I am writing to you to assist you in understanding the procedures in purchasing and closing on a home especially as it relates to our office.
All contracts drawn by realtors for a sale of a home in New Jersey are required to have an "Attorney Review" clause. This clause provides that either the buyer’s or the seller’s attorney may cancel a contract within three business days of receipt by both parties of a fully executed contract. Very often the buyer's or seller's attorney may wish to make changes to the contract and will send a letter disapproving the contract in order to make certain modifications. Once a disapproval letter is sent the contract is not binding until an addendum is signed. We will consult with you regarding any changes that you or the seller may request.
The contract normally provides for a number of physical inspections to be made of the home. Typically you will want a home inspection, pest inspection and radon test performed. If applicable you will also need a separate underground oil tank inspection, septic inspection and well inspection. It may also be wise to have an environmental company perform a sweep to determine if there are any underground tanks on the property. You should arrange to have these inspections made through the realtor. All contracts contain certain deadlines by which the inspections must be done and it is important that these dates be adhered to or you may waive your rights under the contract. Please contact me immediately upon receipt of a report showing any defects or problems with the home that you wish to be corrected. Written notice of any problem should be made immediately to the seller in accordance with the time provided for in the contract.
If you are applying for a mortgage, the application should be made in a timely manner. It is important that you discuss all costs with the lender since these can vary greatly depending on the lender and the program you apply for. If you are locking your interest rate please contact our office to determine if the lock date is appropriate. In most cases locking your rate for at least two weeks beyond the anticipated closing date is recommended.
All lenders will require you to obtain title insurance and a survey for your property. Even if you are paying cash I strongly recommend that you obtain title insurance and a survey in order to protect your investment. It will be the function of this office to order the title search and survey. Many attorneys will not order a search and survey until any mortgage provided by the contract has been approved and a written commitment is obtained. By waiting for the loan approval you will avoid incurring any expense for the search and survey if the loan is not approved. On the other hand if the loan is not approved until a week or two before the closing date, not ordering the search and survey until the loan is approved may result in a delay of the closing. Please contact this office to discuss whether you would like the search and survey ordered prior to the commitment. In most cases once you have met with the mortgage representative you should be reasonably confident as to the likelihood of your obtaining a mortgage commitment you desire.
With regard to a survey, a survey may be ordered with or without stakes. Stakes are not required by the mortgage lender or the title company, and are merely a convenience to you. Stakes can be costly and we must advise the surveyor upon ordering the survey whether you desire stakes. Please advise this office accordingly.
It will be your obligation to provide the lender with any information the lender may require. Upon receipt of the mortgage commitment please read it carefully and furnish this office with a copy. The commitment will advise you as to what the lender will require prior to closing of title. In nearly all cases you will be required to obtain a homeowners insurance policy listing your lender as the holder of the first mortgage. In many cases it is necessary to provide the lender with a copy of the policy and a paid receipt of the first year premium prior to closing.
You should carefully read the lender's instructions with regard to the required insurance coverage. It is very important that the name of the lender be listed with the proper address as required by the mortgage commitment. Many lenders require that the bank and its assigns be listed on the policy and the bank will not permit the closing unless the wording is exactly as required by the bank. If you are purchasing a single family home the lender will not allow the closing to take place until they have received a paid receipt and declaration page of this homeowner’s policy from you. If you are purchasing a property where an association maintains the required insurance such as a condominium the lender will need to be listed on the association’s policy. In this case it is still very important to get your own insurance to protect your contents and any liability you may have to others, however the lender will generally not require a copy of your policy.
It is important to remember that the contract closing date is not a hard and fast date. Many closings take place on the contact closing date but many do not. If it is critical that the closing occur on the contract date please contact this office during the attorney review period to discuss the option of making time of the essence. If time of the essence is not demanded during the attorney review period, the buyer or seller may delay the closing for up to two weeks without penalty. Please contact this office to establish a definite date.
At the closing of title you will need to bring any additional documentation that the lender may require. Normally this will include the homeowners insurance together with a receipt for the first year premium. Additionally, you will need a bank or certified check to cover the balance due on the purchase of the home together with closing costs. Normally closings are held at the buyer's attorney’s office. The lender will provide my office with a cashier's check or will wire the mortgage funds to my trust account. These funds together with the funds received from you will be disbursed through my trust account. Since we will be disbursing the funds we obtain from you on the date of closing the law requires that we may only accept certified funds or a bank check. You may make the check payable to “Batcha & Batcha, Attorney Trust Account” or you may make it payable to yourself and then endorse the check at closing.
My office will receive closing instructions from the lender which will advise me as to the documentation required by the lender and as to the monies the lender will require. The lender should provide you with an estimate of these costs prior to closing. It is not wise to rely on this estimate since the lender is unaware of many of the actual costs when they prepare this form. The only way to know your exact closings costs is to contact my office. Unfortunately, my office will not receive the final figures from your lender until a day or two before closing. Therefore, I will not be able to give you a final figure until that time. Although last minute changes are not normal, you should bring additional checks in the event that minor adjustments must be made at closing of title.
You should arrange for a final walk through of the home with a realtor within a reasonable time prior to closing of title. It is best that this inspection be made on the day of closing when the house is vacant. Once you have closed title to the home you will not be able to make any claims for defects in the home except in certain limited cases. Accordingly, it is important that you be satisfied as to the condition of the house prior to the closing of title.
I trust that this letter will be a guide to you as to how to proceed. Communication between the parties is very important. If you have any questions at any time please give me a call. I look forward to working with you on the purchase of your home.