As you may recall, last month’s blog addressed what a seller needs to do to legally prepare for the sale of their home. This is a follow-up to last month’s blog and relates to the concerns that a buyer should have in a New Jersey residential real estate transaction.
As indicated last month’s blog, the first step in a New Jersey residential real estate transaction is the signing of the contract. When a realtor is involved, a buyer may sign the contract prepared by the realtor and then immediately have it sent to their attorney for review. Both attorneys will then discuss the terms of the contract and make appropriate changes as required. However, it is important that a buyer ensure that the realtor prepared contract is immediately forwarded to their attorney because there is a three day deadline for the attorney review period.
One concern for a buyer is how and where they are going to get the money to purchase the home. Typically, buyers will obtain their purchase money either from the sale of their existing home, a mortgage, or a combination of both. If a buyer has an existing home to sell, it is important that there is a “home to sell” contingency in their purchase contract. This means that they will not be obligated to buy the new home until their existing home is sold and they have the money from that sale. Further, it is important that any purchase contract is contingent upon the buyer actually obtaining a mortgage. Without these contingencies, a buyer can be in breach of contract if they are unable to close on the new home because they do not yet have the proceeds of the sale of their existing home or were unable to get a mortgage.
Another issue that buyers must be concerned with is the home inspection. Typically, buyers will have between 10 and 14 days from the date of the contract to have a qualified home inspector perform an inspection on the home. The home inspectors generally look for system failures (i.e.-air conditioning systems, heating systems, hot water heaters, septic systems, wells, etc.). However, they also look for potential hidden defects that could signal the existence of a bigger problem such as past or present roof leaks, water infiltration, structural defects, termites, mold or the existence of underground oil tanks. Depending upon the severity of the issues found, the buyers may be able to obtain a credit or a reduction of the sale price or, alternatively, request that the sellers repair or replace the defective items prior to the time of closing.
Finally, prior to entering into a contract, buyers must be aware of the actual amount of money they will need to close. Although the buyers may have enough money to cover the purchase price of the home, they must also take into account closing fees that must be paid at the time of closing. These include title and title insurance costs, mortgage company charges, escrows for taxes and insurance, capital contributions to homeowners’ associations, surveys and attorney’s fees. In an average residential real estate transaction, I typically tell my clients that they should at least have an additional $10,000.00 available for these closing costs in order to be on the safe side. However, this is just a guidepost and may differ in each transaction depending upon the cost of the home and issues involved.
Of course, the purchase of a home is the biggest single transaction and investment that people make during the course of their lifetime. Accordingly, it is important to obtain the right attorney to insure that all of their interests are protected and the above issues are properly addressed.
If you have any questions about the legal issues involved in the purchase of a home please feel free to contact my office and I would be happy to discuss these issues with you.