Real Estate FAQ 1
What follows are some of the more common questions we encounter in a residential real estate transaction. Whether you are buying or selling, these questions come up all the time. Remember, real property law is unique to each state and while the law is the same within a state, customs will differ in different regions of a state. The following answers apply to New York State and Long Island and New York City in particular.
Q. When will my closing take place?
A. The contract of sale you entered into generally has a closing date written in, but that is known as an “on or about date”. It is when the parties hope to get the closing done, but is not written in stone. Variables such as attorney and bank schedules, schedules of the parties, the time it take for the lender to be ready, moving truck availability and so on, all contribute to the uncertainty. As a general unwritten rule either party can postpone the closing date for 30 days without penalty. The courts have used the term “reasonable time”, most attorneys consider that to be 30 days, but there are plenty of situations where it could be much less. Once everyone is ready, the attorneys for the buyer, seller and lender will try to find a time when everyone can get together for the closing. They will set a date and time, usually 2 to 7 days in advance, so you may not have much notice.
Q. Do I need to be out of my house when the closing takes place?
A. As a general rule, yes. You are selling your house. As of the closing it is no longer yours, it belongs to the buyer and he/she expects to have a clean, empty house to move into. If this is a real problem for you, it is more and more common for sellers to stay in the house for up to 5 to 7 days after the closing to move out or complete the closing on the house they are buying. You will need to leave a deposit in escrow to guarantee that you will get out and cover any damage. You will be expected to pay the new owners carrying costs, i.e. their per diem mortgage interest, which can be in the $50 to $200 per day range, depending on the size of their loan and interest rate. Attorneys don’t like this, it makes them nervous to have things unsettled and we would generally prefer to postpone the closing for a few days.
You also need to leave the house “broom clean”. That means all furniture and junk must be out of the house, even that massively heavy cupboard you took down to the basement. All the stuff you have collected over the time you lived there needs to be removed. You don’t have to scrub the walls and floors, it needs to be broom clean. So, sweep the floors and vacuum the carpets.
Q. What is title insurance and do I need it?
A. Title insurance is insurance you buy when you purchase real property. It is a onetime payment and is good for as long as you own the property. How do you know the person selling you the property actually owns the property and has the legal right to sell it to you? How do you know there isn’t a mortgage on the property from the seller, or a judgment or lien against the seller that gives someone else rights to the property. You don’t want to buy a house and a few years later have a bank foreclosing on your property for a loan the seller didn’t pay. The title insurance company will research all the public records and provide you with insurance that the title is clean. If some question comes up down the road, the title company will cover it, up to the value of the house as of the day you purchased it (or current value if you choose the extra coverage). All attorneys will tell you to get “fee insurance”, coverage for your ownership interest. All lenders will require you also get “mortgage insurance”, separate coverage for the lender’s interest in the property. So yes, you need title insurance. The cost of the insurance is based on the purchase price of the property and is regulated by the state. If you are curious our friends at Abstracts Incorporated have a closing cost calculator.