The Residential Real Estate Contract in New Jersey, part 1 of 7

In 2007 I was selected by the Institute for Continuing Legal Education to teach lawyers about various topics relating to the real estate law practice. We talked about title to property, liens, easements, use of property, zoning, radon, contracts and more.

I had contributed to the basic book the Institute published on residential real estate practice. I helped a law publisher create legal forms sold to lawyers for use in their practice. I was asked to, and wrote a long article, and a script, for a recording for Sound Legal Advice that was selling educational cassette recordings to provide guidance to lawyers writing or reviewing real estate contracts.

Since 1986 brokers were allowed by a court settlement and order to write contracts under very controlled and specific circumstance.

I was involved in binging that process to the real estate law practice and the real estate industry. Almost all residential transactions involved brokers. Only they, through their multiple listing services, had among themselves the information about what was available for sale. Lawyers were called on to review contracts on behalf of buyers and sellers. The article I wrote was to give guidance.

Current technology has reduced reliance on brokers. We now have web sites providing information that previously was not available to anyone but a broker. Most transactins still involve brokers. But more and more sellers bypass brokers, and their commissions, and call upon lawyers to write the contracts.

I came across that 2007 writing while clearing some of my old papers. With modest changes to make it more current I reproduce it as part of a series on this site. The first installment follows.

Residential Real Estate Contract

Traditionally lawyers wrote real estate purchase and sale contracts. A person not licensed as a lawyer could not write contracts for others. Real Estate brokers, and their licensed agents, wanted to speed up the contract process by writing contracts themselves. They were faced with charges of breaking the law in doing so. Today they can write contracts in limited situations if they follow the Court direction faithfully.. They usually use a printed form provided by the Realtor association.

There is basic information needed to write, review, or understand a contract for the sale or purchase of a residence. There are basic things a buyer and seller need to know in order to each protect their individual interests.

The following, although prepared for the intelligent consumer, will be useful to non-specialist attorneys who counsel the parties to a real estate transaction, and to real estate brokers and salespersons who have the legal right, under certain guidelines, to write agreements.

Signing a contract is the most important step in the process of buying or selling a home. The contract sets the price and spells out exactly how the property will be paid for. It sets forth all the rules by which the transaction will

- or will not - proceed.

Through the contract, the parties can agree to follow tradition, or to vary from tradition. In short, one contract can be vastly different from another, because of specific provisions - and safeguards - tailored to the wishes and the needs of the individual parties. They can only know their needs if they have obtained solid professional advice.

There are at least 1 6 things to look for and think about in a contract. We will address each briefly. Remember only your own personal attorney, trained and experienced in residential real estate closings, can properly advice you about your personal transaction.

Since 1986 real estate brokers have been allowed to write contract documents in a transaction involving a one to four family house.

But with a broker written contract there is no enforceable contract until three business days have passed after the fully signed contract has been delivered to both parties. This time out period is to allow either party to arrange to have a New Jersey attorney review the document and advise them. Contracts written by a lawyer are not subject to this delay. IT IS ENFORCABLE WHEN SIGNED BY ALL PARTIES.

During the three-day review period a New Jersey lawyer can serve notice on the broker, and the party the lawyer does not represent, canceling the agreement. No reason need be expressed.

The technical rules of attorney review must be followed carefully. The proposed agreement must contain very specific and detailed language required by Court rules.

There are just two choices: the agreement can be accepted as written, or it can be cancelled. If cancelled, (and either party can do so through his or her attorney) the parties are free to enter into a new agreement modifying the original agreement. They are also free to enter into an agreement with another party or no agreement at all.

Time for review can be extended beyond the three days by agreement between lawyers. The extended time is usually used for investigation or negotiation.

The risk in accepting the agreement as written is that the party may be bound to terms that are not satisfactory.Thus, there is a tendency to seek changes to improve the agreement. But during that review time the other party is also free to change his mind. As seller he can sell to another party, or as buyer she can buy a different house, before a new agreement has been produced and signed. (to be continued)