Q. When buying property in northern New Jersey, what are the next steps once my offer is accepted?
In northern New Jersey, real estate contracts and closings are handled by attorneys, one for each side of the deal, sometimes in cooperation with a title company or closing company hired by the attorney. The attorney charges a flat fee, quoted to you at the beginning of the deal and paid out from the proceeds of closing. The attorney administers the contract on your behalf and conducts all further discussions concerning appraisal, inspection issues, title search and any other legal matters until closing.
Once we finish negotiating the deal (made in written contract form through the realtor and accompanied by a mortgage preapproval or proof of funds), the seller signs the amended paperwork and attorney review begins. An attorney review period typically lasts 3-5 business days but can also go quicker if everyone cooperates. The attorneys don’t change the terms of the contract, just any language that will protect their client better. (For instance, the buyer’s attorney usually adds language that places the responsibility for an underground oil tank squarely on the seller’s shoulders to remove and also provide clean soil tests.) Ask your realtor for recommendations of NJ-licensed attorneys who are familiar with real estate law.
When attorney review is finished, the clock starts ticking for you, the buyers, to do three things, all concurrently:
a. Get your home inspection done within the next 5-10 days.
b. Put down the remainder of your down payment, usually 5-10 percent, into the seller’s attorney’s trust account, where it stays till closing.
c. Apply for your mortgage ASAP because there is a deadline (usually 30 days) for final approval.
The lender will order an appraisal of the property by an independent appraiser, and that report will be submitted to underwriting along with all documentation of assets, employment, credit history, etc.
NOTE: If you are buying a short sale, the process is different as the contract must get approval from the bank first, and that is up to the seller’s attorney to submit the required paperwork.
Included in the contract is a contingency clause allowing the buyers to perform a home inspection of the property right after the attorneys finish reviewing the executed contract. Typically, the buyers get up to 10 calendar days to hire and schedule a licensed and bonded home inspector to look over the home and give them a report on its condition. The inspector goes through the house and garage accompanied by the buyers for a thorough review of the home’s structural integrity (roof, foundation, upgrades not done to code, etc.), working systems (plumbing, electrical, etc.) and also checks the home and garage for termites and radon. If issues are discovered, the buyer notifies their attorney to reach out to the seller’s attorney to ask for repairs or credits on the issues uncovered. Depending on the contract terms and pace of negotiations in coming to an agreement, the sellers may offer a credit in lieu of repairs, offer to fix one or more issues, or they may refuse to address any specific requests. (It is good to remember that most discussions revolve around structural or safety issues, not minor repairs.) Once both parties come to an agreement on the issues raised, the contingency is satisfied.
In addition, depending on the age of the home, its style and location, a buyer’s attorney or the home inspector may recommend an oil tank sweep of the property to determine if there is a buried tank that has not been disclosed or has not been removed properly with additional soil testing. In addition, if the home has a septic system or an in-ground pool, those items will need to be inspected as well.
Deposit and Mortgage
All this activity takes place in the first two to three weeks of the contract, and both your attorney and realtor will advise you on each step of the process to keep you on track. Once the attorney review is concluded, the deposit is sent to the seller’s attorney’s trust account in the next few days to be held in trust until closing. The clock is also ticking for you to apply for your mortgage, also authorizing your lender to send for an appraisal of the property. Once the mortgage is approved, your attorney will send for the title search and you will be advised to start looking for homeowners’ insurance. Proof of a paid policy must be given to the lender for final approval.
Approaching The Closing
Prior to closing, your attorney will show you the final financial breakdown on a HUD form, which you should review and ask questions about anything you don’t understand. This form must be approved by both attorneys and the title company so they can issue you a clean title on the property at closing and provide title insurance. When the attorneys determine the final closing date, your realtor will contact you to set up final walkthrough of the property prior to closing—usually on the same day or day before, once the seller has moved out. This is your chance to check on any agreed-upon repairs made by the seller, see that the house is in good condition and make sure all agreed-upon items listed in the contract have been left for you (appliances, air conditioners, light fixtures, window treatments, etc.) and are in working order.
Rely on Your Realtor’s
In addition to your attorney, your realtor is key to guiding you through these steps, and brings experience and knowledge of the local market to the table. He or she will be a key adviser and should always be included in all discussions from contract to closing.
Barbara Ostroth of Coldwell Banker Residential RE, can be reached (201)262-6600 in the office, (201)965-3105 on her cell, or email or visit her on the web at [email protected] and www.BarbaraOstroth.com.