A home purchase agreement should include clauses covering financing contingencies, inspection rights, property disclosures, escrow terms, closing cost allocation, and possession transfer details. Each clause defines the rights and obligations of both the buyer and seller throughout the transaction. Missing even one key provision can leave either party exposed to unexpected costs or legal disputes.
At Avenue Law Firm, Manhattan real estate lawyer Peter Zinkovetsky helps buyers and sellers draft purchase agreements that address every critical provision. Whether you are purchasing a co-op on the Upper East Side or a townhome in Midtown, Avenue Law Firm’s real estate attorneys can review your contract and protect your interests from offer through closing.
This guide explains what a home purchase agreement covers, which financing and inspection contingencies to include, how property disclosures work under New York law, how escrow deposits are handled, what closing costs to expect, and when you take possession of the property. Call Avenue Law Firm at (212) 729-4090 to speak with Peter Zinkovetsky about your real estate transaction.
What Is a Home Purchase Agreement in New York?
A home purchase agreement is a legally binding contract between a buyer and seller that sets the terms for a residential property sale. In New York, attorneys typically draft and negotiate purchase contracts after both parties agree on a price. This makes the process different from many other states, where real estate agents handle the contract.
The agreement identifies the property, states the purchase price, and describes the method of payment. It also includes the proposed closing date, conditions that must be met before closing, and what happens if either party cannot fulfill its obligations. Under New York’s General Obligations Law (GOL) Section 5-703, all contracts for the sale of real property must be in writing to be enforceable.
What Does the Attorney Review Period Cover?
In New York, attorney review is governed by the terms of the deal and the contract language, not by a universal statewide three-business-day rule. Before the contract is fully executed, the parties’ attorneys commonly negotiate revisions to the proposed contract, riders, and contingency language. Once both sides sign the final contract, the parties are generally bound by its terms, subject to any contingencies or cancellation rights written into the agreement. At that point, the buyer commonly delivers a contract deposit, often 10% of the purchase price, to be held in escrow until closing or lawful termination under the contract.
What Financing Terms Should a Purchase Agreement Include?
The financing section of a purchase agreement protects buyers who need a mortgage to complete the purchase. Manhattan property prices are among the highest in the country, and most buyers rely on a loan to fund the transaction. Without clear financing terms, a buyer could lose their deposit if their mortgage application is denied.
How Does the Mortgage Contingency Clause Work?
The mortgage contingency clause states that the buyer’s obligation to purchase the property depends on obtaining a loan at a specified interest rate. If the buyer cannot secure financing under those terms within the agreed timeframe, typically 30 to 60 days, the buyer can cancel the contract and recover the deposit.
This clause should specify the loan type, such as a conventional, Federal Housing Administration (FHA), or Veterans Affairs (VA) loan. It should also state the maximum interest rate the buyer will accept. For example, if a buyer cannot afford monthly payments above a 7% rate, the contingency should reflect that limit.
What Happens If the Buyer Cannot Get a Mortgage?
If the buyer does not obtain a mortgage commitment within the contingency period, the parties’ rights depend on the exact wording of the mortgage contingency clause. Many contracts require the buyer to give timely written notice and proof of the financing denial in order to cancel and seek return of the contract deposit. Some contracts also allow an extension or other negotiated accommodation rather than automatic termination.
Some agreements also allow the buyer to seek alternative financing if the original loan falls through. This provision should clearly define the conditions under which the buyer can pursue a different lender without breaching the contract.
How Does the Escrow Release Clause Protect Your Deposit?
Placing a deposit in escrow shows the seller that the buyer is committed to the purchase. The seller’s attorney typically holds the earnest money in an escrow account until closing. The escrow release clause defines when the buyer can recover that deposit if the deal falls apart.
A buyer may be entitled to a refund of the deposit under several circumstances. If the mortgage contingency is triggered because the buyer could not obtain financing, the deposit is usually returned. The same applies if a home inspection reveals serious defects that the seller refuses to address. An appraisal contingency can also allow the buyer to back out if the property is valued below the agreed purchase price.
What If the Buyer and Seller Disagree About the Deposit?
When a dispute arises over the release of escrow funds, the next steps depend on the escrow language in the contract and the instructions the escrow agent is authorized to follow. In many cases, the funds remain in escrow until the parties sign a written release or a court determines who is entitled to the deposit. Having clear escrow language in the contract can reduce the risk of a deposit dispute.
Real Estate Attorney in Manhattan – Avenue Law Firm
Peter Zinkovetsky, Esq.
Peter Zinkovetsky is the founder and managing partner of Avenue Law Firm. He holds a Juris Doctor from New York Law School, a Bachelor of Business Administration in Finance from Pace University, and is a graduate of the United Nations International School. He is admitted to practice in New York and the United States District Court for the Southern and Eastern Districts of New York.
Mr. Zinkovetsky has been named a Rising Star by Super Lawyers Magazine for eight consecutive years, a distinction given to fewer than 2.5 percent of attorneys in the state. Avvo awarded him a 10 out of 10 rating, and the Real Estate Journal included him on its 2018 Ones To Watch list. He has been featured in Forbes, The Post, The Real Deal, Newsweek, and The Observer. He teaches continuing education courses and regularly presents at conferences on real estate law topics.
What Should a Home Inspection Contingency Cover?
A home inspection contingency gives the buyer the right to hire a professional inspector to evaluate the property before the sale is finalized. Without this clause, a buyer may be stuck with costly repairs that were not visible during a casual walkthrough.
What Is the Typical Inspection Timeline?
Once both parties sign the contract, the buyer usually has 7 to 10 days to complete the inspection. During this window, a licensed home inspector examines the property for structural problems, electrical and plumbing issues, roof damage, and other defects. Under New York General Business Law Section 444-b, home inspectors must be licensed and provide a written report within five business days after the inspection.
The agreement should clearly state who conducts the inspection, which parts of the property are covered, and how findings are reported. The seller must permit the inspection at a mutually convenient time.
What Can the Buyer Do If the Inspection Reveals Problems?
If the inspection uncovers defects, the buyer generally has three options. The buyer can renegotiate the purchase price to account for repair costs. The buyer can ask the seller to make specific repairs before closing. If the problems are severe and no agreement can be reached, the buyer can cancel the contract and recover the earnest money deposit.
A thorough inspection contingency protects both parties. Buyers gain confidence that they understand the property’s condition, and sellers benefit from resolving potential issues before they delay or derail the closing.
Key Takeaway: An inspection contingency gives the buyer 7 to 10 days to hire a licensed inspector and evaluate the property. If serious defects are found, the buyer can renegotiate, request repairs, or cancel the contract.
Avenue Law Firm can help you negotiate inspection terms that protect your investment. Contact Peter Zinkovetsky at (212) 729-4090.
What Disclosures Must the Seller Provide Under New York Law?
New York’s Property Condition Disclosure Act (PCDA), codified in Real Property Law (RPL) Section 462, requires sellers of residential property to complete and sign a Property Condition Disclosure Statement (PCDS) before the buyer signs a binding contract. This form covers the seller’s actual knowledge of conditions affecting the property.
What Does the PCDS Require?
The PCDS includes questions about the property’s structural condition, environmental hazards, plumbing and electrical systems, water and sewage, flooding history, and more. Sellers must answer each question to the best of their actual knowledge. A knowingly false or incomplete statement may expose the seller to claims by the buyer.
Since March 20, 2024, the law no longer allows sellers to offer a $500 credit in place of the disclosure statement. Every seller of a one- to four-family residential dwelling must now provide a completed PCDS. However, the PCDS requirement does not apply to condominiums, cooperatives, or properties owned by homeowners’ associations.
What Other Disclosures Are Required?
Federal law requires sellers to provide a lead-based paint disclosure for properties built before 1978. The disclosure must include the seller’s knowledge about any lead paint on the property and a copy of the Environmental Protection Agency (EPA) pamphlet explaining the health risks.
Common conditions that must be disclosed include the following:
- Lead paint: Especially relevant for pre-1978 buildings, sellers must disclose any known lead-based paint hazards
- Radon gas: Sellers must disclose any known radon issues, as this odorless gas can seep into homes from the ground
- Water damage and mold: Any history of leaks, flooding, or mold growth must be reported
- Structural defects: Problems with the foundation, walls, or roof must be disclosed
- Septic and well systems: Any known issues with water supply or waste systems
Avenue Law Firm helps buyers review property disclosures and identify potential risks. Call (212) 729-4090.
Who Pays Closing Costs in a Real Estate Transaction?
Closing costs are the fees and expenses both parties pay to complete the transfer of property. These costs can be substantial, and the purchase agreement should clearly state who is responsible for each expense.
What Are the Major Closing Costs for Buyers?
Buyers in Manhattan often pay for title-related charges, lender fees, attorney fees, and, when applicable, mortgage recording tax. Under Tax Law § 1402-a, a 1% mansion tax applies to residential conveyances of $1 million or more. In addition, certain New York City residential conveyances of $2 million or more are subject to a separate supplemental transfer tax at graduated rates.
For financed purchases involving one-, two-, or three-family homes or individual condominium units, the combined New York State and New York City mortgage recording tax is generally 2.05% for residential mortgages under $500,000 and 2.175% for residential mortgages of $500,000 or more. Individual cooperative apartment loans are generally not subject to mortgage recording tax.
What Are the Major Closing Costs for Sellers?
Sellers are generally responsible for the state real estate transfer tax under Tax Law Section 1402. The base rate is $2 per $500 of consideration. An additional transfer tax applies at higher price thresholds for properties within the five boroughs. Sellers also typically pay the real estate broker’s commission, which is negotiable.
The purchase agreement should include a detailed breakdown of which party pays each cost. This prevents misunderstandings and helps both sides plan for the total amount due at closing.
| Closing Cost | Typically Paid By | Notes |
|---|---|---|
| Title Insurance | Buyer | Protects against defects in title |
| Title Search | Buyer | Examines public records for liens |
| Mortgage Recording Tax | Buyer (if applicable) | Generally 2.05% to 2.175% for qualifying residential mortgages in NYC; individual co-op loans generally do not incur this tax |
| Mansion Tax (Section 1402-a) | Buyer | 1%+ for properties $1M and above |
| State Transfer Tax (Section 1402) | Seller | $2 per $500 of consideration |
| Broker Commission | Seller | Negotiable percentage of sale price |
| Attorney Fees | Each Party | Each side pays own attorney |
What Fixtures and Appliances Should Be Listed in the Agreement?
The purchase agreement should clearly identify which fixtures and appliances remain with the property after the sale. Without a detailed list, disputes can arise over items the buyer expected to keep and the seller planned to take.
Fixtures are items permanently attached to the property, such as built-in cabinets, light fixtures, and plumbing installations. Appliances are movable items like refrigerators, dishwashers, and washing machines. The distinction can be ambiguous, so the contract should explicitly list what is included.
What Items Should the Agreement Specify?
A well-drafted agreement lists items such as kitchen appliances, laundry equipment, lighting fixtures, window treatments, and built-in furniture. Both parties should sign an inventory of included items before closing. If any listed item is not in the agreed condition at closing, the buyer should have the right to request a repair or credit.
Key Takeaway: The purchase agreement should include a signed inventory of all fixtures and appliances that stay with the property. Verbal agreements about these items are not enforceable.
Contact Avenue Law Firm to make sure your purchase agreement clearly defines what stays with the property.
How Does the Home Sale Contingency Work?
A home sale contingency protects buyers who need to sell their current property before they can afford to purchase a new one. This clause prevents the buyer from being financially overextended by requiring the sale of the existing home within a specified period, usually 30 to 60 days.
The buyer is expected to list their current home for sale promptly and make genuine efforts to market it. If the home does not sell within the agreed timeframe, the buyer can cancel the contract and recover the deposit. Sellers may include a contingency removal clause, which allows them to continue marketing the property and accept backup offers while the buyer attempts to sell.
Buyers who need immediate funds can consider a bridge loan, which provides short-term financing to cover the gap between buying a new home and selling the existing one. Both parties should negotiate timelines that account for realistic market conditions, particularly in Manhattan, where transactions can involve co-op board approvals that extend the process.
Key Takeaway: A home sale contingency gives the buyer time to sell their current property before closing on the new one. Sellers can protect themselves with a contingency removal clause that allows them to accept backup offers.
Avenue Law Firm represents buyers and sellers in transactions involving home sale contingencies. Call (212) 729-4090.
When Does the Buyer Take Possession of the Property?
The closing date and transfer of possession mark the final stage of the transaction. Common closing timeframes in Manhattan range from 30 to 60 days after contract signing, though co-op purchases may take longer due to board approval requirements.
What Happens at Closing?
At closing, the buyer pays the remaining balance of the purchase price, and the parties exchange the documents required for the type of property being sold. In a deeded transaction, the seller delivers the deed for recording; in a cooperative transaction, the transfer typically involves shares, a proprietary lease, and related co-op closing documents rather than a deed. The buyer’s attorney reviews the closing package to confirm it matches the contract and any riders.
The agreement should specify the process for handing over keys, garage access devices, and security codes. The buyer usually has the right to a final walkthrough within 24 hours before closing to confirm the property is in the agreed-upon condition.
Can the Seller Stay After Closing?
In some cases, a seller may request a brief period to vacate the property after closing. This arrangement, known as a post-closing occupancy agreement, should be clearly documented. It should include the length of the stay, any rent or holdover charges, and the consequences if the seller does not leave on time.
Consult a Manhattan Real Estate Attorney Today
Buying or selling a home is a major financial decision, and the purchase agreement is the document that governs every step of the transaction. A missing clause or unclear provision can lead to unexpected costs, lost deposits, or legal disputes that delay the closing.
Peter Zinkovetsky has represented buyers and sellers in residential real estate transactions across Manhattan and New York for over a decade. At Avenue Law Firm, our real estate lawyers review every provision of your purchase agreement, negotiate terms on your behalf, and handle filings at the Office of the City Register. We represent clients purchasing co-ops, condos, townhomes, and houses throughout the city.
Call Avenue Law Firm at (212) 729-4090 to schedule a consultation. Our office is located at 505 Park Ave, Suite 202, New York, NY 10022. Peter Zinkovetsky and the Avenue Law Firm team are ready to help you move forward with confidence.
