BUYING A HOME
MY REALTOR HAS DRAWN UP A CONTRACT. CAN I SIGN THE CONTRACT BEFORE IT IS REVIEWED BY MY ATTORNEY?
Contracts for the purchase and sale of real estate which are presented through a licensed New Jersey realtor, or are for a newly constructed or to be constructed home, are assigned an automatic three-day attorney review period by law, which permits you to sign in advance of your attorney's review of the contract. The contract should be presented to our office via email or facsimile immediately after signing to permit the review to be completed within the three-day period. Contracts between a purchaser and seller where there is no realtor involved should NEVER be signed until first reviewed and approved by counsel.
WHAT HAPPENS WHEN ATTORNEY REVIEW IS OVER?
When attorney review ends, all closing preparations begin in earnest. The buyer is required to pay all deposit monies required by the contract, submit a formal mortgage application to the lender, and schedule and coordinate all home inspections through his/her realtor. We will order all title, municipal and judgment searches to examine the history of the property, as well as all buyers and sellers in the "chain of title". Thereafter, once your mortgage is formally approved, final closing preparations can be made.
WHY DO I NEED TITLE INSURANCE?
Title insurance is required by your lender. It protects both you and your lender, in the event of a defect in title or from an undetected lien, in the future. Should such a lien or defect surface, your title company is required by law to pay the claim and clear your title. Thus, you are fully protected against any such claims.
HOW DO I OBTAIN TITLE INSURANCE AND HOW IS THE PREMIUM DETERMINED?
We recommend that title searches and insurance be obtained on your behalf ONLY by your attorney. Never agree to allow realtors, sellers or your mortgage lender to order your title insurance. You want a completely independent company doing all of your title search work. We will order all necessary searches as part of the closing services we provide. Title insurance rates are governed by the New Jersey Department of Banking and Insurance, are standardized (i.e., all premium rates are the same from company to company), and determined based upon the purchase price and mortgage amount. You will receive a title insurance estimate from your lender upon making your loan application.
WHAT TYPES OF INSPECTIONS CAN BE DONE AND BY WHEN MUST THEY BE COMPLETED?
There are five general types of inspections that are available to purchasers depending on specifications of the home being sold. They are:
1) structural and mechanical;
2) termite and wood-destroying insect;
3) radon and environmental;
4) well water (if applicable);
and 5) septic (if applicable) inspections.
Mortgage lenders usually require termite, radon, well water, and septic inspections. If the property you are buying includes a pool or spa, it is strongly recommended that you conduct appropriate pool and spa inspections as well. All inspection time periods will run from either the date of the contract or conclusion of the attorney review period and usually, must be completed within 10-14 days. If the home is serviced by a private well, the seller is typically responsible by law for ordering and obtaining a clear well water certification prior to closing. Your realtor can provide you with the names of reputable inspectors in your area. Once your inspections are complete, we will review any problems or other shortcomings with the other attorney.
You will also be permitted to complete a pre-closing "walk through" inspection either the day before or the morning of your closing. The purpose of the "walk through" is to make sure that everything is in the same basic condition as when you first inspected the property, and that any inspection items which the seller agreed to repair have in fact been repaired.
HOW WILL I KNOW WHAT MY CLOSING COSTS ARE & WHEN RECEIVE THIS FIGURE?
Your lender is required by law to provide you a "good faith estimate of closing costs" within 10 days of your mortgage application. This will provide a detailed estimate of closing costs associated with your mortgage and closing. The lender will provide actual figures approximately 24 hours prior to closing. All figures will be specifically listed and set forth on a settlement form called a HUD-1 or RESPA settlement statement, and will be carefully reviewed with you at the time of closing.
WHAT HAPPENS AFTER THE CLOSING?
After the closing is complete — Congratulations!! — you own the home. We will record your deed, mortgage and all other documents which must be recorded, with the county clerk. Once your recorded documents are processed and returned to our office, the original deed to the property will be mailed to you, for your file, and the final title insurance policy will be issued and also be mailed to you by the title company.
WHY DO I NEED
A survey shows the placement of all improvements (e.g., your driveway, house, pool, fence, etc.) relative to the perimeter or boundaries of the property. In addition to showing the exact dimensions of the property, it ensures that there are no overlaps and encroachments of dwelling or improvements either on or off the property.
Do not confuse a survey with the lender's appraisal. An appraisal is ordered by your lender to verify the market value of the property by utilizing comparable home sales data. Sometimes, your lender will not require a new survey. However, we strongly recommend you get one anyway, as your title company will usually not insure against boundary encroachments unless you obtain a new survey. It is a relatively small investment for true peace of mind in the future.
WHEN DOES THE THREE-DAY ATTORNEY REVIEW PERIOD BEGIN AND END?
The three-day attorney review period starts when the "contract of sale" is fully executed and delivered to the purchaser or his or her attorney. Only business days are counted. If a contract is signed on the weekend, the first day of attorney review would be the next business day, generally a Monday, unless the Monday in question is a legal holiday. Attorney review can never begin or end on a weekend or holiday. Typically, attorney review is formally commenced by one of the attorneys submitting an "attorney review letter" to the other, detailing desired proposed modifications to the contract. Once a review letter is submitted during the review period, the review period remains open indefinitely until the parties have mutually agreed to approve the contract or any proposed changes, thereby concluding the review period.
During the attorney review period, either party may cancel the contract without penalty, for any reason whatsoever. Once the attorney review period is concluded, however, the contract is firm and binding on buyer and seller, subject to buyer's mortgage approval and satisfactory title search and home inspection results.
CAN I BE SURE THAT CLOSING WILL OCCUR ON THE DATE WRITTEN INTO THE CONTRACT?
No. The date listed in your contract is an estimated target date for closing. In fact, closing rarely occurs on the contract closing date. This date can be extended by either the purchaser or seller, without cause, for up to 14 days, to permit coordination of transactions, delays, and contingencies, or to accommodate mortgage lender scheduling. As a result, you should NEVER schedule movers, connect or disconnect utilities, or announce a move out of your existing abode until and unless the closing date has been definitively confirmed. If the closing date listed in the contract is preceded by the words " time of the essence", this becomes a mandatory closing date and may not be extended without the opposing party's consent. A "time of the essence" closing is, however, truly rare.
WHAT DO I NEED TO BRING THE DAY OF CLOSING AND HOW LONG WILL THE CLOSING TAKE?
You will be provided with an exact amount representing the total funds necessary to complete the closing, by our office. Please understand that your lender usually will not complete processing your file and release the closing figures until the afternoon before or the morning of your closing. Hence, we cannot advise you of exactly how much money to bring to closing until then.
Funds you bring to closing MUST be in the form of a certified check, cashier's check or bank check. New Jersey law prohibits the depositing of personal checks into an attorney's trust account. The closing itself rarely takes longer than 1 hour from start to finish. You will be permitted to move into the home immediately after closing.
DO I NEED HOMEOWNER'S INSURANCE?
If you are buying a single-family home, your lender will require that you obtain a homeowner's policy, paid in full, for the first year's premium. They will instruct you on exactly how they are to be insured and for how much. Typically, your lender will require that your home be insured for its full replacement value, in the event of a fire or other covered loss. You must provide your lender with a paid receipt and a copy of the insurance policy either at or before the closing. If you are purchasing a home located within a recognized "flood zone", your lender may also require you to obtain flood insurance.
If you are buying a townhouse or condominium, the association in which the home you are buying is located normally carries a master insurance policy with the necessary coverages. In that case, we strongly recommend that you obtain a "contents" policy, to protect your personal property, furniture, and furnishings, which are NOT protected under the association's policy.