Signing A Contract
1. What is a down payment?
After obtaining an Acceptable Offer from your buyer, a Contract of Sale is prepared by the seller’s attorney & forward to the buyer’s attorney for review & signatures. The buyer must sign the contract & write a check for earnest money (down payment) to be held by the seller’s attorney in a special, non-comingled, account, on behalf of both buyer & seller. The amount of the downpayment is negotiable. It should be enough of a percentage of the purchase price so that the buyer will be induced to complete the transaction. If the buyer doesn’t complete the transaction at the buyer’s choice, the seller can keep the downpayment.
2. Under what conditions would the down payment be returned to the buyer?
In the event that the seller is unable to provide “clear title” to the property. This includes an inability to clear a lien, judgement, or other encumbrance on the property or cloud on the title, by the time of the closing. These items will show up on a title report, which is ordered by the seller’s attorney. Also, if the contract includes a mortgage contingency & the buyer is unable to procure a mortgage, the down payment would be returned to the buyer.
3. Under what conditions can the seller keep the down payment?
The seller would keep the down payment if the buyer backs out of the contract without cause. This is called “liquidated damages” & is considered the compensation for keeping the property off the market during the contract period.
4. What is a Property Disclosure Statement?
New York State law requires that sellers of improved property provide the buyer with a Property Disclosure Statement which points out the condition of different systems of the property. The seller should disclose any problems or issues they know about. In lieu of giving the Property Disclosure Statement, a seller may pay $500 to the buyer & many sellers do this instead.
5. Does the seller need to provide a Lead Paint Disclosure?
If the house was built before 1978, the law requires the seller to disclose that the house could contain lead-based paint & give the buyers the results of any tests the sellers have done.
6. Must the seller leave all the appliances?
It is not mandatory that the seller leave the appliances, unless they are permanent fixtures of the house, like a built-in range or countertop stove. If the seller wants to remove any appliances, they must disclose that before contracts are signed, preferably on the MLS listing.
7. Does the seller need an attorney & how important is it to hire a local attorney?
It is not advisable to enter into a real estate transaction without an attorney. The seller’s attorney will prepare the contract of sale & negotiate the terms of the sale with the buyer’s attorney, hold the downpayment in his escrow account, protect the seller from any potential liabilities, help clear up title issues, & move the transaction towards a closing. Most towns have codes of regulations & ordinances that affect real estate within that district. A local attorney has knowledge of the local zoning regulations & pending land use legislation that may affect a particular property. A local attorney’s experience with local real estate & insurance professionals, as well as building & tax department personnel will also help expedite the transaction.