Questions and Answers:

What is 3 Day Attorney Review?

What is the 3 step process to selling or buying a home?

How do I buy and sell in the same day?

What is a realtor prepared contract?

How do I estimate closing costs?

What is a typical deposit?

What does “AS IS” mean?

What is “Exit Tax”?

What is a Home Inspection?

What is a Certificate of Occupancy?

What is a real estate transfer tax?

How can I find out what yearly real estate taxes are for a property?

Must a seller attend the actual closing?


What is 3 Day Attorney Review?
In the State of NJ Buyers and Seller’s are afforded the opportunity to terminate a realtor prepared contract within 3 days after signing a contract. (weekends and holidays do not count). This can only be accomplished by having an attorney send a letter called a “Notice of Disapproval”. Most often, a Notice of Disapproval is sent to request modifications to a contract. Once Buyer and Seller agree to changes to the contract the parties usually will sign an addendum or a letter to document the conclusion of attorney review.

CAUTION: 3 day Attorney review which can give the right to terminate a contract does not apply to contracts that were not prepared by a realtor. Before signing a legal document such as a contract it is important to review with an attorney BEFORE signing

What is the 3 step process to selling or buying a home?
Generally, there are three steps:

First: Contract and Attorney Review. Buyer and Seller agree to terms and sign a written document where the seller promises to sell and the buyer promises to buy.
Second: Home inspection and mortgage contingency.
Home Inspection: The contract will usually give the buyer the opportunity to have a home inspection in the first 10 – 14 days of the contract. The buyer can ask the seller to make repairs. If the parties can agree on inspection issues, the contract continues. If the parties can not come to agreement the contract may be terminated.
Mortgage Contingency: Most buyer’s require lender financing (a mortgage) in order to purchase. Most contracts will give the buyer about 30 days to obtain a written promise from a lender to loan the buyer money, a mortgage commitment. If the buyer obtains a mortgage commitment the contract will proceed to closing. If the buyer is not approved, the contract may be cancelled or the parties may make some other agreement.
Third: The Day of Closing. Prior to closing a title search is ordered to ensure the buyer will get clear title to the home, free of liens and encumbrances. On day of closing, the buyer will do a walk through of the home to ensure the home is vacant and there is no damage to the property. The buyer and seller then meet for the closing for the transfer of title.

How do I buy and sell in the same day?
Buying and Selling in the same day requires advance preparation. It is not uncommon for someone to sell a home and buy a home in the same day. A seller may sign documents for their sale in advance of closing so they do not need to be physically present at the sale of their home. A seller may also move out of their home in advance of closing and put their personal property in storage, or simply move and close all in the same day.

What is a realtor prepared contract?
A contract prepared by a realtor is called a realtor prepared contract. Only a realtor prepared contract is required to have a 3 day attorney review provision. This permits the buyer and seller to sign a contract and cancel within in 3 business days, by having an attorney send a “notice of disapproval”. A buyer and seller can concentrate on the basic terms of the contract, price, closing date, deposit amount, and mortgage amount and review the fine print with an attorney after the contract is signed.

How do I estimate closing costs?
If you are a seller, there are 3 basic costs:
1. Real Estate Commission (5 – 6%),
2. Real Estate Transfer Tax,
3. Legal fee.

Other costs include paying off a mortgage(s), sellers share of real estate taxes, water, and sewer.

If you are buyer basic closing costs include: lender fees, legal fees, recording costs, title search, title insurance, and the buyer’s share of real estate taxes, water, and sewer. Lenders are required to provide a good faith estimate of costs. An attorney can help a buyer estimate how much money is needed for day of closing.

What is a typical deposit?
A buyer will typically pay between a 5 – 10 % of the purchase price as a deposit. The deposit is usually held by the seller’s attorney in an attorney trust account or by the office of the realtor for the buyer. There is no legal requirement as to the specific amount of deposit a buyer shall pay.

What does “AS IS” mean?
“As Is” could mean that the property is sold “as is” and there are no inspection contingencies and no representations by a seller. However, most contracts state a home is sold “as is” but include home inspection contingencies, and representations by a seller as to certain conditions of the home.

Escrows: Typically a lender will collect escrows or reserves at time of closing. A lender will pay the borrowers real estate taxes and home owners insurance bills in the future utilizing funds deposited with the lender with each monthly mortgage payment. You can think of an escrow account like a check book, you make deposits, but the mortgage company writes the checks. Attorneys may also hold an escrow to resolve certain issues after a closing.

What is “Exit Tax”?
2% Estimated Income Tax:
In some situation a seller may be required to pay an estimated income tax equal to 2% of the sales price. Exemptions include being a resident tax payer of the State of NJ, or qualifying for free capital gains pursuant to the IRS Tax Code.

What is a Home Inspection?
Most contracts will provide the buyer the opportunity to have a home inspected by a professional home inspector. This is called a home inspection contingency. A home inspector will make an inspection of the home and provide a written report which identifies various deficiencies to the home. In some cases, a buyer will have a general home inspection as well as individual inspections for items such as septic, well, electric, heating and air conditioning. Generally, a buyer may request a seller to make repairs based on a home inspection and a seller will advise if they will or will not make repairs.

What is a Certificate of Occupancy?
Certificate of Occupancy: Typically a seller is responsible to obtain a Certificate of Occupancy or Transfer from their City/Municipality prior to closing. Most Cities and Towns require a brief inspection of the house to make sure the home is at least habitable, proper permits obtained, and compliance with State mandated Fire Certification (Smoke Detectors, Fire Extinguishers, and Carbon Monoxide Detectors).

What is a real estate transfer tax?
Sellers are required to pay a tax in order to sell their home. The real estate transfer tax must accompany a deed when it is sent to the county clerk for recording. The real estate tax is based on the sales price. There are specific requirements for calculating the real estate transfer tax.

How can I find out what yearly real estate taxes are for a property?
You can call most cities and municipalities and ask for the tax collector. The tax collector will be happy to provide you with information on real estate taxes. Many towns now offer websites where you can look up this information.

Must a seller attend the actual closing?
A seller may elect to sign documents with their attorney prior to closing and not be physically present at the closing. A seller should coordinate with their attorney and make appropriate arrangements with their attorney to ensure a smooth and successful closing.

Liens: A charge, security or encumbrance upon property. For example, a mortgage, a judgment, real estate taxes, municipal water/sewer, are liens against a real property.

Judgments: When an individual or entity is sued successfully by a creditor the creditor obtains a judgment. A judgment attaches against all real estate owned by an entity or individual. A judgment is a lien.

Foreclosures: A foreclosure is the legal action by bank/lender to enforce payment of a loan secured by real estate. A foreclosure may culminate in a sheriff sale.