When talking about the process of buying and selling real estate, the conversation often revolves around listing your home, finding the perfect place, or negotiating an offer. A less glamorous, more stressful, but equally important part of the real estate process is what happens to get the deal done. Here’s the process, from offer to close for a NYC co-op, in ten easy steps.
Step 1: The Offer
Buyer and seller, either on their own if unrepresented, or via their brokers, negotiate an offer. This process includes disclosure of financials including loan pre-qualification if financing is involved and discussion of contingencies if any.
Step 2: Contract
If both parties can come to an agreement on price and contingencies, a contract will be drawn up by the seller’s attorney. This contract is based on a deal sheet written up by the seller’s broker (if there is a broker). The deal sheet contains information such as the property location, price, terms of sale, contingencies, and names of all parties involved in the transaction.
Step 3: Due Diligence
While the contract is being drawn up and negotiated by both parties’ attorneys, the buyer’s attorney will conduct due diligence on the standing of the building. This includes looking into the building’s financials, completing a title search, and reviewing board minutes and the offering plan. This is also the time for buyers to conduct a home inspection if they wish.
Step 4: In Contract
Up to this point, though there is an accepted offer, the buyer and seller are not technically “in contract.” This means that the seller can continue to show the home and entertain other offers. Often, these offers are accepted only as back-ups in the event that the initial contract falls through. Once the attorneys finish negotiations, both the buyer and seller sign the final contract. At this point, the buyer will pay a deposit to be held in escrow by the seller’s attorney until closing. Once the contract is signed by both parties and a deposit is made, the listing is considered to be “in contract,” and no longer available to the market at large.
Step 5: Financials
Once the listing is in contract, the seller’s attorney will order the payoff file from the homeowner’s existing lender. During this time, if the buyer is using financing, they will move forward with the process of obtaining a mortgage. Contracts will generally allow 30 days or more for the buyer to obtain a mortgage commitment. The bank offering the mortgage commitment will complete an appraisal on the property to ensure that they are making a secure investment.
Step 6: The Board Package
Concurrent to the buyer securing financing, the buyer and seller (with their brokers, where applicable) will work on assembling the board package. Required documents vary from building to building, but generally consist of the sales application and contract, verification of employment, two years of tax returns, bank and financial holdings statements, references, commitment letter for financing, and personal financing . Once the buyer receives a commitment letter from their lender, the buyer will submit the board package to the building’s board for review.
Step 7: The Board Interview
Though the process varies widely from building to building, the board interview generally occurs at the building, either in a shareholder’s apartment or a common space. The meeting can be similar to a job interview from appropriate attire to the questions that are asked. The buyer should be prepared to answer any and all questions asked and to bring their pet if requested.
Step 8: The Closing is Set
At this time, buyers have received the “clear to close” from their lender and are able to complete the transaction with financing in place. If possession is to occur at close, sellers will vacate the premises if they haven’t already. 24 hours before the closing, the buyer will conduct a walk-through of the property to confirm that it is in acceptable condition and any mandated repairs have been completed.
Step 9: Closing
Generally the parties in the closing room include the seller, the buyer, their brokers, their attorneys and a closing agent. All paperwork is signed by both parties, funds are distributed, keys are turned over, and the transaction is completed.
Step 10: Post-Close
While the buyer and seller have completed their responsibilities and the property has been transferred, their attorneys still have a few more steps to make everything official. The attorneys record the sale, transfer the deed or stock certificates, and send out final paperwork to both parties.