What to Do Before Signing A Contract to
Buy or Sell Real Estate
Before You Buy or Sell Your Home
If you are thinking of buying or selling a home, below are
some tips and information to help ensure that your transaction will go
smoothly and without unanticipated problems or surprises and that it will be an enjoyable and
rewarding experience. These tips were written for residential real estate
transactions in Monroe County, New York State. If you are planning on buying
or selling a house in another County or state, then you should determine how
the information below would be affected by the laws, practices and
procedures of such other County or state.
Table of Contents
- The Anatomy of a
Real Estate Transaction
- Seller Decides to Sell
Seller Decides on a Listing, or Asking Price
Seller Decides to Market the Property
Buyer Decides to Buy
Preparation of the Purchase Offer
The Purchase Offer is Submitted to the Seller for Acceptance,
Rejection or Counteroffer
After the Purchase Offer is Accepted, the Contract is Submitted to
the Attorneys for Approval
Coordination of Contracts -- Timing
Applies for a Mortgage and Avoiding Loan Fraud
of Title by the Buyer's Attorney
Obtaining Title Insurance by the Buyer's Attorney
Pre-Closing Possession Agreement
Cancellation of Sale or Purchase
After the Closing
What Should a Buyer or Seller Discuss with the Real Estate Agent and the
Coordination of Purchase and Sale
Buyer Must Exercise Due Diligence
Glossary of Terms
Regional Information (Upstate New York and Monroe County)
Outline of A Real Estate Transaction
The Anatomy of a Real Estate Transaction.
Seller Decides to Sell. The reason a seller is selling
could be valuable negotiating information for a buyer. A buyer should try to
find out why the seller is selling to determine if he or she is a "motivated
Conversely, often the seller does not want the buyer to know
the seller's motivation. If the seller is highly motivated, it could result
in a reduction in the purchase price.
The Seller Decides on a Listing, or Asking Price.
This is usually done with the help of a real estate agent. The agent should
provide the seller with written comparable sales information that should
enable the seller to see what price similar houses, as geographically close
as possible, and as recently as possible, have sold for.
Most real estate agents are willing to do a "market analysis"
before a seller signs a listing agreement with them. Comparing the seller's
property to these comparable sales should enable the seller to arrive at an
asking, or listing price.
Seller Decides to Market the Property. The seller has
to decide whether to multiple list the property with a real estate agent, or to sell
the property himself or herself (commonly called a FSBO -"For Sale By
Commissions. If a seller decides to market the property with a real estate
agent, the seller can expect to pay a commission (in Monroe County usually 6% for residential
property and 10% for vacant land).
Multiple Listing. The advantages of listing with a real
estate agent are that the property is usually listed with The Multiple Listing
Service, which is maintained by the Greater Rochester Association of
Realtors®, Inc. (GRAR), and exposes the property to virtually every active
buyer. Listing with a real estate agent also offers the seller the advantages
of an experienced professional who will advertise the sale and conduct open
houses (for other real estate agents for greater exposure, and to the
general public) and usually assist the buyer in obtaining financing for the
house. Listing with a real estate agent is the customary way to sell a house.
For Sale By Owner (FSBO). If the seller decides to market the property himself or
herself, the costs can be lower because there is no commission; however, the
advertising costs must be paid by the seller. In addition, the seller can
market the property at a reduced rate, or have a greater cushion for
negotiating the sales price, taking into account that there is no commission
to be paid. However, when the seller decides to market the house himself or
herself, he or she loses all of the services provided by a real estate agent,
which are considerable. Unless you have considerable experience in buying
and selling real estate, Dibble & Miller, P.C., does not recommend that sellers
market homes without the assistance of a real estate broker.
Price Negotiations. Buyers generally expect that the seller will accept a sale
price that is somewhat lower than the listing or asking price; however, this
does not always happen.
Property Condition Disclosure Statement. Sellers are required to complete
and sign a Property Condition Disclosure Statement. This statement gives a
potential buyer some information regarding the property including, but not
limited to, the length of time the seller has occupied the property, the age
of the roof and furnace (if known to the seller), the school district in
which the property sits and an indication of any known defects with the
property. If the seller fails to deliver a disclosure statement to the
buyer prior to the buyer signing a binding contract of sale, the buyer is
entitled to receive a $500 credit from the seller upon the transfer of title;
other than this credit, the seller's failure to provide a Property Condition
Disclosure Statement cannot be the basis
of a lawsuit by the buyer. In fact, a common practice has developed to
automatically not give the statement, and instead give a $500 credit. If the
seller makes a false statement in the disclosure, the seller may be subject
to claims by the buyer prior to or after the transfer of title. If a false
statement is made by the seller at any time, you should contact your attorney immediately
and advise him or her of the statement.
Attached is a copy of the
Property Condition Disclosure Statement
originally required NYS Real
Property Law § 462. By the time you read this copy, it is possible that it
may not be the current version required by law. Therefore, you should check
with your closing attorney or your real estate agent in order to determine
if this is the current version. It is, nevertheless, attached because it
does provide information about what you should be aware if you plan to sell
or buy a house.
Buyer Decides to Buy. If possible, a buyer should be
"pre-qualified" for a mortgage if a mortgage is necessary to finance the
purchase. A pre-qualification can make the difference if two parties are
bidding on a house, and one is pre-qualified and the other is not.
Pre-qualification is free and might give you an edge!
Buyer's Duty to Know Mortgage Amount Limits. At a
minimum, a buyer should know how much of a mortgage the buyer
can afford, which is based on the buyer's income, assets, debts, and credit
rating. The buyer's real estate agent, a mortgage broker, or a lender can
assist the buyer in determining what he or she can afford and in obtaining a
"pre-qualification letter" to give to sellers (there is no cost to the buyer
to obtain a pre-qualification).
Preparation of the Purchase Offer. When a buyer finds
a house the buyer likes in his or her price range, the buyer's real estate
agent (or the attorney if no agent has been used) will prepare the Purchase Offer. The offer should be made subject to
the buyer's attorney's approval.
Consultation with Buyer's Attorney. The buyer may want to consult with
his or her attorney prior
to signing or submitting the offer to the seller, but the usual practice is
to use a pre-approved form (see below for more information pertaining to
pre-approved forms) and to send the accepted offer to the buyer and seller's attorneys
after acceptance. Both buyer and seller should make sure any
offer signed by them is subject to attorney approval.
Contingency for Sale of Present House. If the buyer also has a house to sell, and needs the equity
in the house or cannot afford to pay two mortgages at the same time or the
bank will not allow the buyer to pay for two mortgages at the same time, the
Purchase Offer MUST be made contingent on the sale of the
buyer's property. This protects the buyer from being committed to purchasing
a property if the sale of the buyer's house does not close for any reason.
However, any contingency required by
the buyer makes the buyer less attractive to the seller.
The Purchase Offer is Submitted to the Seller for
Acceptance, Rejection or Counteroffer. The seller can accept the offer,
reject the offer, or counter the offer. The seller often counteroffers over
some issue, but the seller's response is dependent on the seller's
motivation and the type of real estate market (buyer's or seller's market).
A seller should know the likelihood of the buyer obtaining a
mortgage, if the contract is contingent on the buyer obtaining a mortgage.
The acceptance should be made subject to the seller's
attorney's approval. The seller may also want to consult with his or
her attorney prior
to signing, accepting the offer, or presenting a counteroffer to the buyer,
but the usual practice is for the seller to use the pre-approved form (see
below for more information pertaining to pre-approved forms) and to send the
accepted offer or counteroffer to the buyer without first consulting an
The seller (as well as the buyer) should know that, if the seller responds
to the buyer with a counteroffer, the buyer can reject the counteroffer and
not buy the house.
Every time either the seller or the buyer submits a
counteroffer, the other party can reject the counteroffer, submit
another counteroffer or decide not to go through with the deal. Therefore,
be careful before you submit a counteroffer because the other party may be
looking for an excuse to terminate the contract -- for example, the
seller may have received a higher offer or the buyer may have found a house
he or she likes better.
After the Purchase Offer is Accepted, the Contract is
Submitted to the Attorneys for Approval. You should make sure that the
contract provides that it is subject to attorney approval and you should
also note the time frame (usually 7 business days) required for your
attorney to provide his or her approval of the contract. Your attorney
should discuss with you all the issues listed in paragraph (2) below before
approving the contract. When your attorney approves the contract it
means that the terms of the contract are acceptable to you. Attorney
approval of the contract does not waive any contingency contained in the
contract (for example, property inspection, mortgage contingency, etc.).
Coordination of Contracts -- Timing.
Unless a seller is willing to move twice (assuming that the seller is buying
another house), a seller's sale contract and the seller's purchase contract
need to be coordinated to the extent possible! This can only be done well through
If the buyer has a house that he or she needs to sell in
order to purchase the new house, a practical coordination of the two
transactions is often more important to the buyer than the other crucial,
but behind the scenes, legal work the buyer's attorney performs. Sometimes
this can be a very complex issue, depending on how long the chain of the
transaction runs (buyer has a house to sell, the buyer of his house has a
house to sell, etc.).
Buyer Applies for a Mortgage
and Avoiding Loan Fraud. Once the offer is
accepted by the seller, the buyer should immediately apply for a mortgage,
as the Purchase Offer is almost always contingent upon the buyer obtaining a
mortgage commitment, within a specific time period.
Be aware that filing a false financial statement with a bank
is a very serious crime, under both federal and state law. It is against your best
interest to continue to deal with any mortgage or real estate broker who
encourages you to falsify your information. Never make a false
Buyers Must Not Commit Loan Fraud
Buyers are required to provide complete and accurate
information when applying for a mortgage loan. This includes
both the buyer and any third party that is assisting the
buyer in either completing the application, or submitting
the application to a lending institution. In this regard:
Do not overstate income or
Disclose all loans and
debts (including money that may have been borrowed to
make the down payment).
Do not provide false
letters of credit, cash on hand statements, gift letters
or sweat equity letters.
Do not provide false or
intentionally inaccurate 1040s, W-2s, 1099s, job letters
Do not accept funds to be
used for the down payment from any other party (seller,
real estate, sales-person, builder, etc.) involved in
Do not falsely state that
the buyer is receiving gift funds to use towards the
purchase, when, in fact, the buyer is borrowing the
Do not falsely state
that a property will be used for primary residence when
it actually is going to be used as rental property.
Do not act as a
“straw buyer” (somebody who purchases property for
another person and then transfers title of the property
to that person), nor should the buyer give that person
personal credit information for them to use in any such
Do not apply for a loan
assuming the identity of another person.
Do not give a real estate
purchase agreement to a mortgage broker or a lending
institution that is different from the one that will be
relied upon at closing. For example, the lending
institution is given a real estate purchase agreement
for $150,000 but is not aware of a seller’s concession
or a purchase price reduction that makes the actual cost
to the buyer less than $150,000.
Do not submit, or agree to
submit, or assist in submitting, to a mortgage broker or
lending institution a false or misleading appraisal of
the property to be purchased.
Federal law provides severe penalties for fraud,
misrepresentation and conspiracy to wrongly influence the
issuance of a mortgage. Buyers can be subject to criminal
prosecution for providing false information.
If a buyer is aware of any fraud in the buyer’s mortgage
loan application, or if any individual tries to persuade the
buyer to make false statements on a loan application, the
buyer should then immediately consult with an attorney.
Mortgage Commitment Obtained. Once the buyer obtains a
mortgage commitment, he or she should make sure that his or her attorney receives a
complete copy of the mortgage commitment (including all pages, from the
first page to the signature page, with any attachments) as soon as it is issued (either directly
from the bank or by providing a copy themselves). It is crucial that the
buyer review the terms and the conditions of the commitment with his or her
attorney PRIOR to signing their acceptance of the commitment and
returning it to the bank.
If all other contingencies are satisfied at this time, the
seller's attorney will prepare and forward the title package to the buyer's
Once the mortgage commitment letter has been accepted by the
buyer, it is the buyer's responsibility to satisfy all of the conditions of
the commitment letter (that is, verification of employment, pay stubs, copies
of bank statements, etc.). The sooner these conditions have been satisfied,
the sooner the buyer is "cleared to close" by the bank.
In addition to supplying the documentation required by the
bank in order to satisfy the mortgage commitment letter, the buyer must
verify with the loan processor directly whether the items submitted to
satisfy the commitment letter actually do satisfy the conditions specified
in the commitment letter. Occasionally the bank requires that the closing cannot even be scheduled until the buyer is "cleared to close."
Examination of Title by the Buyer's Attorney. The
buyer's attorney should examine the title package to determine that the
buyer will receive marketable title. This is the most critical function the
buyer's attorney performs for the buyer.
Dibble & Miller, P.C., recommends that a buyer hire
an attorney who performs his or her own title exam.
Obtaining Title Insurance by the Buyer's Attorney. The buyer's
attorney prepares or obtains a commitment for title insurance.
Mortgagee Policy. Title insurance is a requirement of the bank, as it
protects its interest in the title to the property. This form of title
insurance is called a mortgagee policy.
This is an insurance policy that protects the buyer's interests in the
title of the property, which is called a fee policy (fee in this case does
not mean money, but rather refers to the fact that the buyer is the owner of
the land -- the buyer is often called the fee owner of the land). This is an
optional insurance, however,
Dibble & Miller, P.C., always recommends that it be
Simultaneous Insurance Policy.
A simultaneous title insurance policy is one that obtains both mortgagee and
fee coverage at the same time. The advantage to this type of policy is that
it is less expensive to obtain the additional fee coverage at the time of the
purchase, when the buyer is required to obtain the mortgagee policy anyway.
Dibble & Miller, P.C. examines each individual title on behalf of our clients, rather
than relying on the title company, because it has different interests which
are based more on statistical factors, rather than on the interests of the
buyer (you should note that while we perform title examinations, we do not
Pre-Closing Possession Agreement. Once in a while the buyer wants to
obtain possession of the house before the closing. This can happen when the
buyer has to sell his or her old house and move out before the closing on the
new house. If the buyer moves into the new house before closing, the
seller's attorney will want the buyer to sign a pre-closing possession agreement,
which is a an agreement protecting the rights of both parties, but
especially the seller.
Pre-closing possession agreements are not favored, but are sometimes
necessary to make the deal. There is a higher risk of buyer remorse when
there is a pre-closing agreement, because the buyer is in the house and, for
decide that he or she does not like it, or may find out that the seller had animals in
the house which affects his or her allergies. If this happens, the buyer may
attempt to terminate the purchase. Therefore, when a seller enters
into a pre-closing possession agreement he or she should also collect a
non-refundable deposit from the buyer to make it more difficult, and costly,
for the buyer if he or she attempts to back out of the deal.
Cancellation of Sale or Purchase. If the buyer or seller cancels a
valid contract without legal justification, the party cancelling the contract may be held liable for certain damages by the other
party. A buyer runs the risk of losing the deposit he or she placed on the
property at the time of the signing of the Purchase Offer, and either party
may be held liable for broker's commissions, legal fees and/or be subject to
a lawsuit to force the sale of the property.
The Closing. At the closing, the buyer's attorney
explains the legal impact of the numerous documents the buyer signs or
reviews, and collects the title objection curatives.
The seller's attorney delivers the deed and title objection
curatives, and collects the money due the seller.
The lender's representative collects the documents signed or
reviewed by the buyer and sees that the documents that need to be recorded
(usually the deed, mortgage and discharge of the seller's mortgage, assuming
that the seller has a preexisting mortgage on the house being sold) are
recorded in the County Clerk's Office.
After the documents are recorded the buyer has a new home.
(Technically, the buyer owns the home after delivery of the deed at closing,
but the closing is held in escrow until the documents are recorded in the
County Clerk's Office). A seller should never cancel homeowner's
insurance on a property until he or she has been informed that the documents
were recorded in the County Clerk's Office.
After the Closing. After the closing the attorneys for
the parties send closing statements and other documents to their clients.
The original deed is returned to the buyer's attorney about
four to eight weeks after it was recorded, and often it is then forwarded to the
What Should a Buyer or Seller Discuss with
Estate Agent and the Attorney?
Full Disclosure. The buyer and the seller should discuss with their real
estate agent and their attorney all their circumstances.
Why they are Buying or Selling.
Each party should discuss why they are buying or selling, where they are moving
from or to, what efforts they have taken so far, and their financial
circumstances relevant to the transaction. In summary, everything relevant to the
transaction should be disclosed.
Information about the House. Regarding the house
itself, the seller should disclose whether there (a) is any personal property included
in the sale, (b) are any hidden
defects, (c) is any structural damage, (d) are any repairs or improvements to be
before closing, (e) are any pest infestations, (f) is zoning compliance (did the
seller get a permit for the new deck or guest room that was built?).
Property Inspection. We always recommend a
property inspection for a buyer. Sometimes even the seller is unaware
of a serious defect. If the contract is contingent upon the completion
of a property inspection to the buyer's satisfaction, the inspection must be
completed within days of the acceptance of the contract by the seller, as
specified by the terms of the contract. It is very important to note
the time frame to complete the property inspection because it is the buyer's
sole responsibility to complete the inspection within the specified time
frame. If the inspection is not completed in time, the buyer waives
his or her right to the inspection and may have to purchase the property as
is without the benefit of a professional property inspection to alert the
buyer to possible defects. Given that the buyer must hire a
professional to complete the inspection within a limited time frame, we
recommend that the buyer require at least 10 business days to complete the inspection
after the seller has accepted the contract. That way the buyer should
have ample opportunity to hire an inspector, receive and review the
inspection report and decide if the property is acceptable or if he or she
wishes to cancel the contract due to the unsatisfactory results of the
Certificate of Occupancy (C of O). Any non-owner occupied
dwelling or multiple residence dwelling may require a C of O. A C of O is an official document issued
by the local municipality in which the property is located. A C of O
is typically required upon the transfer of title of multiple residential units
(or rental units). A C of O is usually issued by a municipality after
it completes an inspection of the property and determines it is in
substantial compliance with the applicable provisions of its Building Code.
We recommend that a buyer purchasing a property that he or she does not plan
to occupy, but to rent, ensure that the contract is contingent upon the
seller providing a C of O, if required by the local municipality, prior to
closing, as obtaining a C of O can require a substantial amount of money,
work and time.
Tenants. If you are planning to purchase a property with
existing tenancies, you will want to review and approve any existing leases,
gather information regarding the tenants and perform due diligence to
determine that all rents are current and all security deposits will be
assigned to you at closing.
Other Real Estate. If you must sell your present house before you can
purchase another house, or if you must buy a house before you can sell your
present house, consider making the contract contingent on the other purchase
or sale, to the extent possible.
Mortgage Commitment. If you are obtaining financing to purchase
the property, ensure that the contract is contingent upon your receipt and
acceptance of a mortgage commitment; so in the event you are unable to
obtain a mortgage, within the allotted time frame, you will be able to
provide the seller with a declination letter from the bank evidencing that
you were unable to obtain financing. That way you can show you have
made reasonable efforts to obtain a mortgage and you should be able to
cancel the contract, relieving you of any obligation to purchase the
Coordination of Purchase and Sale.
Unless a seller is willing to move twice (assuming that the
seller is buying a replacement home), the seller's
sale contract and the seller's purchase contract need to be coordinated to
the extent possible!
A Buyer Must Exercise Due Diligence. It is important that the
buyer understand that it is his or her responsibility to carefully consider
all aspects of a purchase of real estate in New York State. The Buyer
must understand that his or her attomey will review the contract and title
documents on behalf of the buyer, but will not be offering any opinion as to
the: (1) suitability of the property purchase as an investment; (2) fair
market value of the property; (3) the actual condition of the property (as a
visual inspection of the property will not be completed by the attorney);
(4) impact, payment or amount of property taxes or possible exemptions from
property taxes; (5) impact of the purchase of rental property on income
taxes; or (6) the suitability of any property management company a buyer may
choose to hire to manage his or her rental property.
Glossary of Terms.
"abstract of title" -- is a summary of all the legal transactions
recorded in the County Clerk's Office affecting the property for at least
the last 60 years in Monroe County, or some other period, depending on local
The seller should search his or her files for the abstract of title, as it may
have been received when the property was purchased. If it is not in the
seller's possession, it may be found at the previous attorney's
office, a title company, etc.
Part of the seller's attorney's services is to locate the abstract and have it re-dated (brought current).
Locating the old abstract can save the seller a significant amount of money
($200 to $600) and time in completing the transaction.
Whether the seller or buyer pays for the abstract of title depends on local
custom; in the Monroe County area, unless otherwise provided in the
contract, it is an obligation of the seller.
"adverse possession" -- a method of acquisition of title to real
property by possession under the required conditions for 10 years. For
example, if you place your fence on your neighbor's property and it stays
there for over 10 years, the property enclosed by the fence, under certain circumstances, becomes
Since there are certain conditions that have to be met in order to establish
ownership of land by adverse possession, you should contact your attorney if
you are either the neighbor whose property has been taken, or the property
owner who has taken his or her neighbor's property.
Dibble & Miller, P.C. has considerable experience in handling adverse
"buyer's market" -- is a phrase that refers to a real estate market that
generally has more houses available for sale than there are buyers.
The usual result of a buyer's market is that the selling price of houses
stays the same or decreases relative to the rate of inflation because of the
relatively low demand.
In a buyer's market there is more of a likelihood that the purchase price of
the house can be negotiated downward.
The 1990's, generally, was a buyer's market because the baby boomers had
bought their first houses in the 1980's, and the pool of first time homebuyers was much
smaller than the pool of sellers.
"counteroffer" -- Any change to a real estate contract after it
has been signed by the buyer or seller (this includes any changes to the
contract made by the attorney approving the contract for the buyer or the
"closing" -- is when the money and the title to the property change
hands between or among the seller, buyer and lenders.
"consideration" -- the reason or material cause of a contract; some
right, interest, profit or benefit accruing to one party, or some
forbearance, detriment, loss or responsibility, given, suffered, or
undertaken by the other.
"contract" -- is formed when an offer is accepted and there is
"fence agreement" -- an agreement that deals with a fence
encroachment (for example, a land owner's fence is on the land owner's neighbor's
property) in order to respond to an adverse possession issue that arises
when title is being examined before closing. The agreement clarifies the
ownership of the property between the fence and the property line.
An affidavit was used in the past, but an agreement is required now, as a
result of a change in local practice caused by a case handled by Dibble & Miller, P.C.
"gift letter or affidavit" -- a statement (usually used by the buyer
for the down payment for the purchase of a house) from a donor (often a
relative) that the transfer to another (the donee, who is usually the buyer
of a house) of money was made gratuitously (without
expectation of repayment).
To issue a gift letter or affidavit when there is expectation of repayment
is fraudulent, and depending on circumstances, could be a crime. It is
important that the gift letter or affidavit be a true and accurate statement
"instrument survey" -- is a map of the property tying it to some
permanent, locatable point, and showing all the improvements on the property
and improvements off the property but that are close to the boundary lines of the property.
In the Monroe County area of New York State, the seller usually pays for the
instrument survey. Once again, it will save the seller a significant amount
of money if he or she can obtain the original survey for the seller's
attorney to have re-dated (updated).
"mortgage" -- literally translated as "dead pledge". An interest in
real estate created by a written instrument providing security for the
performance of a duty or the payment of a debt.
Word History: The great jurist Sir Edward Coke, who lived from 1552 to 1634,
explained why the term mortgage comes from the Old French words mort,
“dead,” and gage, “pledge.” It seemed to him that it had to do with the
doubtfulness of whether or not the mortgagor will pay the debt. If the
mortgagor does not, then the land pledged to the mortgagee as security for
the debt “is taken from him for ever, and so dead to him upon condition
[that this is what the agreement provides]. And if he doth pay the money,
then the pledge is dead as to the [mortgagee]....”
Excerpted from The American Heritage Dictionary of the English Language,
Third Edition Copyright © 1992 by Houghton Mifflin Company.
"mortgagee" - the party that lends money and takes or receives the
mortgage as security (for example, a bank).
"mortgagor" -- the owner of the property who pledges the real estate
as security for the money loaned to him or her (for example, the borrower).
"motivated seller" -- is eager to sell for some reason (house too
small, neighborhood bad) or compelled to sell for some reason (job transfer,
foreclosure pending). Motivated sellers will often accept less than the
market value of the property.
"Multiple Listing Service (MLS)" -- is a computerized database of
houses for sale maintained in Monroe County by the Greater Rochester
Association of Realtors®, Inc. (GRAR), which markets the property to
virtually every active buyer.
"pre-qualification" -- allows a buyer to determine approximately how
much he or she can borrow. This is based on the buyer's income, assets,
debts and credit rating.
The buyer's real estate agent, a mortgage broker, or a lender can assist the
buyer in determining what he or she can afford and in obtaining a
"pre-qualification letter" to give to sellers.
Sellers prefer buyers who are pre-qualified because the seller often
concludes from this that a
pre-qualified buyer is likely to obtain a mortgage commitment, but there is
no guarantee that one will be obtained.
"real estate" -- is land, including the buildings and improvements on
it and its natural assets, such as minerals, timber and water.
"real estate agents" -- real estate agents are licensed by New
York State to represent sellers and buyers of real estate. Real estate
agents work for real estate brokers.
Buyer's and Seller's Agents. There are real estate agents for
"buyers", who represent the interests of the buyer (that is, identify
desirable properties in the buyer's price range and advise the buyer
regarding the neighborhood, schools, resale value and taxes), and real estate agents
for "sellers", who represent the interests of the seller (that is,
identifying potential buyers).
Commissions Paid. The commission paid by the seller (usually 6% in
Monroe County) is split by the agent for the seller and the agent for the
buyer (3% each). The buyer's agent maintains independence because he or she
is free to find the buyer any house to buy.
Both Agents Work for Same Broker. If the agent for the seller and the
agent for the buyer both happen to work for the same real estate broker, the
agent must, by law, disclose this dual agency relationship to both the
seller and the buyer and the parties must acknowledge, in writing, that the
agent fully explained the existence of the dual agency and implications of
the dual agency to them. Dual agency is
a fairly common practice in real estate transactions because of the size of
many real estate brokers. However, the main issue to recognize in this
situation is that the agent is working for both the buyer and the seller and
the result is that there may be some division of loyalty during the
negotiation of the real estate transaction. For more information on dual
agency, see the NYS Department of State, Counsel's Office Legal Memorandum
Be Wary of Dual Agency.
Dual Agent. Occasionally, one agent will act in a dual capacity and
such an agent must, by law, disclose this dual agency relationship to both
the seller and the buyer and the parties must acknowledge, in writing, that
the agent fully explained the existence of the dual agency and implications
of the dual agency to them. In a dual agency situation, neither the buyer nor the seller
should expect to receive the independent real estate advice that they would
have received had they had their own agents. In a dual agency situation, the
agent receives the entire commission (usually 6%). For more information on
dual agency, see the NYS Department of State, Counsel's Office Legal
Be Wary of Dual
Dual Agent Fee Negotiations. Sellers sometime become upset if their
agent attempts to become a dual agent and will seek to renegotiate the
commission to be paid if the seller's agent does become a dual agent (from
6% in Monroe County to between 3% to 5%).
Dibble & Miller, P.C., usually does not recommend a dual agency
In years past there were only seller's agents, because the sellers paid the
agents and the agents owed a fiduciary duty (an obligation to act for the
seller's benefit in the transaction) to the seller.
Now, while the seller still generally pays both the seller's agent and the
buyer's agent, the buyer's agent has a fiduciary duty only to the buyer.
Seller Disclosure of Information.
A seller should, therefore, understand that a buyer's agent has a fiduciary
duty to the buyer, and the seller, or the seller's agent, should usually not
disclose the seller's motivation to the buyer or the buyer's agent.
"seller's market" -- is a phrase that refers to a real estate market
that generally has more buyers than there are houses available for sale.
The usual result of a seller's market is that the selling price of houses
increases relative to the rate of inflation because of the relatively high
demand. The 1980's, generally, was a seller's market because the baby boom
generation was buying their first houses.
In a seller's market there is more of a likelihood that the purchase price
of the house cannot be negotiated downward.
"title objection curative" -- is a document required by the title insurance
company in order to cure a title problem prior to the issuance of a fee or
mortgagee policy (for example, a fence agreement is an example of a title curative
that a title insurance company may require to cure a boundary line issue
concerning the placement of a fence and a property line).
"title insurance" -- is insurance against loss or damage resulting
from defects or failure of title for a specific parcel of real estate. This
insurance also pays the cost of the legal defense of claims against title.
Buyers should carefully review and understand any exceptions from coverage,
and understand that the exceptions that are to be included in the policy are
decided between the issuance of the title commitment, and the closing.
There are two forms of title insurance:
Note: When a property is purchased and financed with a mortgage, fee and
mortgagee insurance can be simultaneously issued, at a substantially lower
than if they are purchased separately.
"title package" -- is the common term for an abstract of title,
instrument survey, and a proposed deed for a property. The seller's attorney
prepares these documents and forwards them to the buyer's attorney upon
receipt of buyer's mortgage commitment.
Regional Information (Upstate New York and Monroe County):
Pre-approved forms for residential real estate purchases are
used in the Monroe County area. The contract form for residential
transactions should be the "Purchase and Sale Contract for Residential
Property" published by the GRAR and the Monroe County Bar Association.
The current contract form can viewed by visiting the
Monroe County Bar
Association web site.
In Western New York, an "Abstract of Title" is provided by the seller to
the buyer as evidence of the quality of title held by the seller.
Since the early 1980's, Instrument Surveys have been required by lenders
and are required in the GRAR Residential Purchase and Sale Contract, which
requires the seller to pay for the survey.
The general custom in Monroe County is that the seller pays a realtor's commission
of 6 percent (6%) of the purchase price for residential real estate.
The general custom in the Buffalo and Syracuse areas is that
the seller pays a realtor's commission
of 7 percent (7%) of the purchase price.
This information is not legal advice or a
substitute for legal counsel. Readers should not act upon, or use as legal
advice, any of this information without seeking professional advice. This
information is not intended to create, and use of it does not constitute, an
attorney-client relationship or the rendering of legal advice.