sale varies depending on which New York county you purchase your home in. For instance, in Ulster County, it is customary for the seller’s attorney to draft the contract. However, in Washington County, it is customary for the realtor to draft the contract.

While this might seem like a small difference, it changes the logistics of the sale immensely. For example, if you were to make an offer on a home in Ulster County, you typically must wait to receive the contract from the seller’s attorney while the seller could continue to show the home. Moreover, in Ulster County, inspections are typically completed before entering the contract of sale.

However, in Washington County, the parties usually execute a contract with the realtors, which results in the home no longer being shown to potential buyers. These realtor-drafted contracts should contain an attorney approval provision that allows you to seek attorney approval of the contract within a specified period. In our experience, this results in a less stressful transaction. Also, in Washington County, if you are doing inspections, you would typically conduct them after entering the contract of sale. The contract is then usually written in a way that conditions the contract on the outcome of the inspections.

Because each New York county has different customs, it is best to seek an attorney with experience practicing in the County where you are purchasing your home. Your realtor can be a great resource when looking for an experienced attorney.

Here at Kelly and Sellar Ryan, PLLC, we take pride in guiding new homeowners through the nuances of the purchasing process. We find that our clients appreciate what we believe to be a deep knowledge of the local real estate markets and the individual customs of the various surrounding counties. Anyone with questions about the information contained in this memo can contact Attorney Thomas M. Morelli at (518) 692-1200 or tmm@ksrpllc.com.

Disclaimer: The information you obtain on this website is not, nor is it intended to be legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls or communications. However, contacting us does not create an attorney-client relationship. Some of the content herein is attorney advertising. Prior results do not guarantee similar outcomes.

What to Expect at Closing and Breaking down a Closing Disclosure

You have found your dream home, navigated offers and inspections, and finally landed a contract. Now comes the big day: closing. While the entire home buying or selling process can feel daunting, I believe understanding the process can help alleviate some of that stress. I know when I was buying my home, no one really walked me through the process of preparing for the closing or explained to me what to expect on the closing day. I hope this post provides you with some explanation of the process.

One of the most important documents relating to closing is the Closing Disclosure (“CD”). This document details all the closing costs for which you’ll be responsible. The exact amount you’ll pay will depend on several factors, including Loan Type, Home Price, and Location.

The typical closing costs you might encounter in New York include:

Origination Fees: Charged by your lender for processing your loan application.
Appraisal Fee: Cover the cost of getting a professional appraisal of the home’s value.
Title Insurance: Protects you from any ownership claims against the property.
Recording Fees: The cost of recording the deed transfer with the county.
Taxes: Prorated property taxes and homeowner’s insurance may be due at closing.
Attorney Fees: The fee your attorney charges for representing you.

Typically, the seller, buyer, and lender (if applicable) will produce their own CDs prior to closing. Each party’s CD can be stylistically different, but the figures should match. The parties exchange their CDs to confirm an understanding of the closing fees and confirm the checks required to close. Below is an example of a Closing Disclosure. I have color-coded the expenses each party is responsible for in this example to more easily show how they are totaled in the checks to be written section. For example, the fees highlighted in yellow are all fees that are to be paid to the County Clerk, which are then totaled in the County Clerk portion (which is highlighted in yellow) in the Checks to Be Written section.

As you can see above, the first calculation on this CD is Credits to Seller. In this transaction, the only credit due to the seller was Town and County taxes the seller had pre-paid for the year. Because the Seller has already paid town and county taxes for the year but will not own the home for the duration of the tax year, the Buyer owes them a credit calculated based on the closing date. As you can see in this example, the Seller credited for 183 days’ worth of taxes.

The second calculation is Credits to Buyer. In this particular example, the annual school taxes were $2,842.73. Based on the closing date, the seller owed the buyer a credit for the equivalent of one day of school taxes. Note: town and county taxes are typically due at a different time than School Taxes. Here the closing date fell one day after the school tax period ended.

In addition to the single day of school taxes, the parties agreed that the seller would offer a $3,000.00 credit to resolve an issue discovered during the inspections.

The next portion of the CD breaks down each party’s expenses. These expenses are color-coded to help understand the checks to be written for the closing. The most complex calculations are the fees owed to the County Clerk and the title company. In this example, the fees to the County Clerk include transfer taxes and fees associated with filing certain required documents. The required documents typically include:

Transfer Taxes ($2 per $500 of total consideration)
TP-584 (New York State Transfer Tax Return) filing fee
RP-5217 (Real Property Transfer Report- required when filing a deed)
Record Deed Fee (varies on number of pages)
Mortgage Tax (varies by County)
Mortgage Recording Fees

While the CD can seem complex, it is simple once you understand each section. However, every transaction and locality is different, and the example above is only meant to demonstrate what you could encounter when preparing for closing. We strongly recommend seeking an experienced attorney to guide you through this process.

Once the CDs have been reconciled, it is time to close! Usually, the closing will occur at either the Seller’s attorney’s office, the lender’s office, or the lender’s attorney’s office. While it might sound obvious, you should confirm the location and time of the closing, so you are not scrambling the day of. Typically, all the parties will attend the closing; however, sometimes, the seller will sign the required documents in advance of the closing and not attend the closing, which is acceptable.

At the closing, the attorneys will discuss and exchange documents for the parties to execute. If the buyer is using a mortgage to purchase the property, their lender will typically require them to sign a promissory note (legally binding agreement that outlines the terms of the loan), mortgage (creating a lien on the property), Affidavits and Declarations (swearing the accuracy of the information you have provided) and Escrow Documents (related to establishing an escrow account to fund taxes and insurance fees). Depending on the type of mortgage and the lender, this process can vary.

Assuming the buyer has taken a mortgage, in my experience, once the buyer has executed the lender’s documents, the parties execute the remaining documents, including the TP-584, RP-5217, and the deed (executed only by the seller). Typically, the parties then exchange the pre-written checks based on the CDs’ calculations, and the buyers are provided with the keys to the property, and the transaction is closed! While this might sound anticlimactic, much of the work is completed before the closing.

While this blog is meant to help explain an example CD and what to expect at a residential real estate closing, endless variables can change what has been described above. No transaction is the same, so I encourage you to hire an experienced real estate attorney to help guide you through this process.

Here at Kelly and Sellar Ryan, PLLC, we take pride in guiding both buyers and sellers through the intricacies of a real estate transaction. Anyone with questions about the information contained in this post can contact Attorney Thomas M. Morelli at (518) 692-1200 or tmm@ksrpllc.com.