Why do you need an attorney when you purchase a home in New York State?
The role of the attorney in the purchase process is to protect the buyer – to ensure that the buyer is receiving proper and clear title, which will avoid headaches (or nightmares) later for the buyer.
When the attorneys enter the process, the contract and negotiations have already been done by the real estate agents. The signed contract is sent to the attorneys for the seller and the buyer, and the attorneys review to make sure nothing was missed and can make changes if necessary or requested by the buyer or seller.
While the buyer is working with the lender to obtain a loan, the seller’s attorney has the title documents updated. The title documents are (1) the survey – a drawing showing the property boundary lines and where the improvements are located within those lines, and (2) the title search – this is a long document that lists every owner and transfer of the property, every mortgage that has been on the property, every easement, and every lien on the property or against the owner or a person with a name similar to the owner. The title search should go back to 1920. Both the title search and the survey would have been last updated when the seller purchased the property and will need to be brought up to the current date. The update process can take several weeks.
Once updated documents are received, the buyer’s attorney reviews them to ensure that any title issues will be resolved before the buyer takes title. For example, there may be open mortgages on the property, meaning a past mortgage may not have been paid off and is still a lien on the property, or it may have been paid off but a discharge was never recorded to remove the mortgage from title. Another example of a title issue can be found on the survey – the driveway may encroach onto the adjacent neighboring property, or there may be setback restrictions for improvements on the property which require any structures to be built a certain distance back from the road. In either of these instances, if the encroachment or violation has existed for a certain period of time and has never caused an issue to neighbors or others, the seller can sign an affidavit stating that, and this protects the buyer if a neighbor were to try to force the buyer/new owner to rectify the issue in the future.
Once the buyer’s attorney has reviewed and noted any issues, title is submitted to a title insurance company to issue a report. This officially lists any title issues that must be resolved prior to closing so that the title insurance company will issue a title insurance policy to protect against any issues not listed in the report, that may not have been discoverable at the time. The lender will require a buyer to purchase a title insurance policy to protect the lender. The lender has an interest in ensuring that its mortgage is the first lien on the property and nothing on title could jeopardize the loan being repaid to the lender in full.
When the title report is completed, the buyer’s attorney works with the bank’s attorney to make sure that the seller will resolve any and all issues noted in the report. When both attorneys are satisfied that title will be clear and all taxes have been paid or will be paid at closing from the seller’s proceeds, the parties can proceed to schedule closing.
The buyer’s attorney attends closing with the buyer and the lender’s attorney. Both attorneys are there to explain the loan documents that the buyer has to sign as well as the loan proceeds and closing costs.
At closing, the seller’s attorney provides any necessary title curatives along with the signed deed, which transfers the property from the seller to the buyer. The buyer’s attorney makes sure that the documents have been completed and executed properly, and then is responsible for putting the deed and mortgage on record with the county clerk. This makes the transfer of ownership and the lender’s lien on the property public record, which puts anyone searching for liens on the property or against the owner on notice that these exist, and that the lender’s mortgage is the first lien.
In conclusion, the role of the buyer’s attorney is to protect the buyer to ensure that the buyer is getting exactly what he or she contracted and paid for, and to prevent any headaches or nightmares in the future with regard to title to the property.