Real Estate Law

The Real Estate Agreement Of Sale

The most important part of a real estate transaction is the agreement of purchase / sale.

Q: After the Buyer and Seller agree on a price for the purchase/sale of real estate, what is the next step?

A: Normally, the next step is to enter into a contract or an Agreement of Sale. This document is extremely important because it fixes each of the parties’ fundamental rights and obligations from the time it is signed through the closing of the Title. Unfortunately, many purchasers and sellers of real estate, sign contracts without the advice of an attorney.

Q: Who prepares the contracts? Is it ok if a realtor prepares the contract?

A: It has become the standard practice, especially if the sale of the property involves a real estate broker, to have a broker present the parties with a “broker prepared real estate contract”. What you should realize is that a real estate broker is not an attorney and therefore, cannot practice law and cannot give you legal advice. There is no obligation that you sign the “broker prepared real estate agreement”. Don’t buy into the representations of anyone that it doesn’t make any difference what contract you sign because the broker-prepared contract is a “standard contract”. When it comes to the purchase or sale or real estate, nothing should be considered as “standard”. The sale or purchase of each, individual real estate transaction may be as different as the styles and color selections of houses that you have looked at.

Q: Should I have an attorney prepare the contract or represent me?

A: Whether you are buying or selling your home, second home or a vacation home, the purchase or sale of any home is a large investment and therefore, you should consult with and retain an attorney to represent your interests in buying or selling any real estate. More importantly, you should meet with an attorney to discuss your needs and requirements and have the attorney either prepare a Real Estate Agreement of Sale/Contract or review and possibly amend the “so-called broker prepared” real estate contract to best fits your needs.

Q: What happens if my realtor says that I do not need a lawyer?

A: Either get another realtor or get it in writing, (which will not happen) - A realtor is not permitted to give you legal advice.

Q: What happens if I sign a broker-prepared contract - is this binding?

A: That depends on the time frame. Under New Jersey law, if the contract is prepared by a broker, each of the parties are given a three (3) day attorney review period or “cooling off” period, wherein and whereby an attorney can cancel the whole contract or accept the contract, subject to certain changes.

Q: What happens if I sign a contract for a real estate deal where there are no brokers who are present?

A: Technically, if all the parties have signed the contract, the contract may be binding. The three (3) day attorney review clause only applies to broker-prepared contracts and does not apply to contracts which are privately prepared or prepared by an attorney.

Q: What are some important provisions that should be considered to be included in an Agreement of Sale?

A: A few examples of provisions which should be considered to be included in the Agreement of Sale are:

• Date of Contract - This may be obvious but it is very important because in the Contract, deadlines and contingencies may be measured from the date of the Contract.
• The identity of the parties - The Buyers and Sellers to the Contract should be identified, including their address and marital status.
• Description of the property - A description of the property should be included and set forth as accurately as possible. The preferred method is a metes and bounds description which can be referenced to an attached survey of the property. At a minimum, there should be a reference to an address and a Lot and Block number which should be compared to an existing survey or compared to a survey that will be performed on behalf of the Buyers.
• Price and method of payment - the contract should specifically state the full purchase price, the requirements of any deposits and the method of payment, i.e. mortgage, kick-back mortgage, assumption of mortgage or cash.
• Deposits - The Agreement may specify that a deposit is to be held in escrow by a third party until the closing of Title or until either party exercises a permitted right of cancellation of the Real Estate Contract. The deposit or escrow clause should also state whether or not the deposit monies are to be held in an interest-bearing or non-interest bearing account.
• Mortgage Contingency - This clause is very important to the Buyers in the event that the Buyers are going to purchase this property through a mortgage. Care should be taken with regard to drafting the mortgage contingency clause and provide for remedies in the event that interest rates increase or decrease, and more importantly, if you are a Buyer, the contract should provide that the agreement is not binding unless the Buyers can actually obtain a mortgage.
• Closing date and place - The closing place is normally held at the Title Company selected by the Buyer or an attorney’s office. The parties should decide whether there is a target date or a specific date that closing must take place by. If there is a specific date that the closing must take place on or before a certain date, this is referred to as “time of the essence” which means that the closing of the property must take place on or before a stated time and date. The problems that may arise include a mortgage commitment expiration date, obtaining title insurance and any other factors that must occur before the closing.
• Type of Deed - The normal Deed required is referred to as a “bargain and sale Deed” with covenant as to Grantor’s Acts. The Deed is normally prepared by the Sellers’ attorney or the Title Company.
• Other contingencies - Other contingencies such as a home inspection report, a Radon testing clause and a termite inspection report should also be considered and utilized in an Agreement of Sale. Again, it is extremely important to consult with an attorney with regard to the purchase and sale and preparation and execution of any real estate documents.

For more information, please contact Blair C. Lane, Sr., at 856-528-3010. Initial consultations are free.