The sale of a home is probably the largest transaction a person will ever undertake. Careful consideration should be given to the technical difficulties involved in the transfer of real estate before the Contract is finalized.
The Contract of Sale
A Contract of Sale is an agreement for the purchase and sale of real estate. This is the most important document in any real estate transaction because it establishes the respective rights and responsibilities of the purchaser and the seller.
Since the Contract of Sale is important and legally binding New Jersey requires a 3 day attorney review period on Contracts prepared by a realtor. Please read the contract before signing. If you have any questions, please ask your real estate agent. If there are any clauses you want added, such as the house sale "As is", make sure they are added to the Contract before signing.
The 3 day attorney review period is to protect the buyer and seller from being forever bound by a contract without them receiving the benefit of legal advice. You only have three days to have your attorney review the contract and make the appropriate changes. Remember that once a Contract is signed and in final form after 3 days, your rights and obligations are fixed concerning the transaction. Your attorney will no longer have the opportunity to structure the Contract to meet your objectives. In New Jersey, the "Statute of Frauds" requires all contracts for the sale of land to be in writing.
The buyers or the buyers' realtor are under no obligation to tell you what the contract means and you may not understand the legal meaning of the terminology. So, if you are going to have an attorney represent you in the transaction, the time to consult one is either before you sign any papers or within 2 days of signing.
The Contracts often have standard clauses. Common clauses are the following: 1. PURCHASE AGREEMENT AND PROPERTY DESCRIPTION 2. PURCHASE PRICE 3. MANNER OF PAYMENT 3A. IF PERFORMANCE BY PURCHASER IS CONTINGENT UPON OBTAINING A MORTGAGE 3B BALANCE OF PURCHASE PRICE 4. MARKETABILITY OF TITLE 5A. ITEMS INCLUDED IN SALE 5B. ITEMS EXCLUDED FROM SALE 6. TERMITE INSPECTION 7. ENGINEERING AND HOME INSPECTION 8. ADJUSTMENTS AT CLOSING 9. ASSESSMENTS 10. SELLER'S RIGHT TO PAY CLAIMS AT CLOSING 11. PURCHASER'S RIGHT TO POSSESSION 12. RISK OF LOSS 13. PURCHASER FINANCIALLY ABLE TO CLOSE 14. NO ASSIGNMENT 15. SURVEY AFFIDAVIT 16. CERTIFICATE OF OCCUPANCY 17. PERSONAL PROPERTY IN WORKING ORDER 18. FEE SIMPLE 19. FLOOD HAZARD ZONE 20. LEAKS 21. RADON 22. HAZARDOUS INSULATION 23. BACK TITLE 24. CLOSING REQUIREMENTS 25. BROKER'S COMMISSIONS 26. ENTIRE AGREEMENT
The Contract of Sale should state the parties, the purchase price and how it is to be paid, an adequate description of the property being sold, the kind of deed to be delivered, the quality of the seller's title to the property included in the sale, the date you are to take possession, and other clauses relating to the property and the parties' respective responsibilities to each other. Recent new laws Lead paint New laws require a signed lead paint warning and disclosure statement. Recent changes in the tax laws allow the seller to exclude up to $250,000 of gain on the sale or exchange of a principal residence. Internal Revenue Code Section 121 was amended by the Taxpayer Relief Act of 1997. For married taxpayers filing a joint return for the year of the sale, the exclusion is increased to $500,000.
Realtor disclosure In addition, regulations require all realtors to disclose in writing whether they represent the buyer, seller or both. We highly recommend to someone selling a house that they retain a full time licensed real estate salesperson. Often trying to sell a house yourself, a "For sale by owner" does not bring in qualified buyers as quickly as a property being sold through an experienced realtor. Home inspectors must be licensed The NJ Home Inspection Licensing Act, which took effect July 6, requires home inspectors to acquire a license from the state, maintain minimum standards of practice and ethics, and carry insurance for their errors and omissions.
Read and Understand the Contract Before Signing your Contract of Sale
Perhaps the seller may want to retain possession of the property for some time in order to find new accommodations. If so, appropriate clauses can be included in the contract defining such rights prior to signing. Never sign a contract involving the sale or purchase of real estate until you have done the following:
1. read the entire contract 2. written down your questions and posed them to your realtor 3. made sure all your requested clauses are included, such as the house being sold "as is"
These are only a few matters usually covered in the contract. However, they illustrate the variety of terms and conditions to be considered when you enter into such a transaction.
Common Clauses Added by Experienced Attorneys
There are many important ways in which an attorney can help protect your interests during a real estate transaction. The Seller's Attorney will often prepare a real estate addendum after reviewing the initial Contract during the three day attorney review period. For example, some Sellers attorney's will advise the draft Pre-Printed Contract is satisfactory provided the following amendments are acceptable to both Buyer and Seller.
SAMPLE CONTRACT ADDENDUM CLAUSES
.c.1. Written Application for Mortgage; Buyer(s) must make complete written application for a mortgage within three (3) days of the date of this letter. Buyer(s) must provide all documents requested by its mortgage company and perform all acts requested by its mortgage company.
c.2. Termite Treatment ; If the Buyer(s) elect(s) to have a termite/vermin inspection, Buyer(s) must use an inspector who has a license with the State of New Jersey to treat termite conditions. The Seller(s) shall not be required to expend more than $500 to treat or repair termite or vermin condition and/or termite or other vermin damage.
c.3. Termite and Home Inspections; The Buyer(s) must have delivered to the Seller's(s') attorney and seller's realtor the Termite Report and Home Inspection/Structural/Engineering Report within fourteen (14) days of the date of this letter, or these contingencies shall be deemed waived. Seller is not required to make any repairs. If Seller is not willing to voluntarily make repairs to damage which exceeds $2,000 or does not response within 7 days, Buyer has only 7 days from date of mailing of home inspection report to Seller to notify Sellers attorney and Seller's realtor in writing that it wishes to cancel the contract under the home inspection clause. If Buyer does not cancel within this time period, the termite and Home inspection clause is waived.
c.4. As is; The Buyer(s) and Seller(s) acknowledge that the property is "as is." The Seller(s) does/do not make any claims or promises about the condition or value of the property included in this sale. The Buyer(s) has inspected the property and will also rely on any rights to inspection which may be provided for in the contract. No representations shall survive closing.
c.5. Mortgage contingency; A mortgage commitment obtained by the Buyer(s) shall be considered to be firm and unconditional even though it contains a condition requiring the Sale of Buyer's(s') home prior to mortgage closing or other conditions. The Buyer(s) hereby waives any condition as an inducement to Seller's(s') to enter this contract. If the Buyer does not obtain a written mortgage commitment by the date established in the Contract, the Buyer has 7 days to cancel the contract or the mortgage contingency is deemed waived. The parties may agree to extend the mortgage contingency at the option of the Seller. A copy of the mortgage contingency shall be delivered to the Seller's(s') attorney and seller's realtor.
c.6. Damage by casualty ; If the premises are damaged by fire or other casualty, the Seller shall have the option to repair the damages. In the event the Seller elects not to repair the damage, the Buyer shall have the right to cancel the Contract.
c.7. Real estate commission ; The real estate commission shall not be deemed to have been earned until title is transferred and the purchase price paid, the passage of title and payment of the purchase price in accordance with the Contract being a condition precedent to any obligation to pay any commission.
c.8. Seller fees; Seller shall not be required to pay more than $25.00 for the mortgage release and not more than $20.00 for Federal Express or other delivery/ mailing services.
c.9. Lead paint ;Buyer has obtained from real estate agent the lead-based paint information format. Seller has no personal knowledge regarding lead paint. If lead paint exists, seller is not required to repair, fix or reduce purchase price.
c.10. Cancel notice by mail; All notices to amend or cancel contract shall be sent by mail or hand delivery. Fax notices is not effective notice.
c.11. Addendum controls over Contract; The terms of this Contract Addendum shall control over terms of the contract.
The Seller's Attorney will request the Buyer's Attorney and the Buyer's realtor to review these amendments immediately and kindly confirm these amendments are acceptable by signing a copy of the letter on behalf of your client(s) and returning same to this office.
The seller's attorney can: * Prepare, review and explain the contract of sale. * Obtain from the Seller back title, including a photocopy of the Deed, survey, title policy and mortgage payoff statement and forward them to the purchaser's attorney, thus expediting the search and survey process.
The Seller's Information Sheet at the end of this article should be completed and returned to * Cooperate with the purchaser's attorney in resolving possession and closing date problems. * Remind the seller to contact their mortgage company and equity loan to obtain a written payoff/balance due on their mortgage. * Cooperate with the purchaser's attorney in preparing the final closing statement. * Prepare a new Deed, Affidavit of title, survey affidavit and any other necessary documents. Fax Deed and Affidavit of Title to buyer's attorney prior to closing and request any changes be faxed back * Review the Respa, which is the Federal Real Estate Settlement Procedure Statement/Amounts paid and to be received * Represent you at the closing and make certain that you receive the correct amount of proceeds from the sale.
Of course, these items represent only a partial list of services which may be rendered by the attorney for the buyer during real estate transactions. Your attorney may be requested to perform any additional services necessitated by your sale.
The Seller's Attorney is the Seller's Advocate and can only represent the Seller
Remember one important point - the buyer, real estate broker, and bank in the transaction may have their own legal staff representing each of their interests. An attorney representing any of the other parties is not your attorney. Under the New Jersey Rules of Professional Conduct, there is a strict attorney client privilege and your attorney will protect the seller's interests.
Home Inspection- To determine defects, not cosmetic repairs
The attorney also may represent his client's interests in connection with the home inspection report. Upon receiving a copy of the home inspections report (which generally involves a structural and environmental analysis of the property to be purchased or sold), the attorney for the buyer, after consultation with his client, will mail a copy of the inspection report to the seller's attorney. The buyer may request certain repairs and/or remediation of the conditions noted by the home inspector. In response, the seller must communicate to their attorney and realtor what action the seller is willing to take to meet the buyer's concerns. Often depending on the terms of the contract, if agreement cannot be reached on issues raised by the home inspection report, the buyer or seller may cancel the contract. More realistically, however, the seller and buyer, through their attorneys and realtors, work to reach a compromise acceptable to both clients.
Immediately Prior to closing
1. Seller's lawyer: review closing statement information; confirm place, date and time 2. Seller to bring keys, tax bill, etc. and arrange for final reading of utilities; review closing statement with client; confirm date, time and place 3. Brokers: follow up with real estate agents to get deposit in certified form, if necessary, to get commission statement receipt, to get extra keys, to arrange final walk-through, final reading and transfer of utilities, deliver C-O and smoke detector certificate if held by broker, arrange pre-closing inspection for buyer. As stated earlier, the realtor for a seller in New Jersey performs substantial services. Attorneys appreciate their efforts in making closings move smoothly.
THE CLOSING- How the Seller attorney can Help
-Travel to closing & execute up to 30 separate documents
-Witness Seller's deed & affidavit of title prepared by seller's attorney
-Review closing instructions; review survey ; review title work
-Follow up CO, smoke detector certificate, and 1099 statement signed by seller
-Protect the Seller from last minute problems
Conclusion- Protect Your Rights
The important thing to remember is that selling a home is a major event involving hundreds of thousands of dollars. In the long run, it's likely to be more economical to have competent professional advice - your attorney's advice - in making the sale than to risk the trouble and expense that could result from not having that advice in the first place. For additional information on legal topics, visit the website NJLaws.com
About the Author: Kenneth A. Vercammen is a Metuchen, Middlesex County trial attorney who has published 114 articles and books in national and New Jersey publications on Wills, Elder Law, Personal Injury, Municipal Court and Real Estate topics. He is a highly regarded lecturer on litigation issues for the American Bar Association, ICLE, New Jersey State Bar Association and Middlesex County Bar Association. His articles have been published by New Jersey Law Journal, ABA Law Practice Management Magazine, and New Jersey Lawyer. He is the Editor in Chief of the New Jersey Municipal Court Law Review. Mr. Vercammen is a recipient of the NJSBA- YLD Service to the Bar Award. He has established New Jersey's most popular Elder Law website on the Internet to provide free information to citizens at NJLaws.com He has served as a Special Acting Prosecutor in nine different cities and towns in New Jersey and also successfully handled over One thousand Municipal Court and Superior Court matters in the past 14 years. He has spoken on Wills and Elder law on numerous occasions to the Adult Community Schools in Metuchen, Sayreville, Old Bridge, South Brunswick and Edison/Clara Barton Seniors and Perth Amboy Seniors. In his private practice, he has devoted a substantial portion of his professional time to the preparation and trial of litigated matters. He has appeared in Courts throughout New Jersey several times each week on many personal injury matters, Municipal Court trials, and contested Probate hearings.
Editor's SPECIAL NOTE: This information was issued to inform and not to advise. It is based on New Jersey law. The statements are general, and individual facts in a given case may alter their application or involve other laws not referred to here. For specific legal advice, contact an attorney.
SELLERS INFORMATION SHEET- TO BE COMPLETED BY SELLER AND RETURNED TO SELLER'S ATTORNEY
1. SELLERS NAME: (as it appears on deed _______________________
2. Real Estate being Sold: Lot No. _________ Block No. __________
3. Present Mortgage Company: _____________________________ Address: ___________________________________________ Loan No. ___________________ 800 Telephone No. ____________ (Provide/ Obtain copy of payoff amount)
4. Other Mortgages, including Bridge Loans or Home Equity: Name of Mortgage Company: _____________________________ Address: __________________________________________ Loan No. __________________ 800 Telephone No. ____________ (Provide/ Obtain copy of payoff amount)
5. Social Security Number: (H) ________________ (W) ___________
6. Is any Seller age 62 or over? If so, name and date of birth: _________
7. Name, Address, Telephone number of Condominium Association, if any
8. Type of Fuel: Gas ___________________ Oil _______________
PLEASE ATTACH A COPY OF TITLE INSURANCE, SURVEY, & DEED (not original)
9. Marriage Information: Date of Marriage __________ Maiden or Prior Name(s) __________ Prior Marriages ________________________ (provide copy of Final Judgment of Divorce needed, not original)
10. Address After Property Sale: _____________________________