Breaking Down Real Estate
Introduction
Whether you are looking to buy or sell your home, Ferrier Law is here for you. We will be more than happy to walk you through the buying or selling process. Our goal is to make the process as easy as we can for you!
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Buyers
Once you have found a house that you are interested in purchasing. You will typically have your realtor submit a bid on your behalf by using a preprinted form of contract incorporating the principal terms and is signed by you. The contract is then presented to the seller for consideration. The seller will sign the contract if the seller accepts your bid. Once the contract is signed by both parties, the realtors will circulate that contract to the attorney for the buyer and the attorney for the seller to start the attorney review process.
Attorney Review Period
After the contract is fully executed and a copy is provided to the buyer and seller, the attorney review period commences. You typically have three days from receipt of the fully executed contract to have an attorney review the contract and disapprove of it. At this stage, either party can disapprove of the contract and render it null and void. If the contract is not disapproved within the attorney review period, you are bound by the contract as written. Therefore, it is important to contact an attorney immediately. An attorney will advise you of your rights and recommend certain modifications to the contract that may be appropriate.. After all modifications have been considered and agreed upon by both sides, the contract is binding and attorney review is complete. Now you are officially under contract.
Contract Provisions & Contingencies
With respect to the contract, there are typically certain contingencies included within the contract for your protection. For example, most contract contain a home inspection contingency, a mortgage contingency, and maybe a home sale contingency (if you are also selling).
Home Inspections
You will usually order a home inspection and provide the results to the seller within ten to fourteen days of the contract date. Inspections should be commenced immediately after attorney review ends. Your home inspector should forward a copy of the report directly to your attorney. Home inspection issues will be discussed with the buyer and the buyers attorney and then any requests resulting from the inspection report will be submitted to the seller to see if they will agree to repairs or possibly credits. Home inspections are not a tool to renegotiate the sales price but are designed to protect you if a house has significant defects.
Mortgage
You are usually required to apply for a mortgage immediately. It is important to review the mortgage contingency clause carefully. The clause may have certain specifications regarding the amount of the mortgage, type of mortgage, points, interest rate and terms. Make sure you apply for the correct type of mortgage. If you do not apply for the mortgage as recited in the contract, you may lose the benefit of this contingency. Also, be aware that some mortgage contingency clauses provide for a waiver of rights if you do not cancel the contract pursuant to the mortgage contingency clause by a certain date. After you have obtained a mortgage commitment, review it carefully. Make sure the rate and terms are correct before you sign the commitment and return it to the lender. There may be certain conditions that must be satisfied prior to closing. Be sure to provide your attorney with a copy of your commitment and conditions. In addition, lenders have specific requirements that need to be met prior to closing a loan. Your attorney will usually obtain the requirements directly from the lender and ensure these requirements are fulfilled.
Title & Survey
A title search is usually ordered by your attorney after all inspections are resolved and you have received a mortgage commitment. Your attorney will review the title search to determine the chain of title and the status of the property (i.e., liens, mortgages, easements, taxes, etc.). The title company that performs the search will also provide title insurance to you which is required by the lender. This insurance protects your interest and your lender’s interest in the property. In many cases, there are title issues that need to be resolved prior to closing. A survey is generally required by the title company and lender. The purpose of the survey is to ensure that you are purchasing the proper parcel and to determine if there are any encroachments, easements or zoning violations. The buyers attorney will order the survey for their client. The buyer will pay for the survey at closing.
Closing
After the lender and title company requirements have been satisfied and appropriate financing procured, a closing date can be scheduled. The closing is customarily held at the office of the buyer’s attorney or the title company. A day or two prior to the closing date, figures will be provided to you by your attorney and reviewed with you. You will be advised of the amount and type of funds to bring to closing. You can anticipate paying certain closing costs in connection with the purchase (i.e., title company fees, bank fees, recording fees, homeowner’s insurance, survey, attorney fees, etc.). All transactions differ and the final closing figures will depend on many factors. Your lender should provide a good faith estimate of your closing costs.
The mortgage documents (i.e. mortgage, note, etc.) are executed so that you can obtain the mortgage funds to purchase the property. The lender provides the mortgage proceeds which are deposited into the attorney trust account of the buyer’s attorney. These funds, along with funds that you may directly provide, are used to pay off the seller’s mortgage, realtor’s commission and closing expenses. A net check is provided to the seller as the seller’s closing proceeds. The seller in turn provides possession of the property to the buyer by providing a deed, other related documents, and the keys to the home.
Post Closing
After the closing, the buyer’s title company forwards the mortgage pay off to the seller’s mortgage lender and records the deed and mortgage. The buyer’s title company also forwards the necessary documents to the County clerk and to the mortgage company for filing.
Purchasing a home may be the biggest investment of your life, and you should consult an attorney to protect your rights. The expense of an attorney is minimal in comparison to the amount of the purchase, costs of other vendors, bank charges and other amounts. The above is a general summary of the home buying process and is not a substitute for legal advice.
If you are purchasing new construction, a condominium, town house, home on a waterway, etc., there may be additional considerations. Each purchase differs and you should consult an attorney to be advised of your rights and responsibilities.
If you have any questions concerning the purchase or sale of residential or commercial real estate, please call us at (732) 946-9000. We handled hundreds of real estate transaction annually and have handled many thousand cases over the past 20+ year in practice.
Sellers
Our services include contract review, attorney review discussions; inspections and inspection requests; reviewing title commitments and surveys to ensure proper title will be conveyed at closing; reviewing closing statements, and preparing and reviewing closing documents; executing closing documents as required by the title insurer and Buyer’s attorney; and attending the closing within central New Jersey on the date of closing.
While unusual, if the time that we have to spend on your file significantly exceeds the time spent on a typical real estate, or your closing involves unusual services, excessive communication, or additional work, we reserve our right to reasonably increase the fee after consultation with you. Some factors that may lead to additional legal expenses include unusual environmental issues such as oil tanks or other environmental problems on the property, open permits that are not properly closed, judgments owed by a buyer or seller that require payoff statements or discharges, excessive phone calls or emails; issues involving tenants or other occupants on the property; preparation of unusual closing documents such as Powers of Attorney, Use and Occupancy Agreement, Escrow Agreements, Leases, and Time of the Essence letters etc.
If your contract is canceled prior to closing (this is usually the result of inspection issues or buyer loan issues) we will invoice you on a pro-rated basis, depending on how much work has been completed by the Law Firm up to the date of cancellation. You will have the option of including any cancellation fee in a subsequent matter if we represent you in that matter. So for example, if you are selling a house and the contract is cancelled during inspections, we may charge a fee of about $350 for the work performed on that matter. We will gladly add that amount to the standard fee on the next contract if you continue to use us to represent you.
Our fee does NOT include any litigation or negotiations to avoid litigation when a transaction does not close as a result of a breach of contract or for any other reason. These are outside of the scope of the Law Firm’s representation in a real estate transaction, even if it is related to the transaction. If litigation or the threat of litigation becomes necessary, we will provide you with the name of a litigation attorney that can assist you.
In addition to our legal fee, you will also have additional closing fees related to your closing costs, including realtor’s commissions (paid by sellers), realty transfer fees or other NJ required taxes (paid by sellers); cancellation or discharge of mortgage and/or liens (paid by sellers); closing cost adjustments (taxes, sewer, rent, maintenance fees, etc., as applicable); condominium charges (if applicable), which will be due at the time of closing. We do not have any control over these additional fees, as they are provided to us by the third-party service providers and/or are determined by regulatory agencies (i.e. recording charges are mandated by the State.
Home Inspections
Buyers will schedule their inspections as soon as attorney review is complete. The contract typically allows 10 to 14 day time period (depends upon the time provision in Contract) to complete property inspections and advise the Seller of any issues. The purpose of the inspections is to determine if there are any defects to the property which you are selling. We will review with you the inspection report that the list of repair requests that the buyers send us and discuss it with you to prepare a reply. Please note that we are not construction expert’s so we cannot tell you what inspection issues you should repair. We will provide our legal opinion as to whether a condition constitutes a defect under the terms of the contract, but we are not home inspectors or contractors and cannot say whether a specific condition is problematic. We also cannot provide estimates for what something might cost to fix.
Our office will negotiate the repair requests with the buyers’ attorney. Typical property inspections, include a house, pest/insect, radon, pool, septic tank, well and underground fuel (oil) tank. Buyers may also inspect for issues such as asbestos, mold, suspected underground oil tanks, stucco or lead paint.
Title Search
The buyer’s attorney will order the title search and survey on buyers behalf. We will send you a form asking for some information about any mortgages you have on the house. It is IMPORTANT that you fill this out and send it back to us. Please keep in mind that home equity loans are mortgages and must be paid off at closing. The title search provides the prior ownership history of your property and will alert us to any liens, exceptions or other items which may impact upon the marketability of title. The title search is for a real estate lawyer's evaluation in determining marketable title. We work hand in hand with the title company and to insure you can convey clear title to the property as of the date of closing. If you have any liens against you (child support, lawsuits, bankruptcy or foreclosures) please let us know ASAP.
The Closing
The “closing of title” is the day that you actually sell your home. The closing is held at the buyers’ attorneys office or the title company office. Final closing figures are typically available the day before the closing which is when we receive closing figures from the buyers’ attorney.
We will plan to meet with you sometime prior to closing at your convenience to sign the closing papers. You DO NOT have to attend the closing in person if you have signed the papers with me in advance. We STRONGLY SUGGEST you sign in advance as it will make the process much smoother for you. If you wish to attend the closing you may do so, but most sellers do not attend closing.
On the day of closing we will arrange to have the money you are owed issued to you via a check or we can arrange that the money be wire transferred directly to your bank account.
Closing Dates
YOUR CLOSING DATE IS NOT GUARANTEED AND MAY CHANGE.
We have limited control over the final closing date. Because there are many persons involved with a real estate transaction (Buyers, Sellers, Attorneys for both Buyers and Sellers, Title Agencies, Realtors, Mortgage Brokers and Lenders), coordinating the closing date can be difficult. Therefore, you should have flexibility with regard to the date we will actually close and remember the “target” date in the Contract for Sale may not be the actual closing date.
Simultaneous Closings (Sale and Buy)
If you plan to conduct simultaneous closings, when you plan to sell and buy on the same date, we suggest that you arrange with your movers to store your personal property and furnishings for at least a period of 3-5 business days to account for flexibility required in case a date gets changed. You should also consider making appropriate sleeping/living arrangements in case of a delay. This is because there is no guarantee that the closing will not be delayed for any reason. Oftentimes delays are the result of bank disclosure requirements that cannot be circumvented. Unfortunately, if you suffer additional costs because of these possible delays, you must not expect to recoup your additional expenses from the other party, even if the delay is their fault.
Certificate of Occupancy
In a real estate transaction, typically it is the Seller’s responsibility to schedule a certificate of occupancy inspection and a smoke detector inspection with the municipality. If you are selling, we suggest that you schedule this inspection at least two (2) weeks prior to the anticipated closing date. We cannot close without the CO being issued.
Also, you should plan to have all agreed upon home inspection repairs completed at least one (1) week before closing. That way, an early walkthrough can be conducted for Buyers to approve the repairs made. If there are issues that arise on the final walkthrough on the day of closing, such issues could delay the closing.