The Buying Process and Timeline
If you are buying a home in the Montclair, New
Jersey area, the process may be different from other
regions of the country. This article will give you
an idea of what to expect, the order in which things
happen, what your responsibilities are vs. the
seller’s and the overall timeline.
Before Making an Offer
By the time you make an offer, you should have long
been pre-approved for a mortgage. It is difficult to
even look for a new home without knowing how much
you can spend. And, with the new, and stricter, 2009
lending laws, it is imperative that you speak to a
lender as early in the process as possible.
Secondly, it is advisable that you have seen plenty
of homes before making an offer on one. If you work
with me, I will ensure that you have seen as much of
the current housing inventory as possible before
making an offer. It may take a couple of months to
find the right home or it may take a year. We can’t
time the moment that you will fall in love with a
home, but we will certainly be ready when you do.
The Amount of Time from Offer to Closing
When the market was at its height, 30 and 45 day
closings were pretty common. While that is still
possible, it’s more the exception than the rule now
due to delays caused by the new 2009 Truth in
Lending laws. Our Senators and Congressman are
working with the banks to try and find ways to
tighten things up and lessen the impact of
systematic delays in the processing of a loan. But,
when you make a personal timeline for when you’d
like to actually ‘move in’ to your new home, use a
60 day closing window as an average. You may even
get a 90 day closing and 120 day closings are less
common. One thing to be very wary of with long
closings is that – after you’ve “locked in “on your
mortgage interest rate, delays in closing can cause
you to lose that rate. We can work with your lender
to make sure that your lock-in rate is not in
jeopardy with the progress of the deal.
Offer Accepted
When you make an offer on a property, you sign it
before the seller does. I will advise you about ways
to make your offer as strong as possible – both
through price and terms of the offer. I will also
write and attach a very favorable cover letter to
the seller outlining your credentials as a buyer. If
the seller accepts your offer, he/she will then sign
it, as well. At that point, we will move into
Attorney Review period – discussed below.
Deposits
Let’s assume that you are putting down 20% of the
total purchase price which is pretty standard.
However, you can put down less. If the home costs
$400,000, the total deposit will be $80,000.
Deposits are typically made in three installments.
The first deposit accompanies the offer itself and
is usually a moderate amount of about $1,000. This
deposit is also known as an earnest money deposit.
The second deposit is usually due within two weeks
of the conclusion of Attorney Review (see next
section) and is larger – perhaps $40,000. The
remaining $39,000 will be due at closing. These
percentages are estimates and may be different in
your case.
Attorney Review
In the state of New Jersey, there is a mandatory 3
day period where you have the right to have an
attorney review the contract amd make changes; to
elect to have the attorney represent you throughout
the rest of the transaction; or waive the right to
use an attorney all. You also have the right to back
out of the deal without giving a reason. Then again,
so can the seller.
Attorney review is also known as a three day ‘right
of rescission’. In Essex County, New Jersey, most
people use an attorney for real estate deals and I
strongly urge you to do so. In fact, it’s even
better if the attorney is a real estate specialist.
I can recommend some very good real estate
attorneys, if you need a referral.
Appraisal and Final Mortgage Commitment
Once Attorney Review has concluded, an appraisal
will be ordered by your lender. The purpose is to
evaluate the property to make sure that it is worth
what you are paying. If the appraisal comes in lower
than the agreed upon sale price, there are steps
that can be taken. In this same time period, your
personal paperwork, the contract of sale, title work
and an appraisal report will go the bank’s
underwriting department for final review. When that
department signs off on the transaction, you will
have your final mortgage commitment and may proceed
to closing.
Inspection
In the state of New Jersey, you have the legal right
to perform a home inspection after submitting an
offer. Typically, it is performed within a week or
two after the conclusion of Attorney Review. If
there are problems with the property, the seller has
the right to rectify them. If he does not, you may
back out of the deal and recoup all deposit monies.
You are responsible for hiring and paying a
qualified inspector. If you need help finding a good
one, I can help. For details on performing and
negotiating an inspection, click on the full article
entitled, Your Home Inspection.
Homeowner’s Insurance
In the state of New Jersey, you must have a
homeowner’s insurance policy in place before you can
close on the property. Ask your insurance broker for
a receipt, or a copy of the policy’s deck page and
bring it the closing table.
Walk-Through
You are legally entitled to do a walk-through of the
property just before closing to ensure that it is in
the same condition as it was when you made the
offer. Typically, this is done on the same day as
the closing but may be done the day before, if you
wish. The closer to closing that it is performed,
the better.
Closing
As a buyer, you will likely arrive at the closing
table an hour or so before the seller in order to
sign the many documents associated with your loan.
If you are paying all cash, this is obviously not
necessary. The seller is not required to attend the
closing and in many cases, opts not to. The buyer,
however, attends.
It typically takes place at the office of the
buyer’s attorney although it can take place at a
title company office or elsewhere. Once the loan
documents are signed and in order, you will look
over the RESPA Form (Real Estate Settlement
Procedure Act) which outlines all the credits, fees
and expenses associated with the purchase. You will
also be called upon to turn over a check for the
remaining deposit money. You will then be given the
keys to the property and, at that moment, you become
the homeowner.
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