A typical real estate transaction begins with a buyer and a seller agreeing on the purchase price and items included in the sale. Most often the parties will have been brought together through the efforts of a real estate agent. In New Jersey real estate agents are allowed to prepare standard residential real estate contracts. However, both parties are allowed the opportunity to have the contract reviewed by an attorney who can terminate the contract or propose changes to the contract. The buyer and seller have 3 days from the full signing of the contract to have an attorney review the contract. The attorney review is a critically important step in a real estate closing. A realtor prepared contract contains generally acceptable and standard language. However, each real estate closing is different and what may be acceptable in one transaction may not be acceptable in another. The role of a lawyer in a real estate transaction is to provide protection for his client and insure that clear title is transferred. A real estate closing should be a friendly transaction. Engaging the services of a lawyer early in the process improves the likelihood that the closing will take place without difficulty.
Upon the conclusion of attorney review the buyer will often engage the services of a home inspector to conduct an evaluation of the property to determine, among other things, defects or repairs that need to be addressed prior to closing of title. The attorneys for both parties may be called upon to negotiate an agreement with respect to items addressed in the home inspection report.
In most cases the buyer will need to obtain a mortgage to pay for the home. A contract will typically give a buyer 30 to 45 days to produce a mortgage commitment. In the event the buyer does not obtain a mortgage commitment within that time frame, the contract may be cancelled and the buyer will obtain a full refund of the deposit money.
Generally, it is the seller’s responsibility to obtain a certificate of occupancy and to obtain and smoke detector certificate from the municipality. After contract contingencies are resolved, the buyer’s attorney will hire a title company to conduct an examination of the title to determine whether the property can be properly transferred free and clear of any liens or defects in the title. The title policy includes insurance protecting the buyer from defects and title liens. No one should ever buy property without obtaining a title search and title insurance. In addition to a title search, a survey of the property is generally required by the mortgage company. A survey will disclose property line and boundary issues as well as easements and rights of way affecting the property. The attorneys for both the buyer and seller review the title and survey in order to eliminate any issues that would adversely affect the property.
As the closing date nears, seller’s attorney will prepare the new deed, seller’s affidavit of title and other closing related documents.
Shortly before closing, the lender will prepare the mortgage documents and a list of costs associated with the mortgage. It is the buyer’s attorney responsibility to prepare a HUD-1 settlement statement. The HUD-1 settlement statement is a government document that contains all closing costs associated with the transaction.
The buyer’s attorney has the added responsibility of writing all the checks associated with the closing and insuring that the closing documents are in proper form to transfer clear title to the property.
After the closing, the attorneys have a continuing responsibility to insure the proper discharge of any mortgage against the property and to resolve any issues that came at the closing requiring an escrow.
Although a real estate closing is generally a friendly transaction, things can sometimes go wrong. For instance, one party may claim that the other has breached the terms of the contract or a party may refuse to complete the closing.
The purchase or sale of a home is generally the largest financial transaction that a person will undertake. In addition to the purchase price there are many closing expenses, such as mortgage points, real estate broker fees and realty transfer fees. In comparison, the lawyer’s fee is usually among the least expensive costs associated with the closing. The benefits of hiring a lawyer in a real estate closing are numerous and well worth the cost of the legal fee.
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