Important Things to Know for the Buyer
The sales contract outlines the terms and conditions of the real estate transaction. Typically, the contract is prepared by the seller’s real estate broker. However, if the seller has no broker, the contract will be prepared by the seller’s attorney. In either case, it’s important for the buyer to have a New Jersey real estate attorney review the contract to make sure it isn’t missing any important terms or contain clauses that may hurt the buyer.
In the case of a broker-prepared contract, there is a three-day attorney review period in which both the buyer and the seller must have the contract reviewed by a New Jersey real estate attorney. If attorney review is not concluded within the three-day period, the seller may withdraw from the contract and place the property back on the market. The three-day review period starts when both the buyer and seller have signed the contract, not when the attorney has received it.
Keep in mind that the vast majority of contracts contain contingency clauses. This means the contract is dependent on something happening first in order for it to be binding on the parties. In New Jersey, real estate contracts are customarily contingent on the buyer obtaining a mortgage, completing the home inspection, and clearing title.
In most cases, the deposit (or down payment) on the property is paid within 10 days after the completion of attorney review. The deposit is typically held in the seller’s attorney’s escrow account and will be released to the seller at closing.
Scheduling the Closing Date
Keep in mind that the date of the closing as set out in the contract is not an absolute deadline. Rather, it is an approximate target date that allows for flexibility if a party is unable to close on that date or if the lender is unable to issue a mortgage commitment in time. As such, do not arrange for move-in or schedule contractors or deliveries on the target date. Typically, you won’t know the exact date and time of your closing until about a week before your target closing date.
If the date and time of closing is an extreme priority, a time of the essence clause may be negotiated with the seller’s attorney and incorporated into the contract.
The Home Inspection
You’re not required to order a home inspection but it’s highly recommended that you do. When buying a property, there are hundreds of things that can go wrong. Problems with major systems are expensive to fix, especially in older homes. Ask your real estate broker to refer you to a licensed home inspector. Your broker will then arrange for a time for you and the inspector to enter the premises together. It’s important to attend the inspection because oftentimes the inspector will mention issues that may not be in the report. You’ll generally have 10-14 days after attorney review to have the inspection completed and submit the results to the seller’s attorney. The seller should then address any material defects by either repairing them or issuing you a credit at closing.
Remember, the vast majority of homes in New Jersey are sold “as is.” The inspection contingency in the contract will only require that the home’s major systems and structural integrity be in “good working order” – not new or mint condition. The seller is not required to fix cosmetic imperfections or normal wear and tear.
After you have decided on a lender and completed the mortgage application process, you’ll be provided with a Good Faith Estimate (GFE). The GFE itemizes the fees associated with the loan and will be provided to you within three business days after submitting your application. Remember, this is only an estimate and not the actual amount you’ll ultimately pay the lender.
Make sure your rate lock doesn’t expire before, on the date of, or immediately after the target date of closing. Your rate lock shouldn’t expire for at least a couple weeks until after the anticipated closing date. If the rate expires prior to the actual closing date, you may be required to pay addition fees to extend your rate. In rare circumstances, the option to extend may no longer be available.
Your final closing figure will need to be made out in the form of a certified check, bank check, or wire transfer to either our firm’s attorney escrow account or the title company’s escrow account. The final closing figure is usually not available until the morning of the actual closing. However, in some cases, the bank will be able to provide us with the closing figure a day before the closing. In the event of a delay in receiving the figure on the day of closing, you can write the checks or wire the funds by using the figures from your Good Faith Estimate. Any overage that you pay will be reimbursed to you later.
On the morning of the closing or on the day before, you and your real estate agent will perform the final walk-thru inspection of the property. The purpose of the walk-thru is to give the buyer the opportunity to confirm that the condition of the property is the same as it was at the time of the home inspection. It also gives the buyer the chance to determine whether any promised repairs were actually completed by the seller.
As a buyer, you’ll typically be required to pay for:
- Mortgage costs
- Title insurance
- Attorney’s fees
- Recording fees
- Survey or survey certificate
- Homeowners insurance
- Condominium fees (if applicable)
- Miscellaneous fees (such as prepaid property taxes and interest)
Mortgage costs will vary by lender. The cost of title insurance is fixed by state law and is calculated by using the purchase price of your home. Legal fees will be paid at the closing. Contact us for a quote. The recording fees pay for the recording of the deed, mortgage, and notice of settlement. These documents will be recorded in the county registrar’s office in which the property is located. The cost of the fees are determined by the number of pages to be recorded. If you’re buying a house, your bank will require a survey, the cost of which is determined by the size of the property you’re purchasing. If you’re buying a condo unit, your bank will require a survey certificate, which may cost up to $400. Your lender may also require that you purchase a one-year homeowners insurance policy. This is usually paid for before the closing.
If you’re buying a condo unit, you may also have to pay for
- First month’s maintenance fees
- Working capital contribution (the equivalent of 2-3 months of maintenance fees)
- Move-in fee (up to $500)
- Administrative fee (up to $300. Pays for the management company, if the condo association has employed one)
There may also be other miscellaneous fees. Your lender may require that the next quarter’s property taxes be paid at closing. You’ll also be charged prepaid mortgage interest for the period from the date of closing to the end of the month.