What are the steps and processes for a closing in New Jersey?
The purchase or sale of a home in NJ is one of the largest financial transactions for most people
involved. In theory, the culmination of a closing should leave everyone happy, with the buyer
getting the home they wanted and the seller receiving their money. However, there are many
complications and nuances that can and do occur, which makes transactions complicated and
stressful, emphasizing the reason to have an experienced, qualified real estate lawyer on your
side. Contact Barli & Associates today to secure the proper legal representation for your
transaction
There are five major processes involved in a real estate transaction:
1) Attorney Review
Once an offer is agreed upon and signed by all parties, the attorney review process must
begin within 72 hours. During the attorney review process, changes to the contract can be
made and negotiations occur to protect you in the process. Either party can cancel the
contract altogether during attorney review, so having prompt and responsive counsel is vital.
2) Deposit and Inspections
After attorney review is completed, the buyer submits an earnest money deposit in
accordance with the contract of sale. The deposit is a separate contractual obligation from the
home inspection.
The buyer is always advised to have a complete home inspection, which includes a general
inspection, termite inspection, radon inspection, and a tank sweep. Depending on the area in
which the property is located, the buyer may have to conduct a septic inspection or well
testing.
After the inspections are completed, the buyer can request that the seller rectify the defects or
provide a monetary concession for the buyer to make the repairs. If an agreement cannot be
reached, the contract generally may be canceled and, in most cases, the buyer would receive
a return of their earnest money deposit. Having competent and responsive counsel ensures
you have the best chance at negotiation or protecting your earnest money.
3) Mortgage
The mortgage process involves the buyer(s) submitting an application with the lender of their
choosing. The mortgage application should be submitted as soon as possible to maximize the
chances for success. The buyer must submit a plethora of financial documentation to the
lender for approval. The lender will order an appraisal of the property to determine its value
and the amount they can loan to the borrower. If the lender approves the loan, they send a
formal mortgage commitment letter to the borrower and attorney, with conditions that must
be worked on to prepare for closing.
4) Title Insurance
The attorney will order the title search to be performed by a New Jersey title insurance
agency to protect the buyer in the transaction. This will ensure the proper sellers have title to
the property and can legally convey it to the buyer. This will also provide any liens,
judgments or other problems that the seller has to satisfy in order to provide clear title to the
buyer at closing.
5) The Closing Itself
Once the above processes are completed, the closing is scheduled with all parties. The buyer
will typically spend about 45 minutes – 1 hour signing all their mortgage paperwork and
bring a certified check fo4r the balance of the purchase price and closing costs. Once that is
completed, the buyer generally will receive a copy of the deed and the keys to their new
home. The original deed is sent to the county for recording.
Do all borrowers need to be listed on the deed?
The short answer to this questions is “yes.” The mortgage company obtains a lien by placing the
mortgage against the property as collateral. In order to perfect the lien, all borrowers must be
placed on the deed to ensure the lender’s rights.
Can I add someone to the deed who is not on the mortgage?
We always advise to get written consent from the lender before adding anyone to the deed of
your property. In most instances, if the person being added is a spouse, the lender does not
object. However, if the person is someone other than the spouse, the lender may not want to
permit that person to go on the deed, as the mortgage only contains rights against the borrower in
the event of a default.
Do I have to physically attend the closing?
Generally, all buyers have to attend the closing to sign their documents in person. Lenders and
title companies do not accept digital signatures or electronic signatures. Documents must be
signed by hand, preferably in blue ink.
Sellers, on the other hand, generally do not attend the closing itself. The sellers usually sign their
documents ahead of time and the closing process is handled by their attorney on the day of
closing.
What is title insurance and is it required?
According to the New Jersey Land Title Association, title insurance is purchased as a one-time
premium paid at closing. It differs from other insurance in that rather than protecting against a
potential future event it insures against those that occurred in the past of the real property and
people who owned it.
This indemnity policy insures against loss resulting from defects of title to real property that
result in a challenge to your ownership. This may include, unknown liens, encumbrances or other
defects, unmarketable title, as well as from the invalidity or unenforceability of mortgage liens
depending on the type of policy being purchased.
Title insurance is required by all mortgage lenders in the form of a loan policy. The borrower
can, and absolutely should, obtain owner’s title insurance at the closing to protect their interests
for the property they just purchased. Given our vast experience in the real estate industry, Barli
& Associates requires all borrowers to obtain title insurance to protect themselves as part of the
closing.
What is the difference between joint tenancy and tenancy in common?
Joint tenancy and tenancy in common are two most common classifications of ownership of a
property. Joint tenancy is where each party is on the deed and has an equal interest in the
property, such as a married couple. In this case, each spouse has an equal share and interest over
the home. If the marriage resulted in divorce, each spouse may sell his or her share in the
property. After a sale, the joint tenancy coverts into a tenancy in common.
Tenancy in common refers to two people without any right of survivorship, essentially making
them co-owners of the property. However, there are also situations in tenancy in common when
the parties do not have equal shares, so it entirely depends on the stipulation of the parties.
In a tenancy in common, the death of one party transfers the rights of the decedent tenant in
favor of his/her heirs. In a joint tenancy, the parties enjoy the right of survivorship, meaning that
when one person dies, the survivor gets the decedent’s share of the property.