All sellers have a basic knowledge of what they must do to their apartment or home to make it look more desirable to a purchaser. However, most sellers do not know what things to think of and what documents they should have available when they put their property on the market. Once you have decided to sell your home and an offer is accepted, the process moves very fast. Any delay can result in losing a purchaser.
Do not underestimate the importance of retaining your closing documents in a safe place after the transaction has been concluded. Most lawyers will retain a set of these documents but not indefinitely. If many years have passed, the attorney may have purged old files.
For all transactions, the attorney should prepare a closing statement and binder with all of the documents after the closing. The statement should provide a fairly detailed financial summary of the transaction. The closing binder will provide the purchaser or seller with a source to review the paperwork concerning the transaction. In addition, the purchaser and seller should provide a copy of the closing statement to his or her accountant for preparation of income tax returns. The closing binder will also contain copies of the loan documents should they need to be reviewed after the closing. The closing binder will also be needed by the seller’s attorney when the property is sold and may contain many of the documents described below.
Here are 15 tips to make sure the Seller is ready when the time comes to sell:
1. Proof of Ownership.
Your need to confirm legal ownership of the apartment before an apartment is sold and a contract of sale is prepared. If you own a co-op apartment, be sure to have a copy of your stock certificate and proprietary lease available to provide to the broker and/or attorney. If you own a condominium apartment or a house (townhouse), have a copy of your deed available. The stock certificate will show the exact number of shares allocated to the apartment and the name of the co-op corporation. The deed will show the name of the condominium and the percentage of common elements allocated to the apartment. If you purchased a co-op apartment without financing, you should have and will need to surrender the original stock certificate and proprietary lease to the managing agent or the co-op corporation at the closing. (NOTE: Failing to produce the stock certificate and proprietary lease at closing can result in fees imposed by the co-op on the Seller ranging from $150 to $750 per document! In addition, some co-ops take a more conservative approach and require the seller to bond the lost stock and lease based on the value of the sales price. This can result in thousands of dollars to the seller). If you are selling a co-op apartment and have a loan, the lender will have the original stock certificate and proprietary lease (you should only have a copy of these documents). For a residential home or condo, the original deed will be recorded in the appropriate public office and eventually returned to the purchaser’s attorney. In turn the attorney should forward the original deed to the purchaser. (NOTE: the deed is recorded and microfilmed in the County Clerk or Register’s office so a copy of the recorded deed can always be retrieved. It is NOT necessary to have the original deed to prove ownership or to transfer the property).
2. Title Report/Title Policy.
The title report and title policy are documents that are required when a residential house or condominium apartment are purchased. Title insurance protects real estate owners against any property loss or damage they might experience because of liens, encumbrances or defects in the title to the property. The final title insurance policy will be sent to the purchaser’s attorney by the title company after the closing. The attorney, in turn should forward the title policy to the purchaser. If the title policy is misplaced, provided you have a record of the title number and title company name, a duplicate copy of the policy can be obtained from the title company.
The title policy is extremely important to keep safe as it will be necessary in the event a title issue arises when the property is sold. This happens more than one would hope. For example, A sells his house or condo to B. As part of the closing, A pays off the mortgage and B obtains a title insurance policy. 10 years later B sells the house or condo to C. When C obtains a title report it is discovered that the B’s mortgage is still on record even though it was paid off. This is a title issue that must be rectified before the closing from B to C. B’s title policy reflects that A’s mortgage was paid off. B provides the title policy to C’s title insurer and the mortgage exception to title will now be rectified.
The closing binder for a house or condo should include the title report. This document will reflect what steps the title company took at the closing to insure that the purchaser obtained “clean and marketable title” (i.e. Title without any liens or serious restrictions). If the title company failed to remove the liens after the closing, producing the title report will generally insure that the purchaser can transfer the premises to a third party without any problems.
If you are selling a house, you should locate a copy of the survey of the property. The survey is a drawing of the footprint of the property prepared by a licensed surveyor and gives the dimensions of the land, where the property lines are located and what structures are erected on the property. A copy of the survey should be located in the closing binder.
4. Certificate of Occupancy.
If you are selling a house, the seller should have a copy of the certificate of occupancy and any other building department written approval for any improvements or additions to the house. The certificate of occupancy is a document issued by the local department of buildings reflecting what structures are located on the property and if they are in compliance with building codes. A copy of the certificate of occupancy should be located in the closing binder.
5. Board Application.
Obtain a copy of your co-op or condominium board application from the managing agent of the building. Have it ready to give to the broker or purchaser.
6. Financial Statements.
Obtain a copy of the last two years of the co-op or condominium’s financial statements and offering plan with all of the amendments. The Purchaser’s attorney will want to review these statements.
(NOTE: if you cannot locate items 1 or 2, the managing agent of the building will most likely have these documents but you may have to purchase them).
7. Offering Plan.
For a cooperative or condominium apartment, the seller should locate an offering plan for the building. The offering plan should have been delivered to the seller when the apartment was purchased The offering plan should be given to the seller’s real estate broker so that it can be transmitted to the purchaser’s attorney when the offer has been accepted by the seller. NOTE: Be sure to get the offering plan back if the sale is not consummated.
8. Financing Limitations.
Know if the purchaser intends to finance and how much. If the sale is for a co-op apartment, you will need to know the maximum amount of financing the co-op will allow a purchaser to obtain.
9. Managing Agent.
Know the name, address, phone number and contact person at the managing agent office (purchaser’s attorney will need to contact this person to review the minutes of the co-op or condo and the broker will need to contact this person to submit the board application).
10. Flip Tax/Transfer Fees.
Find out if your building has a flip tax or transfer fee and who pays it. If there is such a fee, it should me made clear who pays the fee when you have an offer. Also, it may be prudent to have the broker remind the purchaser that there is there is a New York State mansion tax of 1% of the sales price imposed on the purchaser if the property is $1,000,000 or more so there are no surprises when the offer has been accepted.
11. Personal Property.
The seller must determine specifically what personal property is included or excluded from the sale (the general provision is everything is included unless excluded). Furniture is generally always excluded and appliances are generally included. Items that result in problems are built-ins, light fixtures, window treatments and wall mounted flat screen televisions. Generally, all appliances must be in working order and the home should be vacant and broom clean at the time of the closing.
12. Real Estate Taxes/Water and Sewer Bills/Maintenance and Common Charge Invoices.
Know your annual real estate taxes if selling a house or condominium. Have recent copies of your real estate tax bill and water bills (if a house) available in the event it is requested by the Purchaser or his or her counsel. Know the amount of your monthly common charges if selling a condo apartment or the amount of your maintenance if selling a co-op apartment. It is best to have copies of the monthly invoices available for inspection by the Purchaser or his or her counsel. Always disclose if there is an assessment on top of these expenses.
13. Closing Date.
The Seller should determine the closing date and make sure the purchaser agrees to the projected date (you may have an accepted offer on the price but if the seller wants to close in 4 months and the purchaser wants to close in 2 months, you may not have a deal). Remember also, New York State allows a purchaser and seller to postpone the closing for approximately 30 days.
14. Bank Statement.
The seller should provide a copy of a recent bank statement to the seller’s attorney if there is a mortgage or loan on the unit so that a payoff letter can be obtained prior to closing.
15. Attorney Selection.
Select an attorney as soon as you know you are ready to sell. You do not want to be in a position where you have an accepted offer and do not have an attorney to prepare and negotiate a contract of sale.
If there is a tenant in the property, you will need to locate and provide a copy of the lease. While the foregoing list should not be deemed to be all inclusive, having these documents available will insure a smother contract negotiation and signing.
*DISCLAIMER. Nothing herein is offered as legal advice. All information in this article is for informational purposes only. Please consult with an attorney before taking any legal actions.