Q: What are the differences between some common forms of property ownership?
There are a variety of ways that one can hold title to property:
Sole Ownership: owned entirely by one person.
Tenants in Common is a form of co-ownership where property is owned concurrently by two or more persons. The proportionate interests and right to possess the property between the tenants in common need not be equal.
All tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to alienate, or transfer the ownership of, her ownership interest. So with a tenancy in common, any tenant in common can sell his/her interest to someone else at any time, or if an owner dies, his/her share will pass to its heirs or beneficiaries.
A tenancy in common will not protect the owners from creditors. For example, if a creditor gets a judgment against one owner, then that creditor can also ask a court to partition the property which can result in a forced sale and distribution of the proceeds among the owners. In other words, the actions of one co-owner can result in the loss of the property for the other owner(s).
Joint Tenancy: a form of co-ownership where property is owned by two or more persons at the same time. Unlike a tenancy in common, joint tenant holders possess the property in equal shares. When a joint tenant dies, his/her interest automatically passes on to the surviving joint tenant. This is called a Right of Survivorship. A joint tenant may alienate his property, but if that occurs, the tenancy is changed to a tenancy in common and no tenant has a right of survivorship. This form of ownership is not available in all states.
Tenancy by the Entirety: a special form of joint tenancy when the joint tenants are husband and wife -- with each owning one-half. Similar to the joint tenancy, there is is a Right of Survivorship and when one spouse dies, the surviving spouse automatically becomes the sole owner. In a tenancy by the entirety, neither spouse has the right of alienation without the consent of the other. This form of ownership is not available in all states.
In New York, one benefit of holding title as tenants by the entirety is the ability to protect the property from creditors. A tenancy by the entirety cannot be partitioned by third parties. The practical effect of this is that if one spouse gets sued, the creditor cannot force a sale of the property.
Q: What is the difference between a cooperative and a condominium?
Condominium (“condo”) owners legally own the apartment and the undivided interest in the common area. In a "condo" arrangement, the owner is obligated to pay its proportionate share of the common charges which typically includes expenses used to maintain and operate the common areas. In New York City, the owner of a condo apartment will be responsible to pay for its own real estate taxes.
When you purchase a Cooperative (“Co-op”) apartment, you are not by purchasing the actual apartment. Rather, you are buying stock in the Corporation that owns the apartment building. The building then “leases” the Co-op to the buyer under a long-term agreement known as the proprietary lease.
In a " Co-op " arrangement, the Co-op owner is obligated to a pay monthly maintenance to the building corporation for items such as the expenses of maintaining and operating the building property, property taxes and the underlying mortgage on the building (if any).
Q: What is a home inspection?
The purchase of a home may probably be the largest single investment, many people will ever make. To minimize unexpected difficulties, potential purchasers are encouraged to obtain a home inspection.
A standard home inspection is a cursory, visual inspection of the property components to determine the home inspector's opinion of general condition and operability. Only the visible and readily accessible components are inspected and reported on. Therefore, the home inspector does not offer any warranties as to the general condition of the property and/or the operability of any property included in the sale. Further, a standard home inspection does not certify compliance with building codes, zoning regulations, protective covenants, etc.
Should the initial home inspector reveal any possible defects, the potential purchaser is strongly encouraged to complete a more thorough and comprehensive inspection prior to the execution of a Contract of Sale.
Q: What is title insurance?
Title insurance is a means of protecting yourself from financial loss in the event that problems develop regarding the rights to ownership of your property. There may be hidden title defects that even the most careful title search will not reveal. In addition to the protection from financial loss, title insurance pays the cost of defending against any covered claim. It is a one-time expense, is effective the day of the closing and provides coverage throughout your ownership of the property. There are two types of policies which may be available at Closing.
Lender's Policy: is a policy that only insures the financial institution holding a valid and enforceable lien on the property. Most lenders will require that for the Borrower to purchase this type of insurance on the Closing Date.
Owner's Policy: is a policy designed to protect the Owner from title defects that existed prior to the issue date of your policy. Title troubles, such as improper estate proceedings or pending legal action, could put your equity at serious risk. If a valid claim is filed, in addition to financial loss up to the face amount of the policy, your owner's title policy covers the full cost of any legal defense of your title.
Q: What is homeowner’s insurance?
Homeowner’s insurance: commonly referred to as hazard insurance or homeowner's insurance (HOI), is a type of property insurance that is a multiple-line insurance policy that provides coverage for both property insurance and liability coverage. There is an indivisible premium, meaning that a single premium is paid for all risks. Homeowner’s insurance should pay to repair or replace your house and personal property if they are damaged or destroyed due to certain occurrences called “covered losses.”
However, a homeowner's insurance policy will not pay for damage or destruction due to non-covered losses. For example, a standard homeowner's insurance policy specifically excludes claims due to floods. Should the homeowner want coverage due to flood damage, a homeowner can purchase flood insurance separately. The homeowner should consult with an experienced insurance broker to discuss the different type of additional endorsements or riders that may be available.
Q: What is a Closing?
The closing is a final meeting of all the parties involved in the real estate transaction. During a typical closing (except for a closing for a cooperative apartment), the purchaser and his/her attorney, the seller and his/her attorney, the lender’s attorney, and a representative from the title company will convene wherein the purchaser and the seller will execute documents to officially transfer title to the buyers.
Final inspections: depending on what the contract of sale mandate, purchasers are usually entitled to conduct a final inspection, of the property, at least 48 hours prior to the closing date. During this final inspection, the buyer should visit the property to assure that everything is in working order. That means turning on the heat and air conditioning and checking for leaks and other problems. After the closing, most problems will become the buyer’s responsibility.
Documents needed at closing: In most instances, each seller and buyer would be required to bring in valid photo identification. Additionally, Purchasers would typically be required to bring in certified checks and a copy of the homeowner’s insurance binder. Prior to the attendance of a Closing, the seller and buyer should confer with their attorney to ensure that they have all necessary documents/items to proceed with the closing.
Q: Do I have to be present for a Closing?
In most instances, each Seller and Purchaser must be present at the Closing. However, in certain circumstances, a closing can occur with the use of a valid power of attorney. If you cannot physically attend a Closing, you must contact your attorney to see if appropriate arrangements can be made to complete the transaction.
Q: What is a Reverse Mortgage?
A reverse mortgage is a type of mortgage loan that allows a homeowner to get cash from the equity of their home while they live in the property. Instead of making a monthly payment to the lender, the lender makes a payment to the homeowner. The loan gets paid back (with interest) when the borrower dies or moves out of the property. In the event that the homeowner dies, their estate will repay the lender with proceeds of sale. Any remaining equity in the property belongs to the homeowner’s heirs. To be eligible for a reverse mortgage, both the homeowner and property must meet strict eligibility requirements. Therefore, you should consult with a experienced real estate attorney to see if you qualify for a reverse mortgage.