For most people, a real estate transaction will be the most substantial financial transaction they will ever go through in their lives. A home sale or purchase is complex because of the amount of money involved, the numerous steps that must be completed, and the arrangement of financing. While a home sale might be relatively smooth in some cases, some difficulties can arise. Hiring an experienced real estate lawyer might help to address potential problems and protect your interests during the process and the real estate closing. A New Jersey real estate attorney at the Ziegler Law Group, LLC can guide you through the process and ensure your rights are protected.
Understanding the Real Estate Closing and Homebuying Process in NJ
The four main components of the real estate closing and homebuying process are detailed below.
Attorney Review and Contract Signing
Once the seller accepts a buyer's offer to purchase a home, the attorney review period starts. This period provides the buyer with time to have their attorney review the sales contract and typically lasts for three days. This period is critical because it is when changes can be negotiated and agreed to by the parties. Either the buyer or seller can decide to back out during this period without penalty.
When the buyer signs the contract, they will pay a deposit to the seller's real estate agent or attorney. This initial deposit will be a few thousand dollars with the remainder of the earnest money paid by the deadline specified in the contract. Typically, this deadline will be within days of when the contract is signed. The earnest money deposit is held in escrow until the transaction is complete.
The lender will have the home appraised to ensure its fair market value isn't lower than the sales price. While buyers aren't required to complete inspections, it is critical for them to do so. Inspections can uncover hidden issues that could be costly to fix and can provide the basis to negotiate contingencies and repairs. Inspections must generally be completed within two weeks or by an agreed-upon date. Some examples of the types of inspections that the buyer might consider include the following:
- General inspection of the home
- Specialized inspections, including inspections for termites, asbestos, radon, and lead paint
- Well testing
- Flood assessment
- Septic tank certification
- Certificate of occupancy
The buyer can request repairs, a reduction in the sales price, or other contingencies based on the inspections. The seller might agree or deny the requests. The seller might also negotiate. If they can't reach an agreement, the buyer can back out of the deal and should be able to get their earnest money returned.
The process involved with obtaining a mortgage typically begins before the attorney review, but it can happen at the same time. It's best to start the mortgage process early and not do anything that could affect your finances while you are trying to buy a house. For example, you shouldn't change jobs while you are going through the mortgage process because doing so could make it harder for you to gain approval.
The mortgage process begins by submitting a loan application to the lender and sending several financial disclosures, including:
- Bank statements
- Investment account statements
- Bill statements (loan, rent, and others)
- Last two years of income tax returns
- The buyer's employer's contact information
- Pay stubs
- Child support, alimony, or other financial information in addition to the buyer's income
Once the lender reviews the application and financial disclosures, it will decide whether it is willing to approve the loan. If it does, it will send you a loan commitment letter stating that it will extend the mortgage to you as long as you and the property meet the lender's terms.
The lender will require and schedule an appraisal of the home to make sure you aren't paying more than what the property is worth. If it is worth less than what you have agreed to pay, the lender can back out unless the seller agrees to drop the price. If the lender is willing to move forward, you will need to purchase title and homeowner's insurance and submit proof to the lender.
The Closing Process
Once you have completed the mortgage process and attorney review, the closing will be scheduled. The closing is a meeting at which the seller and buyer meet. They will sign all of the sales documents. If you are the buyer, you will pay the seller the balance remaining of the purchase price minus your earnest money. You should receive your keys to the home at the closing. The lender will provide the money for the home purchase to the seller, and the property deed and mortgage will need to be recorded with the county.
Before the real estate closing, your attorney and the title company will complete a title search to make sure there are no defects to the title or other issues with the property that could impact its value. The title search will also confirm that the person selling the property owns and can sell it.
Right before the closing, you will have the right to walk through the property to make sure that the seller has met their vacancy obligations and that nothing has changed since you agreed to purchase the home.
While the closing might seem like the final step in buying or selling a home, A few other things will happen after the closing occurs.
When Does the Closing Occur?
In New Jersey, the seller and buyer schedule the closing during negotiations. A buyer will typically include a potential closing date in their offer. If the seller agrees, they'll sign the agreement, and that is when the closing will be scheduled. The closing is typically scheduled between 30 and 45 days after the agreement is signed, but the time can vary based on different factors that might arise during the process.
Do both the Buyer and Seller Attend the Closing?
Buyers and sellers typically close the real estate transaction on the same day and often do so at the same meeting. This helps to resolve any issues that might arise at the last minute since both parties will be present. However, they aren't required to attend the closing together and can close separately by signing their respective documents.
Details About the Closing
The buyer will be sent a document before the closing date that includes all of the fees that they will have to pay. The buyer will need to bring this amount with them and can bring a cashier's check. An estimate of the closing costs will be provided much earlier, and they will be finalized before the closing date.
The buyer will sign multiple documents at the closing, including some loan documents, settlement statements, tax documents, and others. All of the documents might take up to an hour to review and sign. Your lawyer will explain the documents and answer any questions you might have.
Contact a Real Estate Attorney in NJ
If you are preparing to buy a home in New Jersey, it's a good idea to speak to an experienced real estate lawyer. An attorney can guide you through the process and handle the closing for you. Talk to the Ziegler Law Group, LLC today to learn more by calling us at (973) 533-1100.
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