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New York Real Estate Closing Process
The closing process in real estate transactions is a culmination of months, sometimes even years, of planning and preparation. Below, we outline the various stages of completing due diligence and finalizing the closing.
1. Reviewing the Contract of Sale
To move forward with the closing process, both the buyer and seller need to carefully review and finalize the Contract of Sale. This legal document outlines the terms and conditions of the transaction, including the purchase price, closing date, and any contingencies. The seller's attorney typically drafts the initial contract and sends it to the buyer's attorney for review.
After a thorough examination, the buyer's attorney may suggest changes or additions, which are then incorporated into a rider (i.e., a document that outlines desired changes or added conditions to the contract terms) and sent back to the seller's attorney for approval. Once both parties agree on the final terms, the contract is signed by both the buyer and seller and a down payment is made.
This ensures both parties are committed to the transaction and prevents either party from backing out without consequences. This contract is needed to complete the mortgage process as well.
2. Home Inspection
A thorough home inspection is essential to identify any potential issues with the property. You'll need to hire a licensed home inspector who will examine the property's structure, systems, and overall condition. The inspection typically takes a few hours and covers everything from the foundation to the roof.
After the inspection, you'll receive a detailed report outlining any problems or areas of concern. This report can be used to negotiate repairs or price adjustments with the seller. Be prepared to pay for the inspection up front, with the cost depending on the size and complexity of the property.
3. Certifications & Documentation
The title company will order a municipal report from the building department the property you are purchasing is located in. The Seller will have had to obtain Certificate(s) of Occupancy, which verifies that the building complies with local codes and is suitable for occupancy. If there have been any recent unpermitted improvements, the Seller may need to secure permits and approval from the local building department prior to closing.
Other important documents include property tax records, any existing warranties, and documentation of recent repairs or improvements. Your attorney will review these documents to ensure everything is in order and that there are no outstanding issues that could affect the property's value or your ability to use it as intended.
4. Title Search & Insurance
A title search is conducted to verify the seller's right to transfer ownership and to uncover any potential claims or liens against the property. This process involves examining public records related to the property's ownership history.
5. Mortgage Application & Approval
If you're financing your purchase, you'll need to complete a mortgage application and go through the approval process. This involves submitting extensive financial documentation, including:
- Proof of income
- Tax returns
- Bank statements
- Information about your assets and debts
The lender will review your credit history and may require an appraisal of the property to ensure it's worth the amount they're lending. Be prepared for a thorough financial review and to provide any additional documentation the lender requests. The approval process can take several weeks, so start this step early in the closing process.
6. Home Insurance Policy Verification
Before closing, you'll need to secure a homeowner's insurance policy and provide proof of coverage to your lender. This policy protects both you and the lender from potential losses due to damage to the property and should cover the full replacement cost of the property and any additional structures.
Be prepared to pay the first year's premium upfront, as this is typically required at closing. Your lender will need to verify that the policy is in place before they release the funds for your mortgage.
7. Final Walkthrough
The final walkthrough typically occurs within 24 hours before closing. This is your last opportunity to inspect the property and ensure it's in the condition agreed upon in the purchase contract. You'll need to verify that any agreed-upon repairs have been completed and that no new issues have arisen since the initial inspection.
8. Signing & Finalizing
The closing meeting is where all parties come together to sign the necessary documents and complete the transaction. You'll need to bring government-issued photo identification and any certified checks required for closing costs or down payments. Be prepared to sign numerous documents, including the deed, mortgage documents, and various disclosures.
Read our “Home Buyer’s Guide” for insight into the entire buying process.
We Offer Support to Buyers & Lenders During the Closing Process
Letterio & Haug, LLP can help with the preparation of loan closing documents. We can also act as the buyer’s attorney and offer counsel throughout the buying and closing process.
Learn more about how our real estate lawyers can help you. Call (845) 203-0997.