Buying a Home in New Jersey: From Contract to Closing
Updated: Apr 29
Buying a home is a very exciting process but it can also be intimidating, especially for a first time homebuyer. It is important for Buyers to have a basic understanding of the process so they feel comfortable and are able to make informed decisions throughout the transaction.
Once you are ready to make an offer on a home, your real estate agent will have you sign a written offer in the form of a proposed Contract. The Contract will include the terms of your offer such as the purchase price, deposit amount, type of mortgage you will be obtaining, mortgage commitment date, target closing date, etc. Your agent will then submit the offer to the Seller’s agent. If the Seller accepts your offer, the Seller will sign the Contract. Once the Contract is fully signed, your real estate agent will forward the Contract to your attorney to begin the attorney review process.
Attorney Review is a three business day period which begins the business day after the Buyer and Seller sign the Contract of Sale. During this period, your attorney will review the Contract with you to ensure that it is in line with your understanding of the transaction. Your attorney will prepare their attorney review letter, which will include additional provisions to the Contract designed to protect you against potential risks involved in the transaction. The Seller’s attorney will have an opportunity to make changes to your attorney’s review letter. Attorney review will go on until the parties come to a mutually acceptable agreement.
During the attorney review period, either party may cancel the contract for any reason or no reason at all, so it is important that your attorney is involved immediately to protect your interests.
Once the parties reach a mutually acceptable agreement and approve of each other's changes to the Contract, attorney review will be over. All time periods begin to run from this date. At this time, your attorney will instruct you to schedule a home inspection and apply for a mortgage.
Your deposit will generally be due ten days after conclusion of attorney review, although this date may vary depending on the deal. You will generally make your deposit payable to the Seller’s attorney, who will hold your deposit in their trust account until closing. If you have a legal right to cancel the Contract, your deposit will be refunded to you.
Your home inspection report along with your major inspection concerns will generally be due fourteen days after conclusion of attorney review, although this date may vary depending on the deal. During the attorney review period, your attorney will advise you of which inspections you need and can also provide you with recommendations for licensed inspectors. Generally, your attorney will recommend the following inspections:
· Home inspection
· Wood-destroying insect or termite inspection (usually included in the general home inspection)
· Radon inspection
· Underground oil tank sweep
Additional inspections will depend on the age and location of the home as well as the systems the home has (for example, chimney, pool, private water well, septic tank).
It is best to attend the home inspection because many times the inspector will provide you with feedback or information that they may not specifically include in the inspection report. As soon as the inspection report is ready, you will forward the report to your attorney who will go over it with you and discuss what issues with the property, if any, are present. Your attorney will then prepare an Inspection Demand Letter, which will contain your major inspection concerns. Generally, you can only raise concerns over material, environmental, structural, or system defects. The Seller can address your inspection concerns either by way of repair or credit.
After you have completed the mortgage application process, your lender will provide you with a good faith estimate of the fees associated with the loan. This document will be provided within three business days after submitting your application. The good faith estimate is only an estimate and not the actual amount you will end up paying.
If you are approved for the mortgage, you will receive a mortgage commitment. Your lender will also order an appraisal to determine the value of the property. If the property appraises for more than or equal to the purchase price, you are in a good situation. If the property appraises for less than the purchase price, your attorney will guide you as to how to proceed.
Lastly, you will need to purchase homeowner’s insurance with your lender as an insured on your policy. Homeowner’s insurance must be effective as of the date of closing. Your lender will generally require that you prepay one year’s worth of homeowner’s insurance at or in advance of closing.
Your attorney will order a title search to ensure that you receive title free and clear of any liens or encumbrances. Title refers to ownership of the property. A lien is a claim against a property that entitles a creditor to collect monies they are owed. Your attorney will work with the Seller’s attorney and title company to ensure that you receive clear title at closing. After closing, the title company will provide you with an owner’s title insurance policy that insures amongst other things, your rightful ownership of the premises. The cost of title insurance is determined by state law and is based on the purchase price of the property. It is a one time premium that is paid at closing and lasts for the entire duration that you own the property.
The Seller will be required to obtain a Certificate of Occupancy or Smoke Certificate from the municipality prior to closing. A Certificate of Occupancy is a document certifying that the home complies with applicable building codes and is fit for resale. A Smoke Certificate is a document certifying that the home has the required number of working smoke detectors, carbon monoxide detectors, and fire extinguisher. In addition, the Seller will have to arrange to have any open permits closed out.
Final Walk Through
The Buyer will perform their final walkthrough either on the morning of closing or the day before. The purpose of the walk through is for the Buyer to confirm that the property is in the same condition as it was at the time of the home inspection. It also gives the Buyer the chance to ensure that all agreed-upon inspection repairs were completed by the Seller.
Remember that the closing date in the Contract is an approximate date that allows for flexibility if a party is unable to close on that date or if the lender is not able to clear the loan in time.
Closing is the process of transferring title (i.e., ownership) of the property from the Seller to the Buyer. Closing usually takes place at the Buyer’s attorney’s office. In most cases, the Seller will not attend closing because they will have signed and delivered all of their documents in advance of closing.
Shortly before closing your attorney will send your final Closing Disclosure to you, which will outline your final closing figure to be made in the form of a bank check, certified check, or wire transfer. You will also be instructed to bring government-issued photo ID to closing.
During closing, you will review and sign all documents related to the purchase of the property. If there is financing, you will sign numerous mortgage-related documents. All parties who will be on the mortgage must be present at closing to sign. Once all documents have been signed, the lender will provide funding to the title company, and the title company will distribute funds to the Seller. You will then be provided with keys to your new home and congratulated on completing your purchase!
Wire Fraud Notice. Parties to real estate transactions are especially susceptible to wire fraud. Never send any money via wire transfer without calling your attorney first to verify all wire instructions. Even if an email with wire instructions looks like it has come from someone involved in your transaction, call your attorney to verify the information before sending any money via wire transfer.
The information contained in this post is for informational purposes only and is not intended to serve as legal advice. If you have any questions or would like to schedule a consultation, you may email us at email@example.com or call us at 201-595-0399.