by Barbara Strapp Nelson, Esq.
The purchase of a new home is often one of the largest financial obligations individuals undertake during their lives. Before entering into a contract of purchase, buyers should be aware that certain decisions they make may affect their obligations and responsibilities under the contract.
As all buyers know, the purchase price is a negotiated figure ultimately acceptable to the buyer and the seller. The deposit is also a negotiated amount. There is no set amount for the deposit, although it is frequently 5-10 percent of the purchase price. However, in some situations, it could be less. The deposit is almost always held in escrow pending the closing. The deposit differs from the down payment. The down payment is the difference between the purchase price and the mortgage amount.
In a realtor-prepared contract a three-day attorney review period is required to be included. This means that though the buyer and seller may both sign a contract, it does not become binding for three business days after the signed contract is released to both parties. During this period, an attorney for either party may disapprove the contract for any reason — or for no reason at all. Sometimes a contract is prepared by a party’s attorney; in such event, there is no requirement that a three-day attorney review provision be included. Such a contract would be binding once both parties sign the contract.
If a buyer is purchasing a home for more than $1 million in New Jersey, the buyer will also have to pay an extra 1 percent “mansion tax” to the state of New Jersey at closing. The amount of this payment is 1 percent of the purchase price.
Though buyers are usually aware of the costs involved for a home inspection, these inspection costs will increase if there is a septic system on the property being purchased, as there is separate testing to be done to determine if a septic system is working properly. The same holds true for the potability of well water if the property is serviced by a well, though most contracts provide that the seller will obtain any required testing. In Hopewell Township specific municipal approvals are needed to ensure that both a septic system and well are working properly and that the well water is potable before a purchaser can move in and use the systems.
A buyer also needs to determine how they want to take title so the contract can be prepared in the proper names. Most married couples will take title as tenants by the entirety, but it is possible they may want to take title as tenants in common, or that only one party will take title. Unmarried individuals may want to take title as joint tenants with a right of survivorship so that title automatically vests in the survivor of the two, or as tenants in common so each can transfer his/her own interest as each sees fit.
Generally, a buyer’s realtor or attorney can help guide the buyer through this process and alert the buyer to these decisions concerning their obligations and responsibilities.
Barbara Strapp Nelson, Esq. is a shareholder and member of Stark & Stark’s Real Estate Group, where she concentrates her practice in residential real estate transactions. www.stark-stark.com.