What is 3 Day Attorney Review?
First, it is important to note that before signing a legal document, such as a contract, it is important to have it reviewed with an attorney BEFORE signing. In the State of New Jersey, the realtor prepares the contract on a standard form. The buyers and sellers then participate in a three (3) business day attorney review period. The review period commences when an attorney for either party sends a letter stating that they disapprove of the terms contained in the proposed (and possibly) executed contract. Modifications to the contract may be made by either or both parties. The attorney review period is concluded upon all parties’ agreement to the original contract and the modified terms of it. The contract may also be cancelled by either party during the attorney review period.
How do I estimate closing costs?
If you are a seller, examples of costs are as follows:
- Real Estate Commission (5 – 6%)
- Real Estate Transfer Tax
- Legal fee
- Recording fees
- Reimbursement of search fees incurred by a title company if the services of a title company are utilized.
- Other costs may also be applicable such as include paying off a mortgage(s), sellers share of real estate taxes, payment to obtain a certificate of occupancy, etc.
If you are a buyer, examples of costs are as follows:
- If a mortgage is required, then there may be fees charged by the lender such as commitment fees, appraisal fees, attorney fees, etc
- Legal fees
- Recording costs for documents
- Reimbursement of search fees incurred by a title company, if the services of a title company are utilized
- Title insurance premium
- Buyer’s share of real estate taxes
- Fees charge by a inspector
- Fee to obtain a survey
What is a typical deposit?
A buyer will typically pay between a 5 – 20 % of the purchase price as a deposit. The deposit is usually held by the seller’s attorney in an attorney trust account or by the office of the realtor for the buyer. There is no legal requirement as to the specific amount of deposit a buyer has to pay.
What does “AS IS” mean?
“As Is” could mean that the property is sold “as is” and there are no inspection contingencies and no representations by the seller. However, most contracts state a home is sold “as is” but include home inspection contingencies, and representations by a seller as to certain conditions of the home.
Escrows: A lender may collect money at the time of the closing and hold it in escrow. This money is designated for a certain purpose, such as paying future real estate taxes and home owners insurance. Attorneys may also hold an escrow to resolve certain issues after a closing: money could be held by an attorney until a party resolves an issue that was outstanding at the time of the closing.
What is a Home Inspection?
Most contracts will provide the buyer the opportunity to have an inspection by a professional inspector of the structure on the property. This is called a home inspection contingency. An inspector will make an inspection of the property and its structure to provide a written report which identifies various deficiencies of the structure. In some cases, a buyer will have a general inspection done as well as individual inspections for items such as: septic, well, oil tank, termite, radon, etc. The inspection usually is required to take place within a specified time period, otherwise the buyer would waive the inspection contingency. After the report is received, the buyer may request that the seller make repairs and/or give them a credit towards the purchase price so that repairs can be made after acquisition.
What is a Certificate of Occupancy?
Typically a seller is responsible for obtaining a Certificate of Occupancy and a smoke detector certificate from the city or municipality in which the property is located prior to closing. Most cities and towns require a brief inspection of the house to make sure the home is at least habitable, proper permits obtained, and are compliant with state mandated Fire Certification (smoke detectors, fire extinguishers, and carbon monoxide detectors).
What is a real estate transfer tax? Sellers are required to pay a tax in order to sell their home. The real estate transfer tax must accompany a deed when it is sent to the county clerk for recording. It is based on the sales price and there are specific requirements for calculating the real estate transfer tax.
How can I find out what yearly real estate taxes are for a property? You can call most cities and municipalities and ask for the tax collector to get an idea of what your yearly property taxes will be on a specific location. This information will also be provided by the title company if one is retained.
What is title insurance?
After contract contingencies are resolved, the buyer’s attorney may hire a title company to conduct an examination of the title to determine whether the property can be transferred free and clear of any liens or defects in title. The title policy includes insurance that protects the buyer from any possible defects and title liens. In addition to a title search, a survey of the property is generally required by the mortgage company. If you obtain a mortgage, you will also need title insurance—otherwise obtaining title insurance is not mandatory but is very strongly suggested. Title insurance for property owners, called an Owner’s Policy, is usually issued in the amount of the real estate purchase. It is purchased for a one-time fee at closing and is valid for as long as the owner or his/her heirs have an interest in the property. Only an Owner’s Policy fully protects the buyer should a problem arise with the title that was not found during the initial title search. Possible hidden title problems can include: errors or omissions in deeds, mistakes in examining records, forgery, and undisclosed heirs. Title insurance for mortgage lenders is called a Loan Policy. Most lenders require a Loan Policy when they issue a mortgage loan. The Loan Policy is usually based on the dollar amount of the loan and it protects the lender’s interests in the property should a problem with the title arise. It does not, however, protect the buyer.
What is a survey?
A property survey shows the boundaries of the property, indicating the lot size and includes a written description of the property. Surveys also indicate right-of-ways and easements. Right-of-ways detail the right of others to access certain areas of the property. For example, it may allow access to water or telephone companies for servicing or grant a neighbor use of a shared lane or driveway. Easements are a right that are assigned to the property and cannot be removed very easily, if at all. Surveys may also indicate issues such as a fence located outside the property line or an overhanging roof from a detached garage. In these instances, the buyer can ask the seller to correct the problem before closing.
What is a mortgage contingency clause?
Most buyers require lender financing (a mortgage) in order to purchase. Most contracts will give the buyer a specified amount of time to obtain a written promise from a lender to loan them money, which is a mortgage commitment. If the buyer obtains a mortgage commitment, the contract will proceed to closing. If the buyer is not approved, the contract may be cancelled or the parties may make some other agreement. If the buyer is not approved within the time frame, the contract can be voided.
Must a seller attend the actual closing?
A seller may elect to sign documents with their attorney prior to closing and not be physically present at the closing. A seller should coordinate with their attorney and make appropriate arrangements to ensure a smooth and successful closing. A party may also give their lawyer a Power of Attorney to sign documents on their behalf.
Liens: A charge, security, or encumbrance upon property. For example: mortgages, judgment, real estate taxes, and municipal water/sewer are all liens against a real property. Liens, if any, against a property or party will be presented in seriates provided by a title company if one is retained.
Judgments: A judgment is a lien: when an individual or entity is sued successfully by a creditor, the creditor obtains a judgment. A judgment is attached to all real estate owned by an entity or individual. Judgments, if any, against a property or party will be presented in searches provided by a title company if one is retained.