Buying Process

1. Offer and Contract

• An offer is an intention to buy a property from a buyer to a seller.
• The offer consists of the NJAR 13-page standard real estate sales contract and
  mortgage pre-approval
• It is presented to the seller’s agent to be considered as an official offer.
• The offer outlines important conditions such as purchase price, down payment,
  method of payment (cash or mortgage), closing date, and purchase conditions.
• Within 1-3 days of receiving the offer, the seller will decide one of the following:

1. Accept – Accepts the buyer’s purchase price and conditions
2. Deny – Denies the offer
3. Counteroffer – Presents new purchase price and/or conditions.
   The Buyer then must decide to Accept, Deny, or Counteroffer.

2. Attorney Review

• Once the contract is formed, that is the seller signs off and returns it to the buyer,
  the process automatically enters the attorney review stage.
• The attorneys review all legal details and mediate until closing.
• The attorney review takes about 3-5 days.
• The buyer communicates with the attorney directly regarding the contract.

3. Down Payment

• For mortgage purchases, the down payment, on average, amounts to 20% of the total
  purchase price.
• FHA Mortgage down payment starts at 3.5%.
• The down payment is paid in two parts. The first payment is made after the attorney review,
  and the second payment is made at closing.
• If the down payment is more than 20%, the first payment is 10% of the total purchase price
  and the second payment is the remaining down payment amount at closing.
• The down payment is made to the Escrow Account of the seller’s attorney through the
  buyer’s attorney.
• Note: Be wary of escrow account fraud. Always check the account with the buyer’s attorney
  before wiring the money.

4. Home Inspection

• Within 10 days of the attorney review, a home inspection is carried out.
• If the inspection reveals problems with the property, the buyer negotiates repair or
  credit with the seller.
• Normal wear and tear do not qualify for negotiations.
• Basic Inspection: Home, Radon, Termite
• Additional Inspection when necessary: Oil Tank, Lead Paint, Sewer, Septic System
• If necessary, inspection will also confirm if there’s a record of Oil Tank in the town hall.

5. Mortgage Process

• Once the attorney review is completed, the buyer submits all mortgage-related documents to
  the mortgage company.
• The mortgage company orders an appraisal.
• If the appraisal value supports the contract price and the mortgage application is approved,
  the “Mortgage Commitment Letter” is issued.
• The mortgage company may require a survey (a measurement of property boundaries),
  in which additional costs will occur.
• Within 30 days of closing, the mortgage interest rate should be locked.

6. Title Search

• Once the mortgage commitment letter is received, the buyer’s attorney requests a title
  search from a title company.
• The title search is an investigative process that ensures all conditions are met for a
  successful property purchase. Conditions include Title, Lien, Tax Lien, Restrictions,
  Foreclosure History, Liability, Open Permit, Encumbrances, etc.
• If there is a problem with the title, the seller must resolve the issue and the buyer
  must receive a clean title by closing.
• Title Insurance is a protection against any problems related to ownership of property.
  While this is optional, most mortgage companies require insurance. The cost of insurance
  is set by the state.
• Once the title search is successfully completed, the title company confirms Clear to Close.
  This is the final stage confirming that the process may now enter closing.

7. Certificate of Occupancy (CO or CCO)

• In New Jersey, a purchase of property must be filed with the Town. The Town will then
  run a safety inspection.
• The safety inspection varies from town to town, but most will require inspection of the following:
  10 Year Battery Sealed Smoke Detector and Carbon Monoxide Detector, Fire Extinguisher, and
  miscellaneous conditions that may affect occupancy. For Condo, the unit door must be closed by itself.
• The Certificate of Occupancy must be received by the town before closing.
• Normally, it is a seller’s responsibility to obtain the certificate of occupancy. However,
  there are special circumstances such as Bank-Owned properties or short sales that require
  the buyer to receive the certificate of occupancy.

8. Closing Disclosure (CD, ALTA)

• 1-2 days before closing, the buyer receives the closing document from the mortgage
  company or the title company.
• Once the closing document is reviewed, all remaining balances must be transferred to the
  title company’s escrow account.
• Note: Be wary of escrow account fraud. Always check the account with the buyer’s attorney
  before wiring the money.

9. Final Walk Through

• 1-2 days before closing, the buyer inspects the property one last time.
• The main purpose is to check for any changes that may have happened between
  inspection and closing.

10. Closing

• Closing is the final stage where the Attorneys, Real Estate Agents, Title Company, Buyer,
  and Seller meet to finalize the purchase.
• The closing is usually mediated by the title company at the buyer’s attorney’s office.
• The buyer arrives 30 minutes earlier to sign all necessary mortgage documents.
• The seller hands over all necessary items such as the house key, garage opener, locks,
  passwords, etc. to the buyer.