Although the steps involved in selling a home are similar regardless of where in the United States you live, New York's real estate laws and practices are unique in many respects. Becoming familiar with the process early on will help you avoid problems later. Here’s an overview, from working with a real estate agent to making legally required disclosures to closing the deal on your New York Property.
Working With a New York Real Estate Agent
Most people selling their home in New York list it with a licensed real estate broker or agent. A good agent will help you prepare and price your property, market it to prospective buyers, and negotiate with buyers through the closing.
Before signing up with an agent, get references from other home sellers and check customer reviews on sites such as Zillow and Realtor.com. You can check agents' licenses at eAccessNewYork.
Selling your house "for sale by owner" or FSBO is also a possibility, lack of experience and understanding regarding home pricing, advertising strategies, and the overall process can put you at a disadvantage. You might face unexpected hassles and ultimately fail to get the best price for your home.
Signing a Listing Agreement With a New York Agent
Once you find a real estate agent you want to work with, you’ll sign a “listing agreement,” giving the agent the right to market and handle the sale of your house. Most agents use standard forms created by their state or local Realtor association, such as the New York State Association of REALTORS.
New York listing agreements cover the following terms.
- Commission that you (the seller) will pay. By longstanding tradition, this "brokerage fee" ranges from 5-6% of the house sales price, is due no later than the closing, and is split between your real estate agent and the buyer’s agent. Although recent lawsuits and court settlements have raised speculation that this model will be changed, no significant change has happened yet.
- Type of listing. The standard arrangement is an exclusive right to sell listing, in which which you must pay a commission to the agent regardless of who brings in the buyer (even if you yourself find a buyer, such as by talking to friends).
- Duration of listing. The listing agreement will cover a pre-set amount of time, often between 60 and 90 days.
- List price. Your agent will recommend an appropriate price at which to publicly list the home for sale. To educate yourself as to whether that price is appropriate, see the National Association of Realtors’ website for information on list prices of houses currently on the market, and websites such as Zillow for data on actual prices on sold properties (which can vary greatly from the original list price).
- Property included (or not) in the sale. For example, you might plan to leave behind a built-in dishwasher, which is therefore part of the property that the agent is contracted to sell. Or, you might exclude a refrigerator that you plan to move to your new home, in which case the agent needs to know that and convey that information to prospective buyers.
- Duties and obligations of seller and real estate agent. Your agreement will spell out how the real estate agent will act on your behalf in listing and marketing your house, and ask you to agree to things like putting up a "For Sale" sign.
New York law requires real estate agents to advise potential sellers with whom they work of the nature of their relationship and the respective rights and obligations. (New York Real Property Law § 433.)
Making Real Estate Disclosures in New York
State law in New York (New York Real Property Law § 462) requires sellers to fill in and provide buyers with a completed Property Condition Disclosure Statement, containing information on the property and describing its condition within the limits of the seller's knowledge.
The statement must address details of the property such as:
- presence of hazardous or toxic substances, such as asbestos, methane, or radon
- material defects in the electrical, plumbing, structural, and other house systems and equipment
- basic information about things like the age of the roof, type of sewer system, and water source
- presence of or damage by rot, termites, rodents, insects, or other pests
- fire damage
- mold, moisture, and leakage issues
- any common ownership of portions of the property and/or homeowners’ association (HOA) fees and rules, and
- shared driveways, if any.
The seller is not, however, required to reveal that an owner or occupant of the property is or was suspected to be infected with AIDS or any other disease that medical evidence says is highly unlikely to be transmitted through occupancy; or that the property is, or is suspected to have been, the site of a homicide, suicide or other death or any crime punishable as a felony. (New York Real Property Law § 443-A.)
Alternatively, the seller can credit the buyer $500 at closing.
Certain types of properties (such as foreclosures, newly built homes, and properties being transferred to close family or in a divorce) are exempt from state disclosure rules.
In addition to state rules, if your house was built before 1978, you must comply with federal Title X disclosure regulations regarding lead-based paint and hazards. See the lead disclosure section of the EPA’s website.
Creating a Purchase Agreement in New York
A buyer who wants to purchase a New York home will make the seller a written offer, specifying the price but not including many of the details found in most other states' purchase offers. (In other words, the offer does not take the form of a complete contract, ready to be signed, as you'd encounter in states like California.)
If the seller says yes (usually done orally, not in writing) the buyer may then conduct inspections of the structure and look for possible pest infestations, and change the offer price accordingly or ask for repairs.
Note that the buyer and seller are not yet in contract, nor bound to complete the transaction. The next step, with the help of the seller's attorney, is normally for a final contract to be drafted, negotiated, and signed by both parties. The buyer will then pay a percentage of the purchase price (what's called "earnest money" in most states, but a "contract deposit" or "downpayment" in New York).
The final agreement will contain all terms of the sale, such as the agreed-upon price, contingencies (conditions that must be met before the sale can close), dispute resolution method, and closing date. See the New York State Bar Association Residential Contract of Sale for a sample.
The transaction will next go into what’s called “escrow.”
What Is Escrow?
Escrow is the time period between signing the purchase agreement and closing on the house. The seller's attorney will serve as escrow or title agent, supervising the process, preparing title reports as a preliminary step to obtaining title insurance, working to resolve issues such as liens on the property, preparing closing documents, and so on.
The buyer typically has a lot more to do during this time period than the seller. By the close of escrow, the buyer will need to finalize financing, remove all buyer contingencies, have the property appraised (typically required by mortgage lenders), and get title insurance—usually under set deadlines.
As the seller, you will need to cooperate in making the property available for inspections, appraisal, and ultimately a final walk-through. You'll also need to act on and remove any contingencies that you added to the purchase contract.
If something goes wrong; for example, the buyer cannot obtain financing after all, and this was the basis of a contingency; the buyer might have the right to back out of the deal without forfeiting the contract deposit.
What Happens at the Closing of Your New York Home
By the scheduled closing day, you and the buyer should have fulfilled all the terms of your purchase agreement.
The closing itself might be an in-person meeting of the parties, their lawyers, a representative from the title insurance company, and lawyers representing the buyer's and seller's mortgage lenders. However, more and more parts of the sale can be handled virtually.
As part of the closing, the buyer will need to pay you the purchase price, and you must give the buyer a deed and other transfer documents and clear title to the house or condo. You pay off any outstanding loans on your property and pay commissions to the real estate agents (per your listing agreement).
Once the new deed showing the buyer's name has been recorded at a local government office (by the attorney or title company), the home is officially theirs.
Working With a Lawyer
Unlike many states, New York requires sellers to involve a lawyer in the house-selling transaction. (N.Y. Jud. Law § 484), fulfilling the tasks described above.
You might also want a lawyer’s help with things like drafting a lease agreement if you plan to rent the property back for an extended period of time after the closing, or if problems show up on the title report such as a lien on your property.