Common Forms in a Real Estate Transaction
Written By Leah Caro (President & Principal Broker). Created on 02/06/2015.
New York State (Sec.443) Disclosure Regarding Real Estate Agency Relationships
This form is required by NY State to be executed by all parties to a real estate transaction, including buyers, sellers, tenants and landlords. The document describes the various types of agency relationships. Your agent should discuss these relationships with you in detail at your first substantive meeting so that you can agree on the type of agency representation you will receive. If your agent will represent you as a buyer's agent, then the circumstance of "dual agency" should be discussed at this time.
Dual and Designated Agency Agreements
If you are represented by a buyer's agent, you will have discussed "dual agency" during your initial agency discussion. Should a situation of "dual agency" arise, in all likelihood, this will lend itself to resolution with a "designated agency" agreement. At the time a dual agency arises, both parties to the transaction will be required to acknowledge the dual agency in writing, and also to acknowledge a designated agency agreement at the same time, designating different agents within the same brokerage to represent each of the parties.
Disclosure of Information on Lead-Based Paint and/or Lead-Based Paint Hazards
All purchasers or lessees of housing built before 1978 must be presented with the pamphlet "Protect Your Family from Lead in Your Home". In addition, they must be provided with a disclosure form from the seller or lessor stating any knowledge of the existence of lead-based paint in the home. Should a buyer or lessee wish to conduct inspections for lead-based paint hazards in the home, they will be allowed a 10-day period in which to conduct those inspections, unless otherwise agreed to or waived.
Property Condition Disclosure Statement
As of March 1, 2002, New York State implemented a Property Condition Disclosure Act. This law requires that a completed property condition disclosure statement be provided to the buyer before the buyer is bound by a contract of sale, and this statement must then be attached to the contract. Failure to provide the completed statement as prescribed by the law will result in a $500 credit to the buyer at closing. This law applies to residential property with one to four units, but not to unimproved real property, new construction, condos, cooperative apartments, or property in a homeowner's association that is not owned in fee simple. Other exclusions exist in various situations of foreclosures, estates, transfer between co-owners, and more (consult legal counsel for the details of these various exclusions).
Offer to Purchase
A written Offer to Purchase is commonly used to submit an initial offer on a property. This document is not a standardized form, but should contain the terms of the offer, including offering price, conditions (financing, inspections), inclusions of the sale, proposed closing date, and any other negotiable issues. It should be prepared by the agent working with the buyer, and should be carefully reviewed by the buyer for accuracy prior to submission; the agent may or may not request that the buyer sign the offer.
Memorandum of Agreement or Purchase Memorandum
Again, this is not specifically a standardized form, but this type of document is commonly used to memorialize the terms that have been agreed to by all parties to the transaction to reach an "Acceptable Offer". This document is usually prepared by the seller's agent or broker, and sometimes by the buyer's agent or broker as well. A copy of the Memorandum is typically sent to all parties including the buyer(s) and seller(s), both parties' attorneys, and both real estate agents.
Contract of Sale
The legal contract of sale is typically prepared by the seller's attorney after an agreement has been negotiated, and after completion of any agreed upon inspections. The contract will be sent from the seller's attorney to the buyer's attorney for review and signing by the buyer(s), then returned to the seller's attorney along with the down payment (typically 10% of the purchase price) for signature from the seller(s). While many attorneys use a standard basic contract, the exact language and terms of each contract will vary considerably and should be reviewed thoroughly before signing.
OTHER ISSUES AND CONSIDERATIONS
Carbon Monoxide Detectors
New York State law requires that all one- and two-family homes, condominiums, cooperative apartments, and multiple-unit dwellings (see Law for definition of multiple-dwelling units) have at least one operable carbon monoxide alarm at the time of sale. This law went into effect in March 2003 and was amended in 2009 (the amendment may be cited as "Amanda's Law"). During your initial home inspection, and/or at the final walk-through prior to closing, make sure that there is at least one alarm installed and that it is in working condition.
It will be necessary to have a homeowner's insurance policy in place, pre-paid for one year, at the time of closing. The insurance industry now relies heavily on C.L.U.E. (Comprehensive Loss Underwriting Exchange) Property Loss History reports, a database relating to insurance claims on private property. A property's claim history for the past seven years, including inquiries that did not result in claims, is contained in the report. In addition to considering the property's claim history, insurance companies will also consider the claim history of the purchaser, when deciding whether to issue an insurance policy. A property or purchaser with an extensive or checkered claim history may find it difficult, expensive, or impossible to obtain homeowner's insurance. Only the current property owner may order a C.L.U.E. report; you can ask them to obtain one and share it with you, or ask them to give you written details of their past claims on the property. These days, it is important to investigate the cost and availability of homeowner's insurance early in the process, rather than waiting until just prior to closing.
Well-Water Testing Law
The Private Well-Water Testing Law went into effect in Westchester County in November 2007. It applies to properties served by private wells used for drinking water, and requires that private well water systems be tested for primary and secondary contaminants upon the sale of any real property. For leased properties, the well-water testing must be done within 12 months of the property becoming subject to a leasehold, and at least once every five (5) years thereafter. Every time a rental property subject to the Law is leased, a written copy of the most recent test results must be given to the lessee. All new private wells, prior to first use, and all private wells not in use as a potable water supply for a period of five (5) years must also be tested. Upon signing of a contract of sale for a property subject to the Law, the seller must cause a water test to be conducted in the manner provided. Testing must be done by an employee or authorized representative of a lab certified by the NYS Department of Health. The Law provides that the cost of testing for the parameters set forth in the Law in the case of a sale or lease of property be borne by the seller or lessor respectively. The results of the water test must be delivered to both the buyer and seller, or in the case of a leased property, to the lessee. The Law contains provisions on the rights and responsibilities of parties whenever testing reveals that the well water system does not meet drinking water quality standards for one or more of the contaminants tested, and sets forth specific procedural requirements placed on the parties to remediate or correct the condition to establish safe levels of contaminants. This Law does not apply to properties served by a regulated Public Water Supply where the potable water supply system either serves five or more properties or regularly serves an average of twenty-five (25) or more individuals daily for at least sixty (60) days out of the year. Properties in Westchester County may be served by private wells, community wells, or public water supply companies, so you should inquire as to the source of the drinking water for your property to determine whether or not this Law will apply. More information on this Law may be found at the Westchester County Department of Health website, at www.westchestergov.com/health.
Want To Know More? Questions? Send a quick message: