The standard residential contract of sale used by attorneys in the New York Metropolitan area will often state that the closing will take place, for example, “on or about December 1, 2018.” In New York, unlike many other states, the “Closing Date” contained in the contract, especially if the words “on or about” precede it, is a fluid date. It is rare that a closing actually occurs on the date specified in the contract. The phrase “on or about” has been interpreted by the New York courts to mean that either side has a reasonable period beyond the “on or about” date in which to close.
If all progresses on schedule, a closing can usually occur within 60 days after the contract has been fully executed by the seller and purchaser. However, not all real estate transactions proceed as planned. While many of the transactions do eventually close (unless a buyer is unable to obtain financing or an appraisal comes in too low), there are some that do end up in a dispute or litigation. If a party is unwilling to close within a “reasonable” time after the closing date, many times, before litigation is commenced, the attorney for the party wishing to close can send what is referred to as a Time of the Essence Letter (“TOE Letter”) to the other party. That letter will set forth a new closing date stating that “time is of the essence.” If the party receiving the letter does not close by that date they can be declared in default under the terms of the contract of sale.
It is important to note that the “time of the essence” standard is not a statutory standard but rather one established by the courts and case law, and is constantly changing depending on each case that is decided by the courts. While the courts are silent as to what constitutes a “reasonable” time, many real estate attorneys practicing in the New York Metropolitan area have come to a consensus that “reasonable” is generally about 30 days. However, the case law has explained that the other party must be given a reasonable time in which to act and what amounts to a reasonable time to perform depends on the circumstances of the case.
Whether dealing with a TOE Letter or an “on or about” closing date, the closing date and closing time frames can quickly change and extend far beyond the “on or about” closing date depending on the circumstances.
Most people obtain financing when purchasing a house, condo, or co-op. In that case, the contract of sale will contain a mortgage contingency clause making the sale contingent upon the buyer obtaining a mortgage in a certain amount. If the buyer's loan application is denied by the lending institution, the buyer can then cancel the contract and get the down payment back.
In order to benefit from the protections allowed by the mortgage contingency clause the buyer must strictly abide by all its terms, i.e. the buyer must only apply for a loan in the amount stated in the clause (or such lesser sum as buyer shall be willing to accept), and obtain the mortgage within the time frame given in the clause. If the buyer applies for a loan greater than the amount stated in the clause and is then denied a loan, the buyer will have forfeited the protection afforded by the clause and will not be able to cancel the contract. If the buyer is then unable to obtain other funds to complete the purchase the buyer will be in default under the terms of the contract and more than likely lose their down payment. On the other hand, if the buyer is approved for a loan greater than stated in the mortgage clause, then no problem. Nonetheless, I would never advise a client to take such a risk and put their down payment in jeopardy. There are many reasons why the loan may be denied that have nothing to do with the financial qualifications of the buyer and are beyond the buyer's control. An experienced real estate attorney will help you navigate through this process.
The mortgage contingency clause is there to protect your down payment should your loan be denied. To best protect yourself when purchasing a home with a mortgage, hire an experienced real estate attorney who fully understands all aspects of the mortgage contingency clause and will guide you through the entire closing process.
To speak with an experienced real estate attorney, call us at (516) 314-8433. To learn more about our services and how we can assist you, visit us at www.jreardonlaw.com
Title insurance is crucial for a home buyer because it protects you and the lender from the possibility that your seller doesn't -- or previous sellers didn't -- have free and clear ownership of the house and property and, therefore, can't rightfully transfer full ownership to you. Problems with the title can limit your use and enjoyment of the property, as well as cause you financial loss. This is why you need title insurance.
Your real estate attorney will arrange the process of getting you title insurance soon after your Contract of Sale is signed.
What Could Happen If You Don't Get Title Insurance?
Title insurance protects against the following common hidden risks just to name a few:
Errors or omissions in deeds
Mistakes in examining records
Undisclosed or missing heirs
False impersonation of the true owner of the property
Instruments executed under invalid or expired power of attorney
Mistakes in recording legal documents
Misinterpretations of wills Deeds by persons of unsound mind
Deeds by minors
Deeds by persons supposedly single, but in fact married
Liens for unpaid estate, inheritance, income or gift taxes
Title Insurance: Lender's Policies and Buyer's Policies
Title insurance is typically a combination of two policies: a lender's policy and a borrower's policy. Your lender -- assuming you're taking out a mortgage, will require that you buy a lender's policy (also called a "mortgagee's policy";) to pay for its legal defense costs and reimburse any mortgage payments you can't make because you've lost the house to someone else's claim on it.
The lender may also require you to buy an "owner's policy," covering your own legal fees and other losses, as yet another step toward protecting the lender's collateral. Your title insurance policy remains in effect as long as you, or your heirs, retain an interest in the property. Title insurance will give you the peace of mind in knowing that the investment that you have made in your home is a safe one.