Tips for Buyers of Residential Real Estate
Buying a new home is an exciting, but sometimes overwhelming process for both first-time buyers and experienced buyers. By becoming informed about the home-buying process and staying organized, buyers will ensure a successful and less stressful experience. Buyers may wish to consider the following:
Let your attorney know you are planning to buy a home or that a fully executed contract is expected
Once a contract is signed by buyer and seller, the parties have three days to have the contract reviewed by an attorney. This three-day time frame is the attorney review (AR) period. During attorney review, your attorney will review the contract, discuss recommended modifications to the contract and any special concerns you may want to address, and disapprove of the contract in its present form subject to changes. If the contract is not reviewed and disapproved in writing within this time period, the contract becomes binding as written. Having legal representation from the start of your real estate transaction ensures that your interests are protected. Your attorney will negotiate contract and inspection issues on your behalf, make you aware of laws and regulations affecting your purchase, review your mortgage loan documents, obtain title searches and address any title issues, keep you informed of deadlines, and facilitate closing of your mortgage loan and title to your new home.
Seek the services of a realtor
An experienced real estate professional is a valuable resource for a buyer. Finding a realtor who knows the areas you are considering and is committed to helping you find a home that meets your needs and expectations is a key decision for any buyer. Realtors provide background about communities, including information about schools, taxes and local zoning issues. They also narrow down the search for homes in your price range with your desired features, assist with the offer process and negotiations, and offer data on local market conditions and comparable sales.
Obtain a mortgage pre-approval letter
A pre-approval letter can be issued to a potential buyer before the buyer starts searching for a home. This letter shows sellers that the buyer is serious and qualified. A buyer is not obligated to obtain a mortgage from the lender that issues the letter. It simply gives buyer an idea of the amount of mortgage financing for which the buyer is qualified.
Organize finances and paperwork/apply for a mortgage
Once there is a binding contract, a buyer has a certain amount of time within which to obtain a mortgage commitment (this is not the pre-approval). Having paperwork in order makes the mortgage application and commitment process go more smoothly. When you begin your search for a new home, shop around for interest rates, speak with different lenders about closing costs, and organize paperwork such as tax returns, pay stubs, and bank and investment account statements. When a buyer applies for a mortgage, the lender will provide a good faith estimate of closing costs so that buyer may budget accordingly.
Be prepared to make a deposit
It is customary for buyers to make a good faith deposit of approximately $1,000 at the time the contract is signed and an additional deposit within a week or so after the end of attorney review.
Consider contract term requirements.
While your attorney will likely suggest modifications to the contract during the attorney review period, knowing the terms that are negotiable and any that might be deal-breakers at the time you make an offer will avoid future misunderstandings. For example, consider your preferred closing date, deposit amount, mortgage amount, fixtures and appliances included and excluded from the sale, and any special contingencies you may require such as a house sale contingency. Which terms are sticking points for you? Which terms are you willing and able to negotiate?
Request a Seller’s Disclosure Statement
While sellers of residential real estate in New Jersey are not legally required to complete the Disclosure, a seller has a duty to disclose known defects and may be liable for misrepresentations. Most sellers will not object to providing it, and having the Disclosure is helpful to buyers and their home inspectors.
Inquire about environmental and other issues impacting the property
Even if a Seller’s Disclosure Statement is provided, buyer should ask for information and representations from seller about issues impacting the structural and environmental safety and integrity of the property. Such issues include the existence of underground storage tanks, radon, mold, asbestos, lead paint, EIFS siding, water infiltration and damage, and wood-boring insects. A buyer will want to know if seller is aware of any past remediation of any of these issues and ask for documentation of the same. Buyer will also want to know whether seller obtained required permits and approvals for alterations and improvements to the property and request copies of these documents. There may also be existing warranties on appliances and major systems as well as transferrable service warranties.
Get recommendations for inspectors
Once out of AR, buyer has a limited time period within which to obtain inspections of the property and ask seller to address any issues. Typical inspections include structural, mechanical, radon, pest, lead paint (if the house was built prior to 1978), well, and septic. Sometimes further inspections are necessary, such as for mold, asbestos and underground storage tanks. If the municipality where the property is located requires a certificate of occupancy upon resale, the seller ordinarily obtains the municipal inspection and is responsible for addressing any code violations. All sellers must obtain municipal certifications for smoke alarms, carbon monoxide detectors and fire extinguishers.
Inquire about title issues
When considering a property, inquire about any issues impacting title such as encroachments, easements, and restrictions. Once a contract is finalized, buyer’s attorney will order title searches which will reveal any issues with the title, but asking about any known title issues in advance may eliminate surprises.
Review homeowner or condominium association documents
If the home is governed by an association, Buyer should request an opportunity to review all governing documents, as well as information about association dues and assessments.
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