In New Jersey, the closing process for a real estate transaction occurs in several stages. It is a fluid process where the buyer and seller proceed with the ultimate goal of transferring real property from the seller to the buyer in four distinct stages laid out below.
Stage 1: The first part of the process is where the buyer and the seller agree on a set of terms, with the price of a home as the most commonly negotiated aspect. Generally, the buyer and seller rely on real estate agents to assist them in executing a “Standard Form of real estate Contract”. This standard form is an industry accepted boilerplate contract that is used by many real estate agents statewide. These boilerplate forms do not offer tailored protections for buyers and sellers which is one reason why people hire an Attorney. While an Attorney is not required for real estate transactions, buyers without counsel are taking a substantial risk. Only a licensed Attorney can provide legal advice when problems arise. As such, many people hire Attorneys to facilitate a real estate transaction.
Stage 2: The second part of a real estate transfer is Attorney Review. During Attorney Review, the Attorneys will study the contract to make sure that there are adequate safeguards in place to protect their respective clients and/or the Attorney can disapprove of the contract entirely and cancel the sale for his client. Additionally, Attorneys will revise certain terms to protect their client’s interest. This often involves the deletion and addition of certain aspects of the contract. For instance, if you represent a buyer, you might add a provision that would allow the buyer to cancel the contract if an abandoned oil tank is discovered on the property, or if you were the seller’s Attorney in a cash deal, you might require proof of funds or a substantial deposit.
Stage 3: After the conclusion of Attorney Review, the parties are deemed “under contract”. Once under contract, the buyer and seller are contractually obligated to one another, but the transfer of real estate has not yet taken place. During this stage, the buyer and seller begin to fulfil the contractual duties and due diligence outlined in the contract.
While under contract, the buyer generally conducts a more invasive inspection of the property. A home buyer should at a minimum have a home inspection conducted by an experienced home inspector. Some buyers opt to have more extensive testing for radon, abandoned oil tanks, well water and/or septic tank tests, etc. Additionally, the buyer will contract with a title company to obtain assurance that the seller has good title to the property and has the authority to convey title. More importantly, the buyer usually obtains title insurance through the title company to protect against a defect in title or other title issues. One of the final aspects necessary for a real estate transaction is the exchange of funds. Most buyers will use a mortgage lender to obtain the financing necessary to purchase a home.
The seller will also begin fulfilling their obligations as well. The seller is generally responsible for obtaining the certificate of occupancy and providing a deed for the transfer of the home. Additionally, the seller may be responsible for making repairs as agreed upon after the home inspection.
Step 4: The final step in a real estate transfer is the actual closing. The closing of a real estate transfer is when the deed, title, and financial obligations are finalized. Closing generally takes place at the office of an Attorney or title company. If there is a mortgage involved, the lender will provide the necessary documents for the execution of the mortgage and the seller will provide the original deed to the property and other paperwork necessary for the transfer. The Attorneys for the buyer and seller are usually present during closing and are there to review the voluminous paperwork and handle any issues that may arise at the last minute. The closing usually takes a couple of hours and ends with the seller turning the keys to the property over to the buyer. If you need an Attorney for your real estate closing, click here to get started!