SIGNING THE CONTRACT (AGREEMENT) OF SALE

Negotiating and signing the contract of sale is probably the most important aspect of the purchase and sale of a home. The real estate "Contract of Sale" will set forth, among other things, the price to be paid the amount of deposit money the buyer will provide (which will be held in "escrow" by the realtor, title agent or attorney), certain contingencies that a buyer typically is afforded (i.e., a mortgage contingency and/or home inspection contingency) and the time frame to close. From a practical standpoint, in most cases (in southern New Jersey), the realtors involved in a residential real estate transaction will use one of their standard "Contracts of Sale,"without the involvement of an attorney (on either the buyers or sellers side). The Contract of Sale is not "binding" on either party (the buyer or seller) until three business days after both the buyer and seller have signed. During this period, known as the "attorney review period," either the buyer or seller (or their attorney) may negotiate or request certain clauses be added or deleted (from the Contract of Sale). Two important clauses (from a buyers perspective) included in most Contracts of Sales of real estate are a "mortgage contingency" and a "home inspection contingency".

THE MORTGAGE CONTINGENCY AND OBTAINING A MORTGAGE

Since most buyers do not have the cash on hand required to purchase a home, their home purchase requires a bank loan, or "mortgage loan," Most real estate contracts contain a "mortgage contingency clause," which allows a prospective buyer to seek a return of their initial deposit if the buyer makes a good faith effort to obtain a mortgage commitment (an obligation from a lender to finance the home purchase) and fails. A typical "mortgage contingency clause" will give a buyer 30-45 days to obtain a "mortgage commitment." A prospective buyer should use every attempt to obtain a mortgage commitment during this time; otherwise, the seller most often has the legal right to cancel the Contract of Sale if the contingency has not been met during the specified time.

THE HOME INSPECTION CONTINGENCY AND HOME INSPECTION

Because of the sheer magnitude of the cost of a home as well as the potential cost to a prospective buyer of a potential defect in a home, most Contracts of Sale provide that a buyer will have a certain period of time (often from 14 to 30 days) to conduct a "home inspection." It is recommended that a home inspection be conducted by a certified (often an engineer or contractor) reputable home inspection company.  A buyer is typically required to pay the cost of the home inspection (usually $200-$500),and will receive a written copy of the report. It is a good idea for a prospective buyer to accompany the home inspector during the inspection (and take hand written notes).  A written home inspection report should be forwarded to the prospective buyer (and his/her attorney) which, if it reveals major defects in the home (i.e., problems with the foundation, roof, and/or heating and air conditioning or electrical systems), will allow a prospective buyer to cancel the Contract of Sale under the "home inspection contingency clause."  Alternatively the seller may elect to correct the deficiency at their expense.

TITLE INSURANCE

As much as a buyer may want to believe that the home they have found is perfect, a clear title report ensures there are no liens placed against the prior owners that will restrict the use of the property.  A preliminary title report provides the buyer with the opportunity to review any impediment that would prevent clear title from passing to the buyer.  When reading a preliminary report, it is important to check the extent of ownership rights or "interest." The most common form of interest is "fee simple" or "fee," which is the highest type of of interest an owner can have in land.  Lien restrictions and interests of others excluded from title coverage will be listed numerically as "exceptions" in the report.  A buyer also may have to consider interests of any third parties, such as easements granted by prior owners that limit use of property.  Some buyers attempt to clear these unwanted items prior to purchase.  Costs or sales for title insurance are regulated by applicable state law.

SURVEY

A survey of the ground upon which the property is located is often required by a mortgage lender (as is the case with title insurance). Some lenders will accept a prior survey (i.e., the seller's survey) of the property, depending on the age of the prior survey (the older the survey the more likely a new survey will be required).

CLOSING COSTS

The bundle of fees associated with the buying or selling of a home are called "closing costs". Certain fees are automatically assigned to either the buyer or the seller; other costs are either negotiated or dictated by local custom.

CLOSING

Prior to closing the buyers mortgage company will forward to the title company a closing package consisting of the loan documents to be signed at the closing and the final closing costs. The title company will then prepare a closing settlement  statement (or HUD-1) and advise the buyer of the amount of money needed to be brought to the Closing in the form of a certified check in the name of the title company's trust account.  In the northern part of New Jersey an attorney conducts the closing (rather than the title company) and most often distributes the closing funds.