Real Estate is an extremely complicated, stressful, and sometime frustrating time. Well, it can be but it shouldn’t be! With the right agent and proper advising, buying and selling can be as fun and exciting as HGTV makes it look. The trick is hiring the right agent with the communication skills to make the buying and selling process smooth. Now, I am not living in fairyland, there will be trying times when a buyer asks for a new roof because a piece of fascia is loose, or the settlement may be delayed a couple days. But it depends how the information is relayed and the options you have to move forward.
The first step in making an offer is writing a purchase offer/contract for sale. This is probably the most intimidating part of buying a home. Contracts are serious business! Legally binding to both parties and with money involved, it get’s even more stressful. But do not fear! Let me walk you through the contract now so when the time comes to pull the trigger, you are well educated.
Contracts
The sales contracts we use in Ocean City are pre written by the Ocean City Board of Realtor’s attorney committee. They are revised often to remain up to date on the ever evolving market. Because they are mostly pre-written, there are only a few items that we as agents actually fill in:
~ Property (address, township, lot, block, etc.)
~ Purchase Price and Numbers (price, loan amount, down payment, earnest money payments)
~ Mortgage (mortgage/loan amount, interest rate, down payment, mortgage commitment date)
~ Settlement (settlement date, time and place)
As a buyer, you will also have to determine the following terms that are factored into any offer. Outside just the purchase price, the following terms can make your offer even more appealing to the seller:
~ Home Inspection Period(standard is 15 days, but you can make it 7 days to make your offer more appealing)
~ Earnest Money or “good faith money”, is the amount of money a buyer offers the seller committing to the purchase of the property and their promise to fulfill the contract for sale. Our contracts have room for two separate earnest money deposits. The first is due within 7 days to the title agency. The second deposit can be assigned any due date. I usually make it due just after the 15 day home inspection to make sure the buyer is satisfied with the home’s condition.
3 Day Attorney Review
Every contract completed by a real estate agent in NJ, although mostly pre-written, comes with a 3 day attorney review period. Because real estate agents are not attorneys, the contracts we complete do not immediately become legally binding. Therefore we provide both parties three full business days to contact a real estate attorney and consult with them regarding the contract. At this point, either attorney can request a change to the contract or void the contract without penalty. Whether you contact an attorney or not, after three days, the contract becomes legally binding at end of the third day.
So this is your first safety clause. If you are anxious to make your first offer, don’t fret. If you make an offer and decide the next day you’d like to look elsewhere, you have the safety net to cancel within three days.
During this three business day period, the property is not considered under contract. Although the contract is signed by all parties, the house may continue to be marketed in case the contract does get cancelled.
In a very competitive market, a buyer has the option to opt for an attorney drawn contract to get around the 3 day attorney review. If there is a chance the seller may receive multiple offers, as a buyer, you’d want to get the property under contract with a legally binding contract asap. To do this, the buyer can hire a real estate attorney to write the sales contract. These “attorney drawn contracts” do not come with a three-day attorney review. Once all parties sign the contract, it becomes immediately binding to all parties.
Home Inspection
Every contract is pre-written with a home inspection clause.. The standard home inspection period lasts 15 days. During the first 15 days of having a signed contract in hand, the buyer must complete a home inspection and request repairs to the property. Once repairs are requested the seller has 5 days to respond. If no agreement is made after 20 days, the contract may be deemed null and void. Either party reserves the right to cancel the sale.
This clause is the buyers’ second safety net. At this point, the buyer has already made an earnest money deposit to go towards the sale. As long as the buyer abides by this timeline, they may cancel the contract without fear of losing their earnest money deposit.
Mortgage Commitment
This scheduled date is your mortgage application’s deadline. By this date, the mortgage lender must have approved your loan application. Many commitments are issued with contingencies such as appraisal (if it was delayed), or review of additional financial documents. The commitment is the lenders way of telling the seller that the buyer is vetted and approved for the loan.
Deadlines
After my clients enter an agreement of sale/contract for sale, I always lay out the deadlines leading to settlement. Thirty(30) days is a strong closing timeline for a competitive offer. The deadlines look like the following:
5/1 (Monday afternoon) Contract for Sale – executed and delivered to all parties
5/4 (Friday morning 12am) Contract is now legally binding and attorney review period has expired.
5/8 First Earnest Deposit is due to title company
5/16 Home & termite Inspection must be completed and requested repairs must be made by this date.
5/18 Second Earnest Deposit is due to title company
5/22 Mortgage Commitment is due from the mortgage lender approving the buyer’s mortgage application.
5/30 Settlement takes place the title company designated by the buyer at a time mutually agreeable to all parties.
Congratulations! You’ve made it through the whole buying process!