Why You Need an Attorney in NYC for a Real Estate Purchase
Most first time buyers don’t realize that buying property in NYC not only involves a hefty sum, but a dive into the intricacies of NYC property law.
In NYC, a buyer’s agent can help make the process less stressful, but a real estate attorney is also a must.
Technically, it is within your legal rights to buy property without an attorney, but it’s unusual and can be risky. Ninety-nine percent of real estate transactions in NYC involve legal representation on both the buyer and seller sides of the equation.
Why? For the most part, because in New York State, all real estate contracts of sale need to be drawn up by the principle or their attorney.
It is against the law for real estate agents and brokers to draw up any sales contracts (although this is an accepted practice in some other states) or to review them for the purposes of legally advising you in New York.
If you are not an attorney yourself and don’t hire one, as a buyer you run the risk of getting a contract devised by your seller’s lawyer, which will probably not have your best interests in mind.
Before the contract signing, you’ll also want a real estate attorney to conduct due diligence and scrutinize the deal for legal or financial risks to ensure the seller can deliver it cleanly.
For example, you’d be better off knowing if the building had a history of bed bugs, lead paint or mold than finding out the wrong way later.
Another reason to start early with legal representation: if you refuse an attorney for the contract signing, you’ll most likely need one down the road anyway.
Most banks won’t lend you money for a mortgage without legal representation.
Someone who is very experienced with NY Real Estate—say a house flipper—might waive her right to legal representation, but for the average home buyer, real estate experts wouldn’t advise it.
For the biggest purchase of your life, your best bet is to get all the help you can.
What Do Real Estate Attorneys Do?
Ideally a property lawyer will do much more than just show up for the contract signing.
Your lawyer should do his/her due diligence, negotiate the deal for fairness and represent the buyer at the contract closing.
To be more specific, typical services performed by a real estate attorney include:
- reviewing the contract
- loan and title commitments
- searching for liens
- verifying charges are correct and fair
- attending the closing
- handling title and closing documents
- confirming the title company completed its job after closing
- and addressing any of the buyer’s questions and concerns
Before the closing, your attorney should also review several years’ worth of the co-op or condo's board meeting minutes.
These minutes will provide information about ongoing and potentially expensive problems in the building.
If, for example, the building has a bed bug infestation, or a leaky roof, you may be faced with both inconvenience and a bill down the road.
Your attorney should also review financial statements, and your offering plan, which will include details like bylaws and special risks of the project.
In an older building, these documents can include other information a buyer should be aware of.
For example, if the seller plans to construct nearby buildings in the future that would lead to the obstruction of windows.
Can a property lawyer get you a better deal overall?
Generally, the price of the property is set by the real estate agent, or negotiated between the seller’s and buyer’s agents, but the attorney can investigate whether this price and all other charges are justified.
For instance, if the unit is listed as two bedroom, but your lawyer determines one of the bedrooms doesn’t meet legal requirements, that could mean a price cut—and a reason to be thankful for your attorney.
Starting Your Search for an Attorney
So you’re ready to start looking for a real estate attorney, but how to go about it?
Your best bet would of course be an attorney experienced with real estate transactions, or one that specializes in real estate.
You may see discount “flat fee” attorneys out there, with rates as low as $750, but real estate experts warn against these bargain buys, who might be making their real money off sneaky title insurance commissions.
As always in NYC, location matters. Though you might be tempted by a Hudson Valley lawyer charging a lower fee, it is important to find a lawyer with experience in New York City transactions.
As you most likely know, the NYC real estate scene is unique, and it’s good to have someone who can catch a seller’s curveball.
For example, most properties in NYC are either coops or condos, so you’ll want to make sure your lawyer has negotiated a condo contract or a coop contract in NYC before.
And if you’re buying a coop, make sure they have familiarity with sublease agreements, in case you want to leave in August like everyone else, and make back some of your mortgage payments.
How to Find a Good Real Estate Attorney?
As with most things real estate: starting early is the name of the game.
This means you should ideally start your search for an attorney at the same time you start looking for your home. You need time to do research and find a good attorney.
Another option is to work with an attorney you’re already comfortable with; ask them if they do real estate law, or if they have any trusted colleagues who do.
If you don’t already have an attorney you’re comfortable with, you might ask your real estate agent, your friends and colleagues (or even Facebook) for real estate lawyer recommendations.
Another route is to contact the NY bar association for a list of attorneys specializing in real estate. This will ensure the attorney is properly licensed.
If that seems too time-consuming, look on lawyer Yelp. Search online for local lawyers and read what people say about them.
Many websites provide reviews of lawyers for a variety of legal matters, and some lawyers are literally on Yelp.
What to do once you’ve found a real estate attorney you’re leaning toward? Schedule a consultation and ask the important questions (see below).
At this meeting you’ll most likely not receive specific advice relevant to your transaction, but instead an overview of the steps your lawyer will take.
You may also want to do some background research on the NY State Courts website to ensure any lawyers you’re considering haven’t been subject to disciplinary action.
What Kinds of Questions Should You Ask Before Hiring?
Ask what percentage of their practice is devoted to real estate transactions to get a more accurate snapshot of their real estate experience.
They might claim to have knowledge of real estate law, but if this knowledge has never been put into practice, it won’t help you much.
Of course you’ll be inclined to ask about their fee and what it includes. According to real estate experts, there is no standard fee.
The fee can range from property to property, and fluctuate depending on a number of factors, namely the complexity of the transaction. The fee can also either be flat rate or time-based.
Also, because you can find standard forms online, it might be a good idea to ask your attorney what they offer beyond what is readily available.
If they’re simply filling in the blanks on standard forms, they may not be much help to you, as for sale by owner sales aren’t standard transactions, or even transactions in some cases.
Ask your attorney what issues might arise before closing.
This might include disputes over repairs, or resolution of title issues and appraisal issues.
Your attorney should be able to review the contract and make suggestions to protect you and make the process easier.
Check to make sure you’re meeting the lawyer who will be doing all of your case work.
Some law firms use juniors or paralegals to complete some of the work, so, during your consultation, ask to be introduced to anyone else who will handle the contract, and make sure you’re comfortable with the person before proceeding.
Once you have found a great lawyer, make sure to provide them with all of the documents related to your real estate transaction straight away—this will give them more time to become familiar with the case.
Once they’re well versed in the case, let them advise you on legal matters—this is what you’re paying them for! They are there to help you get the best possible outcome in your housing purchase.
How Much Should You Pay for a Real Estate Lawyer?
The average real estate lawyer based in NYC will charge anywhere from $2,500 to $3,000 as a flat fee for a normal purchase or sale transaction.
However, lawyer fees can be as much as $5,000 for a more complex transaction or for new developments.
There are also light-touch, discount lawyers available who charge flat fees as low as $750.
Find out whether your lawyer will charge a flat fee or hourly.
Real estate attorney fees are typically structured as a flat fee per completed transaction.
You should be careful of any lawyer asking for hourly pay for a real estate deal as that’s a sure sign that the lawyer does not specialize in real estate transactions.
If your partner insists on using the family lawyer who doesn’t specialize in real estate, make sure you do your own research and hold your lawyer accountable for all the services a real estate attorney should perform.
Lawyer fees are typically taken at closing. Most experienced lawyers won’t even bother with an engagement letter to ensure this. They’ll just be there at the closing.
Real estate lawyer fees could be higher for a complicated estate sale with heirs that are hard to track down and a power of attorney involved.
Or the real estate attorney fees could be higher for a purchase involving a foreign buyer and a convoluted corporate structure.
Real estate lawyer fees can also zoom up when you’re buying a new construction home in NYC.
That’s because developers typically expect the buyer to pick up some of their closing costs such as NYC and NY State transfer taxes and the sponsor’s attorney fees.
Unfortunately for buyers of new development condos and coops, the rate charged by the sponsor’s attorney is decided by the sponsor.
Fortunately, just like everything else in real estate, the sponsor’s closing costs are negotiable with the assistance of an experienced buyer’s agent.
Should You Hire a Buyer’s Broker?
When it comes to buyer’s brokers, there are more pros than cons. Hiring a buyer’s broker can help you save on closing costs, and be of assistance in the overall process.
Sellers in NYC have agreed to pay the same total commission whether there are one or two agents working on a deal, so the services of a buyer’s broker are free and already built into the sales price.
Working directly with the buyer’s agent can be risky.
This is called dual agency, whereby the listing agent works for both the buyer and seller and therefore does not have the buyer’s interests at heart. Your own broker, of course, will have your best interests at heart.
Another huge plus: you can also request a buyer’s broker commission rebate.
This means that in addition to having an experienced negotiator and market expert on your side to navigate through the complexities of your real estate deal, you’ll receive a cash commission rebate at close and save money on your transaction.
However, keep in mind that this may not be an idea that your agent is open to. And it may be worth using a very capable buyer's agent or broker for no rebate.
Whether you hire a buyer’s broker, or use your non-real-estate-specializing brother as your attorney to save on costs, no amount of research is too little.
Real estate specialists agree that your housing contract should be thoroughly investigated and negotiated for optimum fairness.
The legalities of your home buy might not be an easy process, but your hard work in this deal will be well worth it in the long run!
For more information on what kind of professionals you should assemble before you first purchase, read up on what you need to know before you buy.