Inside Story: Confessions of a closing lawyer
For most people, if you’re going to spend $800,000 on a NYC apartment, this is a stressful event. People arrive here stressed and unhappy and it’s nice to be able to use my ridiculously expensive law degree to help them out.
Most of my clients come from referrals—from real estate agents and former clients. I don’t pay brokers a fee for referrals. I’m barred from doing that by New York State’s ethics rules, though I’m sure it happens. More often, I think, lawyers who get referrals through a real estate broker feel they need to make the transaction go through, to keep getting those referrals.
I don’t do that. I ask myself if this was my half-million, would I buy. I’ll tell my clients about the roof that’s going to be replaced or something that’s terribly wrong. For instance, in new construction, so many buildings are now underfinanced because the sponsor moved on or filed for bankruptcy, so the building doesn’t really have enough money to make a go of it. I’ll say to the broker, I know you want to get the deal done, but if it’s not right for the client, it’s not right.
My fees are on the higher end of the spectrum. I charge between $2,000 and $2,500, depending on how complex the transaction is, and whether it’s a purchase or a sale (purchases are more work because of the due diligence). I’ll also charge on the higher end if I can tell within 30 seconds that the client is going to be a pain in the ass. A micromanager. It’s the same person who goes to a hair salon and specifies which hair to cut, or knows more than their doctor, or are sure they have cancer when they just bumped their head.
My style is completely Type A—I’m attached to my Blackberry and read emails pretty much instantly and call everyone back immediately. I also do my own due diligence, which a lot of closing lawyers don’t. Rather than sending a paralegal, I go and review the board minutes on my own. What sort of things have I found? These days, unfortunately, a lot of buildings don’t have quite the same amount of money they would like to have.
The other things that turn up are crazy neighbors next door or the crazy lady with 42 cats. But these aren’t necessarily in the minutes; boards don’t like to put them there. So what I do is rather than faxing my questionnaire to the managing agent, I personally administer it to the managing agent--preferably in person, but sometimes by phone--who is in a tough position. They have a duty to the building but generally they don’t want to lie. You can tell if they’re trying to avoid something.
I have yet to run into a bed bug problem although I ask the question. My clients are obsessed. It’s this year’s toxic mold. I’m most concerned with things like, “Oh hey, guess what, we’re replacing the entire elevator system and there will be a $30,000 assessment to the client.”
Closings are usually pretty routine events. But there’s always the exception. For instance, one buyer showed up $10,000 short, figuring he could negotiate down the price at closing. When the seller balked (imagine that), the buyer offered to go to the bank, but wanted a discount for paying in cash! He got the cash but no discount.
The worst part about my job is dealing with the banks. They’re a lot less happy to hand out money these days. The hoops you have to jump through have made things a tedious process. Also, Chase for instance moved all of their processing out to somewhere in Ohio, where the processors are unfamiliar with New York co-op and condo loans. You have to walk them through very routine basic portions—like why this form is this way and why New York State tax law is like this. It’s frustrating dealing with lower level clerks every day.
I rarely have problems with brokers and other closing lawyers. Only one or two percent are sleazy—the rest are totally honest and aboveboard.
While I like most of my clients, they can be shockingly naïve. Very often they have absolutely no idea what’s involved in buying into a building. I’m surprised about how some of my sophisticated clients have lost sight of the fact as the fortunes or non-fortunes of the building go, so goes their quality of life, their common charges, their maintenance charges. That’s the sort of thing I have to walk them through.
About 1 in 5 deals fall apart. It’s almost always because there is something wrong with the building or because of financing issues. It’s hard sometimes because clients are so desperately in love with the property—maybe it’s the chase, or other pressures like having to enroll kids in school. They just can’t step back and see the forest from the trees. The biggest piece of advice I would like to give people is to remember that this is not like finding a spouse or having a child. There will be another property if something happens.
I would also advise people to line up an attorney before the instant they need one. If you’re putting offers in for apartments, you should have talked to a lawyer already. Otherwise it’s equivalent to shopping for an ob-gyn as you’re about to give birth. It’s hard to make an informed decision at such an emotional time.
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