NY Real Estate Lawyer Blog

Long Island Housing Partnership is a government program that provide $15,000 towards down payment and closing costs of a qualifying home in Nassau County, New York.   There are income requirements, and the purchaser must put down at least $2,000.   You do not have to be a Long Island resident to apply - you just need to purchase a home in Nassau County.    Applications are being accepted until December 25, 2007.

An application, with all information and documentation requested, is required to obtain a Purchaser Certificate, and you must enter into a contract of sale within three months and close within six months of obtaining the Certificate.  Prior to issuance of the Purchaser Certificate, applicants who are approved for the program and certified as eligible will be required to obtain one-on-one mortgage counseling and receive a pre-qualification of a mortgage from a recognized institution.  Private mortgages or no-documentation mortgages are not permitted.

The above is general information, and a complete instruction sheet and application, outlining all steps to be taken, should be obtained from Long Island Housing.   They can be reached at (516) 571-0360/(fax) 571-0377. The funds are technically a loan that is forgiven if you remain the home for ten years.  

If you are depending on these funds to close, you must notify your real estate attorney, since there are time deadlines that need to be coordinated.   For example, from my experience, it will take approximately three weeks for the check to be issued by the County, once Long Island Housing is in receipt of all necessary requirements, including the firm mortgage commitment.   Hence, a closing date needs to be put in the contract to accommodate the extra time.

Sometimes the purchaser also applies for a SONYMA mortgage, which could take even more time, since there are numerous steps in obtaining a SONYMA commitment.   It seems lucrative because the interest rate is lower, and the purchaser may  also receive closing cost assistance,  but the purchaser has to pay PMI and the mortgage is forty years.   These factors, and the extra time in closing, need to be weighed and accommodated.  If you are depending upon a SONYMA loan, it should be specifically stated in the Contract of Sale.   Otherwise, you could be in default if the time to close passes, and the contract called for a standard mortgage.  A seller could retain the down payment if they deem that you are in default.

Although there seem to be many hoops to jump through to obtain the above funding, it could be what is needed to allow a moderate income family afford their first home in the suburbs of Nassau County.

Cynthia M. Burke, http://www.nyrealtylaw.com

A short sale  is a device used by lenders and borrowers to avoid a foreclosure action.  The mortgage is in default for a while, and the bank realizes that the borrower cannot pay. The borrower finds a purchaser, but either the market value  has gone down, or for whatever reason, the borrower finds a new buyer who wishes to pay less than the mortgage due. 

The bank will require documentation, including an income and expense statement from the borrower, a hardship letter, the contract of sale, and a proposed HUD-1 Settlement Statement showing all expenses of sale.  Each bank has their own requirements, and it usually takes approximately three weeks to review the package when received. You may feel that you are in limbo, but eventually you should have a person assigned to the case who will negotiate with you.

If the amount offered is approved, the closing can take place, and the borrower provides a letter from the bank to the title company showing approval of the short sale.  The borrower should also make sure that he is released from personal liability on the note for the shortfall.

One consideration in a short sale is whether there will be income tax due on the forgiven amount, and a tax advisor must be consulted before the short sale to resolve this issue.

Another option to avoid a foreclosure is called a Deed in Lieu of Foreclosure, whre a deed is given directly to the lender.  However, you need to make sure that you will not be held liable for the shortfall after the bank sells the property.  Also, you need to check with a tax advisor as to any tax ramifications.

See post regarding Chapter 13 filing as a possible remedy.  A qualified bankruptcy attorney should be consulted to protect your rights.

Cynthia M. Burke, http://www.nyrealtylaw.com

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Everyone knows that housing prices are down from the past two years.  Houses on my street in Baldwin were selling for a high as $500,000 approximately two years ago.  That lasted for about three months, when the prices started going down steadily.

What’s causing all the foreclosures is the lending practices of the subprime lenders.  Some of the practices were fraudulent, where mortgage brokers did creative lending, not giving the true picture to the banks and ultimately the investor who purchased the loan.  A person with marginal credit and income would be given a one hundred percent loan, to cover both the purchase price and closing costs, but the mortgage would be extremely onerous to the borrower.  For example, usually a first and second mortgage would be given.  The first mortgage would be a thirty year fixed with a reasonable intrest rate, but the second would be adjustable with a very high rate.  Also, because of inflated appraisals, the mortgage would be higher than the actual market value of the house. With no investment and no equity in the house, it would be easy for such a person to walk away from the house and just let it fall into foreclosure.  The owners could actually live there for a couple of years, without paying anything, until the foreclosure was complete, and a further eviction procedure was commenced.  It could be tied up in court for a long time.  It doesn’t seem fair to the bank, but they are the ones who convinced the buyer to take one or more mortgages he or she couldn’t afford.  Add that to the fact that real estate taxes are so high on Long Island, and keep going up each year.  Plus the high cost of utilities. 

The inflation of appraisals is bad for the neighborhood, because it artificially inflates market value.  When someone next door to you buys based upon an inflated appraisal, and cash out the phantom equity, that information gets reported to the local assessor’s office.  This can cause your real estate taxes to go up.  However, now try to sell your property for that amount.

Many mortgage brokers selling subprime mortgages have gone out of business, but I am sure there are still many out there.  As a seller, don’t be a party to the fraud by allowing your contract to be amended to a price well above the real purchase price.  This is a way for a purchaser to get a higher mortgage (practically one hundred percent of equity or more).  The seller doesn’t receive the money, and it is couched as a “gift of equity” or a promise to make repairs, or whatever the mortgage broker comes up with creatively.  I consider this to be a fraud on the lender.  A seller’s concession may be okay depending upon the circumstances.  According to the New York State Bar Ethics Committee is it only okay if it is totally legal, it is disclosed to all parties and on all documents, and no party is prejudiced.  That seems like it would be difficult to determine under all the circumstances.

Cynthia M. Burke, http://www.nyrealtylaw.com

First American Title Insurance Company is offering a product called Eagle 9, which is akin to title insurance for real property.  Typically, purchasers of a co-op obtain a lien search to determine whether there are any liens against the owner, or UCC’s filed by a bank to secure a loan against the unit or building.  In most cases, no further title insurance is purchased by the purchaser, and if any problems arise with respect to title or liens, there will be no insurance protection.  Prior to Eagle 9 and currently, a TIRSA endorsement has been available (title insurance for co-ops), which was probably thought too expensive and not worth purchasing.

An Eagle 9 policy is relatively inexpensive for the coverage it provides.  It provides coverage should it turn out that the purchaser does not have proper ownership, if a prior owner comes out of the woodwork and proves he still owns the co-op.  It protects against federal tax liens that won’t be found by a typical search (because they could be filed out of state); against liens that arise between the gap of the search and the closing, and various other title problems that could be determined after the closing.

Considering the substantial investment that many make to purchase a co-op, the cost of the Eagle 9 policy, which is far less than title insurance for real property or the TIRSA endorsement, would be a worthwhile investment for peace of mind.

Cynthia M. Burke, http://www.nyrealtylaw.com

Obviously, closing costs are a major concern of purchasers of real estate.  Sellers also need to be aware of what costs they will incur upon the sale of their premises.  The typical seller’s closing costs are as follows for the sale of real property, including condominiums.  The real estate broker’s fee and transfer tax also apply to the sale of a cooperative.

(1)  The seller typically pays the real estate broker’s fee due, if any.

(2)  The seller typically pays transfer taxes.  New York State has a transfer tax of .004 percent.  Any property in New York City carries an additional one percent (1%) transfer tax on properties $500,000 or less.  Anything above that carries an additional transfer tax of 1-1/4%.  A Transfer tax on a New York City property can be substantial.

Other muncipalities in New York, such as Yonkers, have their own transfer tax.  This must be determined on a case by case basis. 

Note that the “mansion tax” of one percent (1%) on properties with purchase prices over $1,000,000 is paid by the Purchaser.  The transfer tax levied by properties located in Peconic, Long Island, is also paid by the Purchaser.

(3)  If a seller in New York does not provide the statutory Property Condition Disclosure, then the purchaser shall receive a $500 credit at the closing.  This cannot be couched as a reduction in the purchase price on the contract, and no credit given at closing.  This does not apply to a cooperative, a commercial property, or a sale by an estate or other fiduciary.

(4)  Property taxes not yet paid, but a lien, will be a credit to the purchaser prorated up until the date of the closing. For example, school tax on Long Island is not due until October, although it covers the period July 1st to December 31st.  Hence, if you close in August, the purchaser will be paying the full tax due in October, and will get a credit from July 1st to the date of closing from the seller.

(5) If the contract provides that the seller is giving the purchaser a seller’s concession towards closing costs, this amount is deducted from the purchase price.  The seller will receive a credit for the transfer tax attributable to the seller’s concession amount.

(6)  The contract must be consulted to determine any other credits given to the purchaser by the seller for specific issues with the property.

(7)  If there is a mortgage on the property, the title closer will usually charge a “pick up” fee per mortgage in the approximate amount of $175-$200. This is their compensation for confirming the pay-off amount, taking the pay-off check at the closing, and arranging for express delivery to the mortgage company.

(8)  The seller will pay the recording fee for the Satisfaction of Mortgage.  Lately, banks have been adding this cost to their pay-off, since they are required to forward a Satisfaction directly to the recording office of your county. Sometimes the title company will put this on their bill, but they are not allowed to charge you if the bank is charging you directly.

(9)  If the sale is subject to a tenant, the seller will need to transfer the security deposit to the purchaser.  Rent will be prorated to the date of closing.

(10)  If the property has oil heat, the seller should obtain an oil dip from its oil company, with a receipt for the value of the oil, and the seller will get a credit for that amount from the purchaser.

(11)  The seller may have to give the purchaser a credit for the prorated amount of the next water bill attributable to the seller.  It is advisable to get a final reading near the closing, so the exact amount will be known.

(12)  If the seller stays over beyond the closing date (in order to have time to move, or close on their purchase), which is usually limited to a five to seven day period, adjustments, including purchaser’s per diem interest on their mortgage, is calculated until the date of possession. If the seller stays beyond the agreed upon five to seven day period, there is an additional penalty of approximately $150-200 per day added to the adjustments. 

(12)  Seller’s attorney’s fee.

The above is a general guideline with respect to seller’s costs, deductions and credits.  The seller’s attorney will determine which ones are applicable, and arrange for them at closing.

Cynthia M. Burke, http://www.nyrealtylaw.com

Tenants in Common

Real estate owned by one or more persons as tenants in common give a percentage ownership to each person, and upon that owner’s death, their percentage share goes to their estate.  If they have a Will, it goes to the persons named in their Will.  If they die without a Will, then it goes to their legal heirs. (This could become problematic if the person has many heirs entitled to share, as it may render the property unmarketable.)  With this type of ownership, each owner has the right to transfer their share during their lifetime, without obtaining the permission of the co-owner.  If the Deed is silent as to form of ownership and just lists the names, then it is presumed that the parties own as tenants in common.  If one party wishes to have the premises sold, they can bring what is known as a partition action, which forces the sale of the property, sometimes at auction.  Any party to the deed has the right to live in the premises without paying rent to the other owners.   In addition, they may be entitled to credits for items such as taxes, maintenance and repairs.  If the premises are rented to a non-owner, all owners would be entitled to share in the ent, but should be aware that a formal demand against the receiving owner is necessary to sustain a claim for rent in a partition action.  Of course, any party can settle and buy-out the other party, if an agreeable arrangement can be reached prior to being sold at auction.   This type of action usually arises during an estate situation, where one party lives in the premises, and other heirs feel that they are being excluded from the estate.

Tenancy by the Entirety

This form of ownership may only be held by a husband and wife.  The Deed should recite the names as follows: “John Doe and Jane Doe, husband and wife”  or John Doe and Jane Doe, his wife.”  If silent, it is presumed that a married couple has taken as tenants by the entirety.   If a different form of ownership is desired between a husband and wife, then it must be specified as either tenants in common or joint tenancy with right of survivorship.   Under a tenancy by the entirety, each spouse owns 100% of the property, and upon the death of one spouse, the other spouse owns the property free and clear of any encumbrances that may have been caused by the other spouse.  For example, if one spouse sells his share of the property, the owner may not come onto the property or force a partition (a sale of the property).   The only way that person could have an interest in the property is if the other spouse dies first.  He would then step into the shoes of the living spouse who transferred his interest.  On the other hand, if a husband who transferred his share dies first, then the transferee would have no interest, since the wife would take the entire property free and clear of any actions taken by the husband.   In the same vein, neither spouse can disinherit the other spouse by leaving the property to someone else in their will.

Joint Tenants with Rights of Survivorship 

This form of ownership transfers the co-owner’s share to the other owner(s) upon their death.  In order for it to apply, the Deed must specify the words, “as joint tenants with rights of survivorship” after the names of the grantees. It is possible to have different combinations of ownership, such as two persons with rights of survivorship, and another person as a tenant in common.

If joint owners wish to change their form of ownership all that need be done is for the parties to reconvey the Deed to themselves, with the proper language included.

The above is general information, and any transfer of ownership should be supervised by an attorney to make sure that your rights are protected, and that the Deed will be accepted by the County Clerk’s Office for recording.  If you don’t have the Deed recorded, the property can be reconveyed by the grantor to someone else, and if they have no actual notice of your Deed, and they record their Deed before you, then you will lose ownership of the property.  There are documents that need to be prepared and filed with the Deed for recording purposes, and there are specific requirements as to how a Deed must be drawn to be accepted by the County Clerk.

Cynthia M. Burke, http://www.nyrealtylaw.com

Both tenants and landlords should be aware of the thirty day notice rule in Nassau and Suffolk Counties with respect to holdover proceedings.  This is the type of proceeding that is necessary when you wish to evict the tenant, even if rent is current, or the tenant is willing to bring the rent current in court.  If there is a Lease, and the rent is current, you will need to prove some other breach of the Lease.  In a holdover proceeding, a landlord must first give a thirty day notice to evict stating the grounds for removal.  This notice must be served before the 1st of the month in order to give someone notice that they are to leave by the end of that month.   If a notice were served after the first of any given month, it must specify the last day of the following month as the date for the tenant to vacate (be careful if there are 31 days in the following month - the 31st day must be specified).  

If the tenant does not vacate, there are no self-help remedies.  A landlord must then bring a summary proceeding with the landlord tenant court in the jurisdiction of the property.  Remember to make an indication of when the thirty day notice was served, and attach an Affidavit of Service to a copy of the Thirty Day Notice, which needs to be brought to court.  The Thirty Day Notice should be referenced in the Petition, including the date and manner of service, and the best practice would be to attach the Thirty Day Notice and Affidavit of Service to the Petition.  Otherwise, the Petition may be dismissed based on a jurisdictional defect.

If a Petition is brought against a tenant for non-payment of rent, and there is a Lease, then the Lease must be consulted to determine if there are any notice requirements, and the manner of service.  It would be a good idea to attach the notice and affidavit of service to the Petition.

If a landlord wishes to obtain a Judgment for past due rent on default, in case the tenant does not appear in court, then the tenant must be served personally with the petition.  I have also seen at least one judge allow three attempts in giving a Judgment.   Otherwise, the only remedy will be for a warrant of eviction, without a stay, but no money judgment. 

Cynthia M. Burke, http://www.nyrealtylaw.com