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TEN THINGS EVERY BUYER SHOULD KNOW WHEN PURCHASING A HOME IN NEW JERSEY 

      Purchasing a home is a very important decision and requires careful consideration.  For most buyers, it is the biggest purchase of their lives.  The process begins with a realtor showing a prospective buyer homes and ultimately ends with the closing at the attorney’s office.  It is important to enlist the help of a real estate attorney who can help the buyer navigate through the complicated paperwork and make the process less stressful and nerve-racking by providing the buyer with trustworthy recommendations to inspectors and mortgage loan brokers.  To become better informed with the process, here are ten helpful things for a buyer to keep in mind.

1. Be prepared with a pre-approval letter.  A pre-approval letter from a mortgage company demonstrates how much purchasing power the buyer has and the amount of the mortgage that the buyer will qualify for.  A pre-approval letter should not be confused with a mortgage commitment letter and a pre-approval letter does not guarantee a mortgage for the amount stated in the letter.  A pre-approval letter is helpful because it gives the buyer an idea of what the buyer can afford.  It also demonstrates to the seller that the buyer is capable of purchasing the property.  A pre-approval letter is not an agreement and the buyer is not obligated to obtain a mortgage from the same mortgage company that drafted the pre-approval letter.

2.  Realtors are important.  Excellent realtors guide a buyer to homes that fit the buyer’s needs and personalities.  Realtors are also local specialists and can tell a buyer about the local school systems.  Realtors help a buyer determine the amount of the offer for the house and conduct negotiations with the sellers.  After an offer is accepted, realtors help the buyer with arranging home inspections.  It is important that the buyer establish a relationship built on trust with his/her realtor. 

3.  The Attorney Review period does not start when the attorney receives the contract.  The Attorney Review period starts when the last buyer or last seller signs the contract, not when the attorney receives the contract.  Thus, the Attorney Review period starts only after both parties have signed the contract.  The Attorney Review period is when the buyer and seller each has the opportunity to terminate the contract.  The buyer’s attorney will typically reach out to the seller’s attorney with a letter and change some of the terms in the New Jersey Association of REALTORS® Standard Form of Real Estate Contract.  After negotiating the final terms, the parties are bound by the terms of the contract and any rider or addendum.  Attorney Review has then concluded.  If neither party acts within three business days after signing, the parties are bound by the contract as signed.  Attorney Review can be shortened or extended by the consent of both parties.

4.  The contract is contingent upon several events.  In New Jersey, its customary that all real estate contracts are contingent on the buyer obtaining a mortgage (unless the buyer is paying cash), home inspections and a clear title.              

5.  Deadlines are important.  Every real estate contract contains deadlines for making deposit payments, obtaining a loan commitment letter from the mortgage lender, and inspecting the property.  If the deadlines expire, the contract can be considered breached, thus allowing the seller an out if he/she wants to terminate the contract, or binding the contract as written.

6.  Every real estate contract in New Jersey is sold “as is.”  The terms “as is” produces more real estate litigation than any other clause in the contract.  “As is” means that you get the house exactly as it stands, nothing less and nothing more.  A seller has to ensure that the house, the structure and its operating systems are in good operating condition at closing.  A seller does not have to guarantee that the house or the systems are brand new.  The seller has a duty to disclose any hidden defect that it knows about.      

7.  New Jersey Real Estate Attorneys have distinct roles.  A New Jersey Real Estate Attorney orders title insurance, sets the date for the closing, works with the title company to determine how much money the buyer should bring to the closing, works out any problems encountered during attorney review and inspections, supervises the buyers, guides the buyer through the entire process and works closely with the lenders.  A New Jersey Real Estate Attorney does not arrange homeowner’s insurance or coordinate inspections.   

8.  A buyer has several costs in addition to the purchase price of the home.  A few of the buyer’s costs include paying for an inspector, title insurance, recording fees and attorney fees.  A buyer does not pay a realtor’s commission – that is the seller’s expense.   

9.  Private mortgage insurance (“PMI”) will most likely be needed if the buyer does not have 20% of the contract price to put down at closing.  PMI allows a buyer who does not have enough savings to purchase their home to achieve the 20% threshold.  The cost of PMI is added to the monthly mortgage statement.  

10.  The closing date is set by the borrower’s lender and not by the seller or buyer.  The closing will take about 1.5 to 2 hours.  The first part of the real estate closing will involve signing mortgage documents.  The important documents are: 1) the Promissory Note, which is the document where the buyer promises to repay the loan; and 2) the Mortgage, the document giving the lender the power to repossess the property if the buyer does not pay.  After the mortgage closing is complete, the Seller’s attorney will arrive to complete the transaction.  The deed and the keys will be handed over to the buyer and the buyer will become an official homeowner.

     Purchasing a home can be a seamless process if the buyer is prepared and knows what to expect.  Having an experienced real estate attorney will help the buyer navigate the transaction from start to finish, avoiding worry, trouble and expense later.  To learn more about the value that can be provided to a buyer in a real estate transaction, contact The J. A. Centanni Law Office today at 908-753-0153.