Once your search for your dream home with your real estate broker has focused upon a property that fulfills your requirements, you will submit a form contract bearing your signatures through your selling broker to the sellers through the listing broker. If accepted by the sellers, evidenced by sellers’ signatures, the brokers will arrange for the delivery of the signed contracts to the attorneys for each of the parties, to commence what is known as attorney review. A $1,000.00 binder in the past was typically paid by the buyer at this point as good faith money, but this munificent payment has, for the most part, gone the way of the dinosaurs, as administratively not worth the trouble.
Attorney review lasts three (3) days, unless completed sooner or extended by agreement. During this time, counsel for either of the parties may either accept or reject the form contract, or, in the vast majority of cases, propose amendments by way of a rider and/or a letter amendment setting forth revisions to the form contract. If the contract remains viable after this period by the attorneys' agreeing upon such revisions and the respective clients’ signing off on such revisions, you as buyers are in control of the transaction, subject to your satisfaction of the inspection and mortgage contingencies. The additional deposit in most cases is paid within ten (10) days of completion of attorney review.
The home inspection is vital as your tool to investigate the condition of the home in all of it's facets. Once the report is received, the attorneys negotiate repairs and/or credits against the purchase price in lieu of repairs, sometimes assisted by estimates. For the buyers, credits are preferable, since repairs sometimes are mere band-aids performed by the sellers that can result in a closing table issue after your final walk-through inspection just prior to closing. Terms of the resolution should be confirmed by letter by and between counsel.
Assuming successful negotiation of the inspection issues, the last remaining contingency is your receipt of an acceptable mortgage commitment. Be careful that there are no stated conditions that may prove problematic to closing, and take particular note of interest rate lock and commitment expiration dates. Once a satisfactory mortgage commitment is received, the contract is considered firm.
At this juncture your attorney will arrange for ordering title searches and, if necessary, a survey. You can earn significant time and/or money savings if your attorney is able to obtain a copy of the sellers’ title policy and survey. In the case of the sellers’ title policy, it or the Sellers’ Affidavit of Title that your sellers received when they acquired title to the property may serve to answer title issues raised by your title company in its searches that relate back to your sellers’ acquisition closing. In the case of the sellers’ survey, if no structures, extensions or outside improvements have been added to the footprint of the property since the survey was rendered for sellers, it can save you the cost of a new survey by the sellers’ delivering a Survey Affidavit of No Change. Once received by your attorney, these are forwarded to your title company and/or to your mortgage lender for pre closing approval.
Upon “clear to close” approval by the mortgage lender, a closing date is set by the mortgage lender and confirmed by the attorneys after consultation with their clients. You must have homeowners'/hazard insurance in effect as of the date of closing, with your mortgage lender also named as loss payee or additional insured. The balance due from you of the purchase price plus settlement costs must be in the form of a bank or certified check or wire transfer into the escrow account of the settlement agent, now more commonly the buyers’ title company than the buyers’ attorney. If the purchase price is in excess of $1M, the buyers’ settlement costs will include “mansion tax” (paid to the county and shared equally with the State) at 1% of the purchase price. Before coming to the closing, a final walk through inspection is arranged with your broker. Closing is a "speak now or forever hold your peace" opportunity in this regard; a credit or escrow will handle any eleventh-hour walk-through or other problems.
The mortgage lender is now required to give its borrowers three (3) business days’ written notice in advance of a closing date of all of the lender’s fees and charges in connection with the closing. If the total of these fees and charges must later be corrected and the corrected figures exceed the initial figures by more than 1/8% of the mortgage loan amount, the closing must be postponed until the borrowers receive a corrected written notice from the lender three (3) business days in advance of the postponed closing date. Of course, other factors may also result in a postponement of the closing date and history is replete with the results of such complications. What we call “the nature of the beast.”
At closing, the buyer executes all mortgage loan documents required by the mortgage lender and exchanges the remaining funds due for the title documents (e.g., deed, affidavits and municipal approval) from the seller. A federally-approved form (Closing Disclosure (“CD”)) is signed by the seller and an ALTA Settlement Statement is signed by all parties and the settlement agent.
After closing, your attorney or the settlement agent will forward to you your recorded deed and title policy. All that then remains (besides repaying your mortgage for a good part of the rest of your life!) is to enjoy your new home!
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Christopher G. Weigl is an attorney at law who resides in Ridgewood and maintains his law office at 123 Prospect Street in Ridgewood. He is admitted to the bars of New Jersey and New York. He has served as Chairman of the Solo and Small Firm Section, formerly the General Practice Section, of the New Jersey State Bar Association, and is a member of the Probate and Estate Planning committee of the Bergen County Bar Association. This article was published in the September 27, 2002 edition of The Ridgewood News and has been updated to reflect statutory amendments and current estate tax law.
Christopher G. Weigl
Attorney at Law
123 Prospect Street
Ridgewood, New Jersey 07450
(201) 689-7772
(201) 788-0534 (cell)
(201) 689-7885 (fax)
cgwesq@verizon.net