Individual Legal Services

Many people ask, “Why should I hire an attorney?” The answer can be summed up in four words — to protect your rights. Truth is, before you can hang up your hat, create memories or raise your children in the place you want to call home, you must first understand the home purchasing process.

In the state of New Jersey, there are essentially four steps that one must complete to either purchase or sell a residential property.

Step 1: Enter into and sign a contract for sale
Step 2: Attorney Review
Step 3: Inspection, Mortgage and Title Work
Step 4: The Closing

Step 1: Contract for Purchase and/or Sale of Residential Real Estate

When two or more parties agree to the purchase and sale of real estate, the parties usually enter into a Contract for Sale of Residential Real Estate. This agreement is governed by The Statute of Frauds, which requires that contracts concerning real property must be in writing and signed by all parties.

The Contract for Sale of Residential Real Estate must include the following:

• Name of the Buyer
• Name of the Seller
• Property Address, including County and the lot and block number as described on the tax map of the municipality where the property is located
• Amount of Purchase Price
• Amount of Deposit
• Balance of Purchase Price
• Time and Place of Closing

The following additional items do not have to be included in the Contract for Sale but are strongly recommended:

• Mortgage Contingency Clause
• Items Included in Sale Clause
• Inspection Clause
• Inspection Contingency Clause
• Condition of Property Clause
• New Jersey Megan’s Law Statement
• Attorney Review Clause
• Broker’s Commission
• Lead Paint and Radon Remediation Clause

Once all parties sign the Contract for Sale, the buyer will post an initial deposit and the balance of 10% of the Purchase Price will be posted by the buyer within 10-14 days following completion of Attorney Review. Our office usually holds the deposit by the buyer if we represent the seller and insist that the attorney for the seller hold the deposit if our office represents the buyer. In some cases, with the consent of our attorneys, the realtor will hold the deposit until closing.

The Role of the Realtor

When purchasing or selling Real Estate, a realtor can be extremely helpful in helping both the buyer and seller navigate through the seemingly complex maze that comprises a real estate transaction.

New Jersey real estate agents are subject to licensing standards established by the State Department of Banking and Insurance and the New Jersey Real Estate Commission. Real estate agents have a duty of loyalty to the person who hired him or her. When an agreement to purchase property is made, the Contract for Sale of Real Estate is strictly between the seller and buyer. As such, the real estate agent is not a party to the agreement and should not make any promises or representations about the subject property. All real estate agents throughout New Jersey must adhere to the Realtor Code of Ethics.

Click here to view the Realtor Code of Ethics.

The Realtor as an Agent of the Seller

Generally, the seller involved in a real estate transaction may hire a realtor to obtain a buyer for his or her property. The seller and the realtor enter into a listing agreement whereby the realtor endeavors to find a buyer and the seller agrees to pay the realtors commission from his or her proceeds as a result of the sale.

The Realtor as an Agent for the Buyer

The buyer involved in a real estate transaction generally hires a realtor to locate suitable property and to negotiate, on the buyer’s behalf, a suitable price for the subject property. The realtor can also be extremely helpful in the home inspection process and in most cases, recommend a certified home inspector who will give the buyer an assessment of the property.

Step 2: Attorney Review

In the State of New Jersey, contracts prepared by real estate brokers allow for a three-day period of review by either the attorney for the purchaser or the seller.

Every contract of sale prepared by a real estate broker must begin with the following clause:

This is a legally binding contract that will become final within three business days. During this period you may choose to consult an attorney who can review and cancel the contract. See section on attorney review for details. N.J. State Bar Association v. N.J. Association of Realtor Boards, 93 N.J. 470, 475 (1983).

Once the signed contract has been delivered to the purchaser and seller, they have three days, not including Saturdays, Sundays or legal holidays, before the contract automatically becomes "legally binding unless an attorney for the buyer or the seller reviews and disapproves of the contract." Id. at 475-476

As such, it is extremely important that either you or your realtor immediately fax a copy of the contract to one of our seven offices. Remember, the attorney review period runs from the date the contracts are signed, not the date that our office receives the contract.

When our office receives the contract, generally we reject the contract in its present form and make addendums to the contract that protect your rights and interests. Some additional addendum items may include:

• Change in the contract price
• Change in the date of closing
• Change in the inspection clause provisions
• Change in financing terms
• Change in items to be included in sale clause

During attorney review our office will either come to an agreement on the amended contract terms with the opposing attorney or with your consent, cancel the contract. Keep in mind that in order to obtain the most successful outcome, it is always wise to be flexible in your approach to contract negotiations. Our job is to inform you of items that may help or hinder you in negotiating a real estate contract that best protects your rights and interests.

Upon conclusion of attorney review, a binding contract, which includes all revisions and amendments, exists between the parties. At this stage, it is time to proceed onto Step 3, which is Inspection, Mortgage and Title Work.

Step 3: Inspection, Mortgage and Title Work

Inspection

Now that you are out of attorney review, if you are a purchaser, it is wise to have an inspection of the property that you want to purchase. Generally, inspection of the property takes place within 14 days after the end of attorney review. Inspections are important because a qualified inspector can discover hidden problems that may cost you a significant amount of money after you have purchased the property.

A qualified inspector may inspect the following home systems:

• Heating and cooling systems
• Plumbing systems
• Electrical systems
• Roofing and structural support
• Attached fixtures
• Major appliances
• Septic system (if applicable)

Click here to view a sample home inspection form in .pdf format (Adobe Acrobat is required to view page)

Inspections for wood destroying insects such as termites and inspections for the presence of radon gas, asbestos and mold are also highly suggested. If a well is located on the property, then both the buyer and seller will have to comply with Private Well Testing Act, N.J.S.A. 58: 12a-26 to 37. This Act requires that tests be performed on the well system and the seller usually pays for the cost of testing. Test results are valid for one year from sampling; except for coliform results, which are valid for six months from the time tests are conducted. At the closing table, both parties certify in writing that they have both received and reviewed well test results.

Once an inspection of the desired property is complete, a copy of the inspection report is forwarded to the attorneys for both the buyers and the sellers. Based upon the contents of the report, the buyer and seller may address the inspections issues in the following ways:

• Seller agrees to fix most or all outstanding problems
• Buyer agrees to pay for repairs and receive a discount on the price of the sale
• Seller sells the property “as is” and provides the buyer with a credit at closing
• Seller refuses to fix any outstanding problems and buyer cancels the contract

These are just a few of the ways inspection problems may be resolved. Again, it is the job of our office to protect your rights and interests when it comes to negotiating inspection issues. Remember obtaining the most successful outcome often depends on your flexibility in regards to your approach and expectations in resolving inspection issues.

Mortgages

Now that you have completed attorney review and the inspection process is underway, you must figure out how to pay for this investment. Most buyers obtain a mortgage in order to help pay for the property. To learn more about mortgages, please see top of the page.

Before obtaining a mortgage, you must be approved for an amount, which you can afford. Most lenders will loan a homebuyer up to 80% of the appraised value of the subject property. Usually, the lender will order the appraisal of the property in order to get an accurate picture of the true value of the property. Once a determination is made as to the value of a property, the lender will take certain variables such as credit score, debt to income ratio, value of the property and home purchase history in determining whether or not you will qualify for a mortgage.

Once you qualify for a mortgage, your lender will forward a mortgage commitment to our office. The mortgage commitment is a commitment on the part of your lender to providing you with a mortgage to purchase your property. The commitment contains information such as loan type, length of loan, and interest rate.

To view a sample mortgage commitment in .pdf format, click here:

Title

Title to real estate must be free and clear of all encumbrances, liens, clouds, litigation risks, or other title defects. Generally, the buyer employs an attorney or a title insurance company to perform a title search. In a title search to ensure that he or she is taking title to the property without any defects. Our office or a title company examines the public records in the county in which a property is located, mapping a chain of title by examining all the recorded deeds concerning the property. The title searcher will also determine if there are any encumbrances on the property, such as mortgages, unpaid real estate taxes, liens for municipal improvements, unpaid federal taxes, government claims, legal judgments, foreclosures, condemnations, covenants, and easements. A title insurance company will insure the buyer against losses caused by the title being invalid.

A survey of the property is laid out like a map and shows the placement of the structure relative to the perimeter of the property lines. Almost all lenders require that a survey be drawn and submitted to them for approval, prior to closing. In some cases the lender will accept an existing survey if it is not too old and if the Seller can give an Affidavit saying that there have been no changes to the property since the date of the survey.

Our office places an order for the title search and survey of as soon as attorney review is complete. Generally it takes ten days to two weeks for a title search and survey to be completed. When title is received, it is reviewed by our office for defects, and then submitted to your lender. Your lender needs to approve the title before they will clear you to close. Once you close, you will have insured title to the property even though the actual title insurance policy will not be issued for many months after the closing.

Once the Inspection, Mortgage and Title Work are completed, it is time to prepare for Step 4: The Closing.

Step 4: Closing

After all the anxiety and hard work, your big day has finally arrived. CLOSING DAY!!! In New Jersey it is customary for closings to take place at the office of the buyers attorney. So chances are, if you are purchasing a home in the vicinity of Newark, Elizabeth, Plainfield, New Brunswick, Perth Amboy or Trenton, your closing will take place at one of our offices. If the purchase is for a new construction property, then closing will take place at the office of the builder’s attorney.

Prior to closing, our office will provide you with the exact amount of money you need to bring to the closing table. This amount is based upon the various closing costs that you will incur as indicated on the HUD-1 Settlement Statement. The HUD-1 Settlement Statement breaks down all the charges and fees that are charged to both the Buyer and Seller as a result of the transaction. The HUD-1 also delineates how much the Buyer will bring to the closing table and how much the seller will take away from the closing table.

To see an example of an actual HUD-1 click here:

When arriving for the closing, plan on spending at least 2 hours conducting business related to the transaction. At the closing table, the buyer must bring a certified check, bank check, or cashier's check, as personal checks will not be accepted for payment of closing funds. Funds may also be transferred via wire transfer to our attorney trust account. In order to wire funds to out attorney trust account please contact our office 24 hours prior to closing so that we may provide you with proper wiring instructions.

Very important! Purchasing a home is a family event! If you are married, bring your spouse, or if you purchased the home with a partner, you must both be present at the closing as your lender may want to have both of your names on the mortgage.

An attorney from our office will be right there at the closing table with you. Your realtor usually comes to the closing also. A representative of the lender does not attend the closing but sends all documentation by overnight delivery or email. The other party, represented by their attorney, will also be present at the closing. However, it is not unusual for a Seller not to attend in person, but to pre-sign all closing documents and to send an attorney as their legal representative.

If you are a seller you must complete the following items prior to or at the closing:

• Sign the Deed
• Complete and sign the Affidavit of Title
• Complete and sign the Seller’s Residence Certification
• Complete the 1099 Tax Information Sheet
• Provide a Certificate of Occupancy issued by your municipality
• Provide a Smoke Detector and Carbon Monoxide Detector Certificate
• Ensure that a working fire extinguisher is located within the dwelling
• Transfer your utilities out of your name and obtain a final water reading
• Sign the HUD-1 Settlement Statement
• Bring keys to give to the buyer

If you are a buyer you must complete the following items prior to or at the closing:

• Bring proof of your identity (driver’s license, passport, etc.)
• Sign all your mortgage documents, including mortgage commitment and application
• Bring closing monies in the form of a certified check, money order or wire
• Transfer utilities into your name
• Obtain Homeowner’s Insurance and bring proof of payment to closing
• Sign HUD-1 Settlement Statement
• Receive keys from the seller

After all closing figures have been verified and all checks, keys and handshakes are exchanged, CONGRATULATIONS, you have just either sold or purchased a home!

To speak with an experienced Residential Real Estate attorney immediately call us toll free at 1–800–923–3456 or contact us to discuss your legal matter today.

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