Selling a home in NY state - can you do it pro se?

[Paul84]

What is the name of your state (only U.S. law)? New York

Is it correct that a seller of a house in New York does not need to hire a lawyer, even if it may be customary to do so? I ask because local lawyers want as much as $2000 to handle what should be a straightforward process. For many years, we've rented out the house, and I've always handled the tenancy agreements--based on a boilerplate contract with some riders--even though the tenants typically had lawyers represent them or review the terms.

In the case of our hoped-for home sale, the New York Bar Association provides online a sample house contract of sale; a copy of the deed should be available at the town clerk's office; and drafting a new deed of general warranty for sale based on that should be short and easy to do.

My wife wants to sell this house, which she owns and which had only one previous owner; it has no mortgage nor any liens. So are there any other potential complications to consider, from the sellers' perspective? Also, just as one pro-rates property taxes up to the date of sale, can one get a refund for unused months of an annual home-insurance premium after the sale date?

I assume our accountant should be able to help with any questions about New York State's form TP-584, the Real Estate Transfer Tax Return.

 

[FlyingRon]

The lawyer typically does several things during a house sale.

1. Prepares the purchase contract. Yes, you can use a preprinted form. Most real estate agents have them. You can modify it as part of your offer as you see fit.
2. Reviews the signed contract. Once you have a contract signed, he typically reviews the entire contract as agreed to make sure there aren't issues. Again, if you want to live dangerously, accept contracts without legal assistance.
3. Handles the escrow/closing. In New York, part of the fee you see is going to handle the closing. You can't get around this. You can not do the closing pro se if there are banks involved (or even a party who is prudent). Someone needs to handle holding the moneys in trust until the deed is filed and any outstanding liens are paid and prepare the HUD-1 and disburse the funds. You don't typically need a lawyer for this, but it's common in your state. Title companies or specific escrow houses are used elsewhere. In fact, these usually will employ an attorney for some aspects even if the bulk is handled by non-attorney workers. You pay for this service in any event.
4. Records the deeds. Again, you can do this yourself (I've done it on my own properties). The buyer would, however, be immensely foolish to rely on you to do this.

So other than the closing/deed recording, you can avoid the lawyer at your own peril.

 

[adjusterjack]

Is it correct that a seller of a house in New York does not need to hire a lawyer, even if it may be customary to do so? I ask because local lawyers want as much as $2000 to handle what should be a straightforward process.

I've always wondered about that. I have relatives in NY who hired lawyers because they thought it was mandatory. I had a tough time accepting that because using lawyers in a real estate sale in AZ is a rare exception.

My wife wants to sell this house, which she owns and which had only one previous owner; it has no mortgage nor any liens. So are there any other potential complications to consider, from the sellers' perspective?

Flyingron's explanation has helped me understand the NY situation but I want to point out that there are title/escrow companies in NY that you can hire to do the escrow/title insurance/closing/recording etc once you have drafted your own contract and gotten the earnest money from the buyer. Probably would cost you a lot less than an attorney.

Just be aware, though, that a buyer in NY is likely to be of the attorney oriented mindset and could bring his own attorney to the table.

If that happens, make sure your sales contract address who pays for it.

Also, just as one pro-rates property taxes up to the date of sale, can one get a refund for unused months of an annual home-insurance premium after the sale date?

Yes.

The way you do that is, after the sale closes, call your insurance agent and cancel the policy. You'll get a refund for the unearned premium from the date of the close to the next anniversary. The refund check will go directly to you since you have no mortgage company in the middle.

 

[FlyingRon]

In fact, it's usually the buyer who controls who handles the closing (though it can be negotiated).

The other option is that you are free to negotiate with an attorney for just the closing parts if you want to do the rest of the work on your own. In fact, I've filed my own deeds after they were prepared by the seller's counsel, but that's only because I'd been through the process before during a divorce setltlement.

 

[Paul84]

I've always wondered about that. I have relatives in NY who hired lawyers because they thought it was mandatory. I had a tough time accepting that because using lawyers in a real estate sale in AZ is a rare exception.



Flyingron's explanation has helped me understand the NY situation but I want to point out that there are title/escrow companies in NY that you can hire to do the escrow/title insurance/closing/recording etc once you have drafted your own contract and gotten the earnest money from the buyer. Probably would cost you a lot less than an attorney.

Just be aware, though, that a buyer in NY is likely to be of the attorney oriented mindset and could bring his own attorney to the table.

If that happens, make sure your sales contract address who pays for it.



Yes.

The way you do that is, after the sale closes, call your insurance agent and cancel the policy. You'll get a refund for the unearned premium from the date of the close to the next anniversary. The refund check will go directly to you since you have no mortgage company in the middle.

AdjusterJack and FlyingRon, thanks very much for your comments. I think in New York it is mandatory that the home buyer use an attorney, but not the seller.

 

[Paul84]

AdjusterJack and FlyingRon, thanks very much for your comments. I think in New York it is mandatory that the home buyer use an attorney, but not the seller.

The buyer's attorney says, (1): "This [New York] is not an escrow state so all Bank's [sic] require some representative to appear to sign affidavits, smoke detector affidavits, Seller CD, 1099, FIRPTA affidavit,. (sic)" and (2): "As far as the contract, we need to use the standard NYSBA form. This is the form used throughout the state."

Are (1) and (2) indeed true for New York?

If so, for (1), is it possible to hire a paralegal as the in-person presence for the closing to sign off on affidavits/declaration? Why cannot this occur by seller's signature ahead of time and remotely? We live overseas so cannot appear in person. We're both U.S. citizens and taxpayers if that's relevant for FIRPTA.

And for (2), if true, every transaction differs, so each contract will have its own riders. Seems clearer and to make more sense to incorporate the riders directly into the relevant NYSBA form's paragraphs, which is what I did, but which the buyer's attorney is balking at reviewing.

My wife is selling the house at a heavy discount--some 21% below what she bought it at in '02, with no mortgage and a lawyer who I'm confident did an adequate title search in '02 but now lives in Florida. I think we could grieve the house's annual school and property taxes down by at least 20% next year. Such savings would have a present value of tens of thousands of dollars to any buyer, so I am not especially keen to waste more money on this by paying $2000 for an unneeded lawyer. We could re-list in the spring, with a more proactive realtor, at a higher price or continue to rent it out as we've done for over 10 years. Any thoughts?

 

[Paul84]

At a Closing, for What would an Attorney need a Notarised "Power of Attorney"

After arriving at an agreed-upon executed contract with the buyers' lawyer, we bit the bullet and hired an attorney to act as the escrow agent, to prepare and deliver a final closing statement, deed, and NYS transfer documents with the appropriate payments (that should be calculated by the attorney and approved by us in advance); and to attend the closing. For these activities and to attend closing, why would this attorney need a notarised "Power of Attorney" (PoA)? The lawyer wants my wife to sign over such powers in a PoA, specific to the property, for (1) Real Estate Transactions—i.e. the deed--which seems reasonable (so long as the county requires an original signature) although couldn't my wife just sign the deed and have the lawyer hold it in escrow? In addition, however, the lawyer's proposed PoA asks powers for (2) "chattle and goods"; (3) for banking; (4) for insurance; (5) for tax matters; and (6) for all other matters.

We want to know in advance what amounts this attorney will need for each of the transactions (which should not exceed payment of the 0.4% New York State transfer tax and any deed registration fee since there's no mortgage on the property). Then, at my wife's instruction, my wife's U.S. bank can mail or wire that total amount to the attorney rather than our providing an open-ended blank check. In other words, is a PoA necessary at all, and if so, isn't the one requested much too broad?

 

[FlyingRon]

The attorney should be able to give you a preliminary HUD-1 showing just what needs to be paid. THere are always charges to be paid. You'd be lucky if it were only the two you mention. There are tons of things like taxes and certain other fees that are going to be prorated (either you credit the share to the buyer if they're collected in arrears or the buyer pays for what you've already paid beyond the closing).

 

[Paul84]

The attorney should be able to give you a preliminary HUD-1 showing just what needs to be paid. THere are always charges to be paid. You'd be lucky if it were only the two you mention. There are tons of things like taxes and certain other fees that are going to be prorated (either you credit the share to the buyer if they're collected in arrears or the buyer pays for what you've already paid beyond the closing).

Thanks, FlyingRon. The only other taxes or fees I can think of would be credits from the buyer because my wife prepaid property and school taxes and annual services like pest-control monitoring. Also, I believe the new Closing Disclosure has replaced the HUD-1, and the buyer's mortgage lender has the responsibility to deliver it.