If you are considering purchasing an apartment in New York City, a good starting point is to ensure that you understand the implications and differences between buying a co-op versus a condominium apartment. Your broker should explain this to you, but if you find yourself not fully understanding the fundamental differences, having any additional questions, or working without broker representation, you should discuss your options with your lawyer. Even though lawyers can be expensive in New York City (typically $1,000- $3,000) the expense is well worth it because you are protecting one of the most significant investments that you will make.
For starters, your agent or broker is not a lawyer. Unfortunately, some buyers rely solely on the legal expertise of their broker to purchase an apartment. While most brokers are incredibly knowledgeable, they cannot replace the legal guidance of a licensed lawyer. We would be leery of any agent or broker engaging in the “unauthorized practice of law” and jeopardizing their license by giving legal advice. Co-op and condo purchases can get tricky at times and a having a legal professional in your corner is essential; between the bylaws, rules & regulations and house rules, first-time buyers often find themselves very confused by the overwhelming amount of documents.
Additionally, apartments in New York City are sold “as is.” Therefore, it is up to you to do your homework and not solely rely on the seller’s team to convey the information that is most important to you. Remember the seller’s team does not work for you, and your buyer broker may not always have the answers you need. In any event, it is important to remember that your broker is not there to “act” as a lawyer; you should hire your own licensed lawyer to give legal advice throughout the entire buying (or selling) process.
Here are a few reasons why you should hire a lawyer in NYC to buy an apartment
- Lawyers are (more or less) Required. All New York State real estate contracts must be written by a party to the transaction or a lawyer. As such, almost 100% of the time, the parties in a New York City real estate transaction are represented by lawyers. Therefore, unless you are a licensed New York State attorney, then you should definitely hire a lawyer to purchase or sell.
Additionally, you should avoid having the seller’s lawyer draft the contract, without having your lawyer review it. If you rely solely on the seller’s lawyer to draft the sales contract, you run the risk of it being a one-sided contract. Lastly, most mortgage companies will typically not only expect but also require you to have your own lawyer before they agree to finance the transaction.
- Lawyers protect your investment.
If you’re a Seller: A seller is always advised to consult with a lawyer before signing a brokerage agreement to sell their property. If a seller does not carefully review the brokerage agreement, they may end up being liable for commission even if the property doesn’t sell. Additionally, the seller’s lawyer is usually responsible for the first draft of the sales contract.
If you’re a Buyer: Before you sign a contract for an apartment, your lawyer will perform due diligence. For starters, the lawyer will review 2-5 years of board meeting minutes. Reviewing the board minutes will clue the lawyer in on any issue going on in the building, such as a major roof repair that is needed or a recurring bed bug infestation. Lastly, as part of the due diligence process, the lawyer will also review financial statements, the building’s offering plan, and the bylaws (and any amendments). Overall, after performing due diligence, a lawyer can spot a “bad deal” and can advise you to pursue another property.
Once your lawyer is satisfied with the due diligence, he will obtain a draft of the sales contract from the sellers’ lawyer. The two lawyers will then go on and negotiate the terms. Once your lawyer is satisfied, he or she will instruct you to sign the contract and hand over the 10% down payment, which will be placed in an escrow account by the seller’s lawyer.
- Your lawyer will help close the transaction. Once you have signed the contract and paid the down payment, your lawyer will begin preparing for closing. If purchasing a condo or single-family home, your lawyer will order a title report to identify any issues that the seller must resolve before closing, such as liens or property violations. This is also the point where an inspection will occur. Based upon the results of the inspection coupled with the title report, your lawyer will negotiate repairs and any other terms that need to be amended before closing.
Additionally, your lawyer will be around to assist you with information and documents that your lender may request as part of your mortgage application as well as get you a good faith estimate of your closing costs.
- You will have an advocate at closing. A “Closing” is a transaction where the title of a property is transferred from a seller to a buyer. This transaction typically takes about three hours to complete. The seller, buyer, lawyers for all the parties, the managing agent for the coop, the mortgage lender and the real estate agents are all typically present at the closing. At the closing, your lawyer will be there to walk you through the transaction. They will also be there to ensure the accuracy of all the closing documents such as the deed, transfer tax returns, and mortgage documents, and again double check the payment amounts. Lastly, your lawyer will be there just in case something goes wrong or any of the documents are inaccurate.