When a purchaser of property receives  oral or written notice of a third party’s interest in the property prior to taking title.

• Example : Oliver borrowed $100,000 from his sister, Sally.  Sally failed to record her mortgage interest.  Bart contracted to buy Oliver’s property.  Bart obtained a title search, and found clean title to the property.  At closing, Oliver’s deed to Bart stated that the property was sold “subject to the $100,000 mortgage;” however, Bart did not read the deed before accepting it.  Here, Bart takes Oliver’s property subject to the mortgage interest held by Sally because Bart was given actual notice of the mortgage in the deed.

A mortgage where the interest rate applied on the outstanding balance varies throughout the life of the loan.

• Example : Bobby agreed to a mortgage of $275,000 over the next 20 years at a variable rate.  The initial interest rate applied was 2.75%.  After 18 months, the interest rate was changed to 3.40%.

Permits a trespasser’s possession of real property to ripen into ownership through the passage of time.  In New York, the following requirements must exist for no less than ten years (10 years) :

Open & Notorious Possession: an adverse possessor must be using the property publicly, and not hiding his or her use.

Hostile Possession : an adverse possessor occupies the property without (i) offering to purchase it from the owner, (ii) the owner’s permission to use the property, or (iii) acknowledging to anyone that the owner has title to the property.

Tip! If you notice that your neighbor is using part of your property regularly, it may be wise to give written permission to use the property, to protect against adverse possession in the future.

Exclusive & Continuous Possession: the ten-year requirement must be unbroken and continuous;  the adverse possessor may leave and come back for short periods, but the use of the property cannot be intermittent.

Actual Possession: the adverse possessor must actually be using the property as if it was his or her own.

Good Faith Claim of Right: the adverse possessor must demonstrate that he or she took possession with an objective good faith belief that he or she owned the property.  If the adverse possessor knew that the property did not belong to him or her, then he or she cannot establish adverse possession.

No Disability: the owner was not under any disability (ex. infant or mentally incompetent) when the adverse possession began.

• Example: James and Eliza live next to each other.  There is no dividing fence between their yards.  James builds a shed that is actually  15 square feet onto Eliza’s side of the property.  Eliza does not say anything.  James uses the shed as if it were on his own land.  James does this for 12 years.  James may establish that he “owns” the land on Eliza’s property which his shed was encroaching on.  Eliza could have stopped James by asking him to remove his shed, or to sign an agreement indicating their mutual consent to the arrangement.

The process of developing an opinion of value, for real property.  Typically, the appraisal will reflect the market value of the property.

• Example : Alex wanted to sell his home.  He ordered an appraisal from a certified appraisal company to help him value his home in light of the current real estate market conditions.  The appraisal came back with a $450,000 valuation.  Alex decided to list his house with a purchase price of $435,000.

A clause in a real estate contract that requires the property to appraise at the sale price or higher.  This clause may help secure a mortgage.

• Example : Danielle is purchasing a home from August for $500,000.  In the real estate contract, there is an appraisal contingency clause that requires the home to appraise at $500,000 or Danielle may opt out of the purchase and receive her down payment back.

A licensed real estate agent who has a fiduciary duty to represent the best interests of the purchaser of a home.

• Example : Jane is looking to buy a new home, and she hires Louis as her buyer’s agent.  Louis finds a great property that Jane is interested in and he helps negotiate the price and certain conditions for the purchase.

Caveat Emptor  (“Buyer Beware”)

This concept requires buyers of real property to take care and diligently inquire into the structural and environmental condition of the property and neighborhood before entering the real property contract.

• Example : Bill offered to purchase Sally’s house.  Against the advice of Gulotta & Gulotta, PLLC, Bill decided not to get an inspection of the property before entering into the contract of sale.  Later, Bill found that the plumbing system was in disrepair and the roof was leaking.  Bill cannot now rescind the contract of sale.

A closing is where the deed is executed and delivered by the seller, and the buyer tenders payment (usually by certified or bank checks).  If a closing date is fixed in the contract, it is only a tentative target date.  Failure of either party to close on that date is not a breach of contract.  Both are afforded a reasonable time, even beyond the closing date, to perform their respective obligations, unless the contract is expressly made “time of the essence.”

• Example : Johnny and Barbara entered into a written contract of sale that specified an “on or about” closing date of July 15.  On August 5, Johnny, Barbara and their attorneys all gather together.  Johnny brings a certified bank check for the remaining funds required and Barbara signs the deed over to Johnny.

When two or more people hold a simultaneous present/future interest in the same piece of property.

• Example: Judy and Tom got married in April.  In June, they both purchased a house together as Tenants By The Entirety.
• Example: Andrea and her best friend purchased a house together as Tenants In Common.
• Example: Gabe and James got engaged in March.  In April, they purchased a house together as Joint Tenants.

Notice provided by all prior recorded documents in the property’s chain of title.  Purchasers have a duty to search the chain of title for any prior recorded interest, and are deemed to have constructive notice of any previously recorded document in the chain of title.  Gulotta & Gulotta, PLLC ensures that we obtain a title search from a reputable title company on behalf of any of the purchasers we represent.

• Example:  Edward signs a contract to purchase Fred’s property.  Gulotta & Gulotta, PLLC orders a title search of the property on Edward’s behalf.  The title search reveals that there is a lien on the property for failure to pay property taxes.  Before continuing with the purchase, we make sure that the lien is paid off before closing or the deal is cancelled and Edward’s down payment is returned.

A deed is a written document signed by a seller to convey title to real property.  The signature of the seller on any real property interest must be acknowledged by a notary in order to be accepted for recording by the County Clerk.

Types :

• Quitclaim Deed
• Special Warranty Deed / “Bargain & Sale Deed”
• Full Warranty Deed / “General Covenant Warranty Deed”

A deposit made to a seller that represents a buyer’s good faith intention to buy a home. The deposit allows the buyer extra time to secure financing for the rest of the purchase price, and allows time to conduct the title search, property appraisal, and inspections before closing.

• Example: Martha signs a real estate contract agreeing to purchase John’s home for $300,000.  When Martha signs the contract, she also writes a check for $30,000 as a deposit or “down payment” that get’s deposited into John’s Attorney’s escrow account.  At closing, this money will be released from escrow to John.

A written real property contract may include a mortgage contingency clause, conditioning the contract on the buyer obtaining a mortgage of a certain amount/interest rate.  If the buyer cannot obtain those exact or better terms, then he or she may be excused from the contract.

• Example: Adrian enters into a contract to purchase Shelly’s house for $400,000.  Adrian puts $50,000 down, and the contract of sale has a mortgage contingency clause specifying that Adrian will obtain a mortgage commitment of $350,000.  Adrian complies with his mortgage company’s requests.  However, Adrian is only approved for a mortgage of $275,000.  If he chooses, he can cancel the contract and his $50,000 down payment will be refunded.

The market value of a homeowner’s unencumbered interest in his or her property.  Equity is measured as the difference between the property’s fair market value and the outstanding balance of any liens or mortgages on the property.

• Example: Elle purchases a home for $400,000.  She finances $320,000 for the purchase price through a mortgage from Star Bank.  Three years later, the house has increased in value to $450,000.  Also,  the mortgage lien amount on the house has decreased as Elle has made her mortgage payments each month; the current mortgage lien is now $275,000.  Elle’s home has an equitable value of $175,000.

Even after the mortgage debt is formally accelerated by the bank, declaring the entire balance due, the mortgagor (borrower) always has the right to pay off the mortgage amount before the referee’s hammer falls at the foreclosure auction.  This payment by the borrower will discharge the debt and require the mortgagee (lender) to issue a “satisfaction of mortgage” to be recorded in the chain of title.

• Example: Jake defaulted on his mortgage payments.  Star Bank gave Jake a 90 day notice and then formally accelerated the entire mortgage balance of $250,000 due.  Star Bank then sued on the mortgage to have the property sold at auction.  Two days before the scheduled foreclosure auction, Jake gave Star Bank a certified check for $250,000.  Star Bank must now issue a satisfaction of mortgage to Jake and the property may no longer be sold at auction.

An asset or money held by a third party on behalf of two other parties whom are in the process of completing a transaction.

• Example : Scott makes a down payment of $35,000 for the purchase of Marge’s property.  Marge’s attorney, Gulotta & Gulotta, PLLC, will hold this $35,000 payment in an escrow account.  The $35,000 will only be released according to the terms of the real estate contract, either to Marge at closing or refunded to Scott if Marge fails to perform her obligations under the contract.

An agreement with a real estate broker that deters the seller from using the services of another broker.  If another broker brings about the sale, then the broker with the exclusive agency may also seek a commission. However, if the seller sells the property himself, he will not be liable for a commission.

• Example: Mario, a licensed NYS real estate broker, entered into an exclusive agency agreement for 6 months to sell Anna’s house.  Two months later, Anna’s best friend, a licensed NYS real estate broker, presented a buyer to Anna.  Mario will still be entitled to a partial commission from the sale of Anna’s home.

A contract with a real estate broker that requires all sales negotiations to pass through the broker.  The seller is liable for a commission if the property is sold, even if he or she personally found the buyer & brought about the sale.

• Example: Parker is trying to sell his house.  He hired Tiffany, a licensed NYS real estate broker.  They signed an exclusive right to sell agreement for 6 months.  Three months later, Parker was approached by his neighbor who offered to buy the house.  Park accepted and the sale was effectuated.  Tiffany is still entitled to a commission on the sale of Parker’s home.

A mortgage insured by the Federal Government (Federal Housing Administration).  These loans are mainly for low/moderate-income purchasers.  These loans require a lower minimum down payment and credit scores than most conventional loans.

• Example: Tommy wants to purchase a home for $300,000.  He only has $12,000 of his own funds to put towards the purchase.  Additionally, Tommy’s credit score is not as high as he would like.  Star Bank has denied Tommy a conventional mortgage loan.  Tommy is able to obtain an FHA loan with only this 4% down payment and less than perfect credit.

A mortgage loan offering an interest rate that remains the same for the life of the loan; monthly payments of principal and interest will never change.

• Example: Carl obtains a 30-year fixed-rate mortgage for $320,000 with an interest rate of 4.60%.  In year 29 of this loan, Carl’s interest rate is still 4.60%.

An object which has been annexed to and made part of a property.  If an object becomes a fixture, it passes with the property that is conveyed by deed, intestacy, under a will, by adverse possession, mortgage foreclosure or taken by eminent domain.  The person who formerly owned the object before it was annexed to the property loses title to it when it passes to the new owner of the property.  Any personal property essential to the functional utility of a fixture may not be removed from the property (ex. garage door opener, hose attachments to central vacuum system).

• Example: Bob is selling his home to Sally.  Bob would like to take the awning outside in his backyard with him.  However, Sally insists that the awning is a fixture and Bob must leave the awning and the crank used to operate it.

When the mortgagor (borrower) defaults in paying the note, then the mortgagee (lender) may either (i) sue on the note for a money judgment, or (ii) sue in equity on the mortgage for a foreclosure judgment on the property, where the court appoints a referee to sell the property at a foreclosure sale and use the sale proceeds to pay off the note.  The mortgagee may not pursue moth remedies simultaneously.

• Example: Mack purchases a property for $400,000.  He takes out a mortgage from Star Bank for $320,000, and he signs a note promising to repay that amount over the next 30 years at a fixed interest rate.  Mack does not make the payments as promised and Star Bank sues on the mortgage to force a foreclosure sale of the property.  The property gets sold for $325,000 and the mortgage amount is paid off.

A type of loan that is secured by real property.  Hard money loans are typically used in real estate transactions, and the lender is generally an individual or company, not a bank.

• Example: Joe wants to build a brand new house.  He obtains a hard money loan from Lou for $295,000 with an interest rate of 3% payable over the next 10 years using land as collateral.  Joe builds a house on the land he purchased with this loan and later sells the new home for $695,000.  Joe pays off the full balance of the hard money loan to Lou.

A clause in a real estate contract that allows the seller of a home to remain in possession of the home for a specified number of days after the closing date.  If the seller does not give up possession of the property after the specified date, then he or she will usually be charged a holdover fee.

• Example: Lisa sells her home to Ken.  The closing takes place on June 1 and there is a holdover clause in the contract allowing her to stay in the home for 2 days after the closing and she will be charged $300 per day thereafter.  Lisa stays in the home for a total of 5 days after the closing date.  The money held in escrow will be reduced by $900 for the extra 3 days Lisa stayed in the home and given to Ken.

An organization in a community or condominium complex that makes and enforces rules the residents.  Anyone who purchases property within one of these communities or complex’s automatically becomes a member, and may be required to pay dues, known as “HOA fees.”

• Example: Bob purchases a condominium in a 55 yr. and over retirement community.  Bob is automatically a member of the HOA and must follow the rules regarding upkeep of his premises.  Additionally, Bob now pays $250 every month in HOA fees.

A clause frequently included in a real estate contract that makes the purchase dependent upon the sale of the buyer’s home.  Basically, if the buyer’s house sells by the specified date, the contract moves forward.  If the buyer’s house does not sell by the specified date, then the contract is terminated.

• Example: Linda agrees to purchase Tony’s home, but their real estate contract has a home sale contingency clause based on Linda first selling her current home by May 1.  Tony wants to terminate the contract, but Linda sells her home on April 25.  Tony must not go forward and sell his house to Linda.

Where facts exist to excite the suspicion of a reasonably prudent person and cause him or her to further investigate or inquire as to the third person’s possible interest in the realty.

• Example : Nancy is purchasing a property from Stacy.  However, Nancy is aware that a separate family is currently living in the property.  Nancy has inquiry notice, and must determine whether this family has a legal interest in the property.  Nancy must determine the family’s status as a renter, owner, or otherwise before proceeding with the purchase.

An assessment of the physical structure and mechanical systems of a house, such as a roof, ceilings, walls, floors, windows, and doors. A home inspector will attempt to reveal any issues with the home.

• Example:  Thomas’ offer to purchase Mel’s home was accepted.  Before entering into a real estate contract, Thomas ordered a home inspection.  The inspector found that the roof had multiple leaks and needed to be completely replaced.  Thomas decided not to go forward with the purchase and walked away from the deal before signing any contracts or giving a down payment.

A provision in a real estate contract giving the buyer the right to have the home inspected within a specified time period.

• Example : Nico entered a real estate contract to purchase Kim’s home and provides a $30,000 down payment.  The contract has an inspection contingency clause allowing Nico to obtain a home inspection within 5 days.  On the 4th day, Nico gets the home inspected.  The inspection report reveals the the home has a major roof leak.  Nico decides to terminate the contract and receive a refund of his $30,000 down payment.

Two parties each hold an undivided possessory interest in real property with a right of survivorship such that when one dies, his or her interest passes to the surviving party.

• Example: Vanessa and Nicole got engaged and purchased a home, taking title as Joint Tenants.  Nicole passed away three months later and Vanessa became the sole owner of the property.

A licensed real estate agent who has a fiduciary duty to represent the best interests of the seller of a property.

• Example: Dan wants to sell his home and hires Jackie as his listing agent.  Jackie lists the property on Multiple Listing Service, shows it to buyers and negotiates the price and conditions of the sale.  Jackie is then paid a fee based on the purchase price of the home.

An official notice that informs the public that a lawsuit has been filed involving a claim on the property.  A buyer of a property must assume any litigation that exists pertaining to the property when a lis pendens is filed.

• Example: Stripe County filed a lis pendens on Maggie’s property for unpaid property taxes.  John agreed to purchase the property from Maggie.  When John’s attorney ordered a title report and found that a lis pendens was filed on the property.  John decided not to go through with the purchase because he did not want to face the lawsuit by Stripe County.

Marketable title is ownership of real property that is free from encumbrances and reasonable doubt as to the interest of any third person so that the buyer will not have to defend his or her ownership through litigation.

• Example: Jesse enters into a written contract to purchase Ralph’s home.  Gulotta & Gulotta, PLLC order a title search which revealed that the neighbor’s fence extends 8 feet onto Ralph’s property.  Ralph is not able to convey marketable title to Jesse.  Gulotta & Gulotta, PLLC successfully negotiates a credit to Jesse for $7,000 off of the purchase price.  Jesse agree and the closing proceeds.

Security for a loan, and most frequently the mortgage is placed on the borrower’s property, but may be placed on a third person’s property, to secure the loan of the borrower.  When a buyer finances the purchase price, two separate documents are executed by the buyer (i) a note promising repayment of the loan, and (ii) a mortgage to secure the repayment of the loan.

• Example: Joseph is looking to purchase a $400,000 property.  Joseph puts $40,000 down when he signs the contract.  He plans on bringing an additional $40,000 of his own money to the closing.  Joseph takes out a mortgage of $320,000 and signs a note on the mortgage, promising to repay it over the next 30 years at a fixed interest rate.

A written real property contract may include a mortgage contingency clause, conditioning the contract on the buyer obtaining a mortgage of a certain amount/interest rate.  If the buyer cannot obtain those exact or better terms, then he or she may be excused from the contract.

• Example: Adrian enters into a contract to purchase Shelly’s house for $400,000.  Adrian puts $50,000 down, and the contract of sale has a mortgage contingency clause specifying that Adrian will obtain a mortgage commitment of $350,000.  Adrian complies with his mortgage company’s requests.  However, Adrian is only approved for a mortgage of $275,000.  If he chooses, he can cancel the contract and his $50,000 down payment will be refunded.

An agreement with a real estate broker whereby the broker only earns a commission when he or she produces a buyer ready, willing, and able to buy.

• Example: Alice, a licensed NYS real estate broker, signed a non-exclusive agency agreement for 6 months to sell Mary’s home.  Three months later Mary was approached by James who offered to purchase her home.  Alice is not entitled to a commission from the sale.

When a homeowner dies without a will bequeathing his or her property to an heir.  Usually, an estate attorney or representative has to sell the property in order to liquidate the asset and distribute the money to the homeowner’s estate.

• Example: Lorraine passed away without a will.  Her sister, Vivian, hires an attorney to have Vivian appointed as the administratrix of Lorraine’s estate.  Once appointed, Vivian hires a real estate agent to sell the property.  Once sold, Vivian deposits the proceeds from the sale in the estate bank account.

A document that establishes a person has the funds available for a specific transaction. A proof of funds document is intended to ensure that the funds needed to carry out the transaction are accessible.

• Example: Vinny offers to purchase Peggy’s home using all cash, without needing to obtain a mortgage.  Peggy requests that Vinny provide proof of funds with the executed contract.  Vinny signs the contract and sends it back to Peggy with a copy of his recent bank statement.

Seller of an existing residential dwelling shall deliver a disclosure statement answering 48 questions on the condition of the property based on the seller’s actual knowledge.  Failure to do so will result in the buyer receiving a $500 credit at closing.

• Example: Bill is selling his home to John for $275,000.  Bill chooses not to execute the property condition disclosure form and John gets a $500 credit towards the purchase price.

Simplest of all deeds whereby the seller promises to only convey whatever interest he or she may have.  He or she simply states that he or she is quitting any claim he or she has to the land.  If a contract makes no mention as to the type of deed to be delivered at closing, then only a quitclaim deed need be tendered.

• Example: Jane gifts ownership of her house to Ron, her brother.  Jane wants to gift the property to Ron, and does not want to go through a traditional sale process.  Jane executes a simple quitclaim deed to Ron to transfer her ownership interest in the property.

In New York, priority to real property ownership is given to a subsequent bona fide purchaser who, at the time he or she takes the deed, has no Constructive, Inquiry, or Actual Notice of a prior unrecorded deed, and he or she is the first to record his or her deed.  This protects the first person without notice who records his or her deed.

• Example: Hilda sells her property to Lillian on Monday; before Lillian records the deed,  Hilda sells the same property to Charlotte, a bona fide purchaser unaware of Hilda’s previous sale of the same property to Lillian. Charlotte records her deed before Lillian.  Charlotte has good title to the property and is given priority over Lillian.

A specific amount/percentage that a seller is willing to pay on behalf of the buyer to assist in the buyer’s closing costs.

• Example: Dorothy agrees to purchase Peter’s property for $200,00.  Dorothy offers $205,000 with a $10,000 seller concession at closing, reducing the total closing costs Dorothy needs from $10,000 (5% closing cost at $200,000) to $5,250 (that’s 5% of $205,000, minus the $5,000 concession).

A subsequent bona fide purchaser who has a superior interest over a prior unrecorded interest may transfer his or her bona fide purchaser’s status to future individuals who would not otherwise qualify as bona fide purchasers.  Under the “Shelter Doctrine,” these future individuals prevail over the prior unrecorded interests, even if they took the deed to the property without notice of the prior unrecorded interest.

• Example: Trent sells his property to Alice on Monday; before Alice records the deed,  Trent sells the same property to Ben, a bona fide purchaser unaware of Trent’s previous sale of the same property.  Ben then sells the property to Cathy, but Alice notifies Cathy of the deed conveyed from Trent to Alice before the sale to Cathy occurs.  Since Cathy has notice of the prior sale, Cathy does not qualify as a bona fide purchaser.  However, under the shelter doctrine, Cathy will receive the same treatment as Ben, and will prevail over Alice in a legal action regarding the ownership of the property.

When a financially distressed homeowner sells his or her property for an amount less than the balance due on the property’s mortgage.

• Example: Mitch is selling his home to Pete for $250,000.  Mitch still has a mortgage balance of 275,000 remaining on the property held by Star Bank.  Star Bank receives $250,000.  Star Bank may choose to sue Mitch for the $25,000 deficiency or forgive the deficiency.

To be enforceable, any contract affecting an interest in real property (except oral lease of 1 year or less) must be in writing and signed by the party to be charged with its breach or an authorized agent whose authority is expressed in writing.

• Example: Jason verbally offers to purchase Kelly’s house.  Kelly agrees and verbally accepts Jason’s offer.  Two weeks later, Kelly enters a written contract of sale to convey her home to Zach.  The verbal agreement between Jason and Kelly is unenforceable and Zach has a binding contract to purchase Kelly’s home.

A tenancy by the entirety is similar to a joint tenancy, except it (i) requires an existing valid marriage, (ii) neither spouse may unilaterally destroy a tenancy by the entirety without the other’s consent.

• Example: Sam and Tracie got married in April.  In August, they purchased a house and took title to the property as “tenants by the entirety.”  Ten years later, Tracie passes away, and Sam becomes the sole owner of the property.

When two parties own real property concurrently with no right of survivorship such that when one dies, his or her interest in the property passes through his or her estate and not to the surviving co-owner.

• Example: Mary and Peggy graduate law school and decide to purchase a house together.  They take title to the house as Tenants In Common.  One year later, Mary passes away.  Mary’s interest in the property passed through her estate to her brother, Rob.  Rob and Peggy are now Tenants In Commo

Multiple sources are searched, such as deeds, county land records, federal and state tax lien records, divorce cases, bankruptcy court records, and other financial judgments against an owner of real property to reveal any judgments or liens that could potentially attach to the property.

• Example: Megan signs a real estate contract to purchase Don’s home.  Megan hire’s Gulotta & Gulotta, PLLC who orders a title search of Don’s property.  The title search reveals a judgment against Don for $10,000 that has attached as a lien on the property.  Before going forward with the closing, Megan’s attorneys demand that Don satisfy this judgment so the lien may be removed.

When a third party Trustee acts on the instructions of a Trust to sell real property.  The proceeds from a Trust sale are for the welfare of the Beneficiaries, not the Trustee.

• Example: Ronny is the Trustee of the Beverly Smith Irrevocable Trust.  The beneficiaries are Tom and Jane.  Beverly Smith’s house was put into the trust when it was first created.  Ronny was instructed to sell the home and distribute the proceeds evenly amongst Tom and Jane.