NEW JERSEY REAL ESTATE CLOSINGS
Are you buying or selling real estate in New Jersey? Whether in Hudson, Bergen, Essex, Passaic or any of the 21 counties in the state, The Law Office of Joseph A. Rutigliano, LLC can help. Please read our article for an outline of the real estate closing process.
Whether you are buying or selling a piece of real estate in New Jersey, it is a good idea to have a lawyer represent you in the process – one who has experience in real estate transfers. An experienced real estate attorney will have the experience and contacts that will allow him to protect his client and ensure that the ownership is transferred free and clear of all issues.
The Beginning of the Process
A buyer and seller usually negotiate the purchase and sale of real estate with the help of a real estate agent. Real estate agents are permitted to prepare standard residential real estate contracts only. A realtor prepared contract contains generally acceptable and standard language to all parties. These contracts contain no tailored provisions to the benefit of any one party.
Buyer and Seller may present the contract to the attorney of their choice if they wish. Their attorney may then make amendments to the contract of sale by changing the language of the contract. Our office’s preferred method of making these changes is by drafting riders to the contract. Each party has 3 business days (weekends and holidays do not count) from the date a fully executed contract of sale is delivered to disapprove of the contract. This only applies to contracts prepared by a realtor (as opposed to a custom contract negotiated between attorneys.) If no one disapproves (cancels) the contract, the transaction goes forward with the contract as written.
What happens if an attorney sends a disapproval letter? The transaction is treated as though it is terminated and one or both attorneys draft and submit riders that modify the contract of sale.
In New Jersey attorney review can take as little as a day or as long as several weeks or months, although from about three to seven days is more common.
The Contract and Riders
The contract of sale is of primary importance to the real estate transaction. It is the document which lays out each party's responsibilities from the time it is signed until closing of title. It is important that the parties understand what their obligations and rights are before agreeing to be bound by them. However, as stated above, standard residential real estate contracts generally contain language that is standard and acceptable and to all parties.
While every line of a real estate contract affects your rights and is, therefore important, because of the inherently fair nature of these contracts it is the handwritten language that should be scrutinized.
Whether representing buyers or sellers, a good real estate attorney will have a set of riders that have been drafted and developed over time that can be customized for a client’s particular needs. These riders will materially modify the original contract to a client’s financial advantage as much as possible while still remaining fair to the process.
If you are buying a condominium, co-op or a townhouse, we will put in a provision requesting copies of important documents, including the Master Deed, Bylaws as well as the House Rules of the Condo Association, in addition to the financial documents, including a budget, and/or financial statements, which will show the financial stability of the building. These will generally be provided if available or if in the possession of seller. If seller does not have any document you wish to see, you may contact the condo association to secure same.
Once riders have been agreed on the parties conclude attorney review and the next portion of the process, the inspection contingency, begins.
In order for a closing to occur, there may be contingencies that must be satisfied prior to a deal being deemed firm. A contingency means that an event must occur before the event of a happening, i.e., if your contract is contingent upon mortgage commitment, you must obtain a commitment before a closing can occur. Two typically used contingencies are as follows:
1. Inspection Contingency
We encourage all of our purchasing clients to contact a qualified home inspector to ensure the property they wish to purchase is evaluated for visual defects. Depending on the age and condition of your building, you may choose to get inspections in the following areas: termite radon, septic, well, home heating oil tank, and/or lead paint. A structural inspection generally runs about $400-$600 for a one family home or condominium. These are out of pocket expenses that you will pay directly to the inspector. You will work with your real estate broker and the seller to coordinate this.
Very often repairs, credits or a reduction of the purchase price are requested by the buyer of the seller based upon the results of these inspections. At that point, the attorneys for both parties may be called upon to re-negotiate the contract of sale with respect to items addressed in the home inspection report.
Regardless of the purchase price or the ability to request changes (some properties are marketed as “As Is” properties – meaning the buyer is on notice that no repairs, credits, ect will be agreed to by seller – we encourage our clients to do all available inspections. We draft all riders with a right of cancellation based on the results of home inspection reports even on “As Is” properties.
2. Mortgage Contingency
More often that not, a contract is contingent upon a buyer being able to obtain a mortgage commitment. This contingency permits a buyer a given amount of time, usually 30 to 45 days, in order to obtain that mortgage commitment. In the event, however, the buyer does not obtain a mortgage commitment within that time frame or is denied financing (depending on the contractual language agreed upon), the contract may be cancelled and the buyer should obtain a full refund of the deposit money.
Once a commitment is issued, however, the matter becomes similar to an all cash transaction, that is to say, you may have to purchase the house regardless of the fact the lender fails to fund the loan for any reason. We will try to have buyers agree to language that will protect you, but you should choose your lender carefully.
During the period between the end of attorney review and the closings, your lender will be requesting from you certain documentation that will be used to evaluate your creditworthiness and qualifications as a borrower, i.e., pay stubs, bank statements, tax returns. There may be certain conditions that the bank may require of you, i.e., pay off debt or produce letters of explanation for large deposits or derogatory credit, or sign gift letters. You should work diligently with your lender to satisfy all of their conditions.
Depending on the township you purchase in, a seller may be required to obtain a continued certificate of occupancy (CCO), and all municipalities are required to provide a smoke detector inspection (smoke cert) by state law. Sellers are required to obtain this documentation and the buyer’s real estate agents will usually assist in this process.
After contract contingencies are resolved, a title insurance company is hired to prepare a commitment of title, which is an examination of the history of the property in the public records. The commitment of title should disclose defects in the chain of title, including, the existence of judgments, liens, and mortgages. The property must be conveyed to a buyer free of defects both for your protection and to ensure your lender is satisfied their claim to the property is first.
As your attorneys as buyer, we will order your title insurance in conjunction with the title searches from a licensed title agency. Title insurance fees are set by the State of New Jersey and we work with a select group of trusted title agents who provide excellent service to our clients. Title insurance, title searches and the survey costs are paid at closing.
A survey of the property is often required by your lender on all real property. A survey is a map of the property, as determined by the opinion of a surveyor, at a moment in time, which discloses where improvements lie in comparison to the property lines. You should discuss this with your lender to discover their requirements. We will provide a written request as to whether you wish to order a survey in connection with your purchase.
What other expected closing costs will there be?
Mortgage closings costs vary by the mortgage company. You should speak to your lender, banker or mortgage broker about their specific costs and fees. Some companies collect fees upfront and others are paid at closing. It is wise to contact multiple mortgage companies to compare rates.
Your mortgage company will require you to purchase a homeowner’s insurance and provide a paid receipt. This must be paid prior to closing. If you are purchasing a co-op, the co-op attorney will require you provide a receipt at closing.
Condominium Association fees
Many condominium associations require a non-refundable three month capital contribution to be paid at closing to the Association as well as the first month's maintenance. The condominium association will provide this information upon request.
You will usually have to pay the property taxes for the upcoming quarter at closing.
Once all the items mentioned above, as applicable, are completed, a closing can be scheduled. At that time, the parties and attorneys (subject to the buyer’s lender’s clearance to fund and the title company’s approval as to clear title) mutually agree on a time and place where all parties can appear for the closing of title. Most closings take place at the buyer’s attorney’s office, but they can also can take place at the title company’s office or the co-op attorney’s office in the case of a co-op sale.
Shortly before the closing date, the lender will prepare the mortgage documents and a list of costs associated with the mortgage. The closing statement will be prepared by the title company with input and approval from all parties and the lender.
At the closing of title, once the deed is signed and recorded with the county clerk. Then the buyer takes ownership of the property.
Please feel free to contact Joseph A. Rutigliano if you have any specific questions you feel were not covered in this article.
The Law Office of Joseph A. Rutigliano, LLC is a New Jersey law firm specializing in residential closings, refinance closings and bank closings. Our firm has extensive experience and closes over one hundred transactions each year and are committed to providing the best possible individualized service to all of our clients. We understand that buying or selling your home will be one of the largest financial transactions of your life and that it can be a stressful process. We strive to make the transaction as painless as possible by taking the time to answer all of your questions and concerns. Our top priority is to be a strong advocate for your best interests. Call us today 201-850-1100.