The Residential Real Estate Contract in New Jersey, part 4 of 7

6.  Price of the Property

This concept seems simple. How much will it cost?

A house is usually listed for sale for an asking price, an amount agreed to between the seller and the real estate broker. This is what the seller hopes to get. The broker, or agent, who listed the property, has examined other properties in the area. In making their study, and arriving at a recommended figure, brokers have made adjustments for differences in the listed property and other property recently sold. They also made adjustments for other differences, like time of the year, marketplace conditions, and supply and demand.

The buyer looking for property is usually guided and advised by a broker, or sales agent, who is sometimes a subagent of the listing broker. It used to be that with rare exception, all brokers and salespersons worked for the seller and were paid by the seller with money from the buyer. A sales agent would provide limited market information to the buyer and help him structure his offer for the property, but that agent, unless he clearly announces otherwise, worked for the seller.

Today most licensees, the generic term for brokers and sales people, are dual agents. That means they are equally obligated to buyer and seller and do not, and cannot, keep the confidence of one party from the other. The parties will be asked to sign a document acknowledging the limited responsibility of the real estate person working with them. After negotiations, usually conducted through the listing broker, a price for the property is agreed on.

But that's just the beginning. An important part of the price is the terms - the way the price is to be paid, the timing, and any conditions of making that payment.

7. Terms on Which the Price is to be Paid

Payment usually consists of an earnest money deposit paid upon making an offer, a further deposit on signing the agreement, and perhaps an additional deposit sometime after attorney review or when contingencies have been satisfied. Payment may also consist of a mortgage

to be obtained from a lender, or from the seller, plus additional funds to be paid by the buyer from his own sources. The terms, or system of payment, is not set by law. It often follows tradition. But terms are always fully negotiable.

The buyer usually wants to part with as little money as possible before the deal closes, a time when he takes possession of the property. The seller usually wants as much as he can get up front.

The buyer sees a cost in the form of interest lost. He sees the risks of not having his money under his control until he has title to the property. The buyer may not have the money needed to complete the transaction until he has sold the house he's living in, or has sold other assets.

The seller feels more secure with as much money in hand, or in escrow, as possible, although deposits are not automatically forfeit. He thinks that the buyer is less likely to walk away from the deal if there is a substantial amount of money already out of his pocket. The seller may need the money to purchase another dwelling.

The deposit may, or may not, earn interest. Either party may claim to be entitled to the interest. There is no law, other than the rules made by the agreement of the parties, to deal with and determine the disposition of interest earned, if any, on the deposit.

Here are some things to think about when considering terms: The buyer doesn't know if the house will pass inspections that have yet to be made. He may not be sure that he can get the mortgage financing he'll need for his new house.

The buyer will not have had time to confirm the representations about title made by the seller. The buyer should be concerned that liens on the property from the seller's mortgage and other liens are in fact, less than the amount of money owed at closing.

If the seller is to hold a first or a second purchase money mortgage, the rate of interest on that mortgage, and the time it will be owed, have a direct effect on the price that the buyer pays. The lower the interest rate, and the longer the term of payment, the less that is being paid for the property.

The parties often agree that a ten percent deposit will be paid over a set time. The payment is usually made to the seller's attorney, or to a New Jersey licensed title agency who acts as escrow agent for the parties and holds the money until closing.

The agreement usually requires that final payment at closing be made by certified or bank check or wired funds. Lawyers are required by the Supreme Court to wait for funds to clear after deposit before writing checks against those funds, unless the check deposited is a certified or bank check. Tne final funds are often run through the trust account of a title agency (to be continued)