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

14.  Time for Closing of Title

The agreement need not set out a date for closing in order to be valid and enforceable. The law will provide for a closing date a reasonable time after the signing of the agreement. The problem is in relying on the concept of "a reasonable time," because nobody can be sure when the closing is to take place. Thus, the usual practice is to provide a specific date in each agreement. Sometimes the date is expressed in terms of a day on or before a specific date. The date set out is a target date at best, unless the parties have specifically made time of the essence.

The concept of a target date, rather than a very specific date, may be an unfamiliar one. But the idea of a target date is to protect the parties from the drastic consequences of a time-of-the-essence situation where a party can not perform and would thus be subject to damages and loss of the opportunity to buy the property. A buyer may fear the loss of his deposit, but it is not automatically lost if the closing does not go forward, unless provided in the contract through a liquidated damage clause.

It is possible to make time of the essence by agreement of the parties at the time the contract is signed. Also, time of the essence may be declared before the target date has passed if there is reasonable belief that the other party intends to breach his agreement. It is, of course, possible to make time of the essence for a future reasonable time after the target date for closing has passed.

There is no magic time that must be allowed after notice. Some use ten days and think they have allowed sufficient time. But more time may be required because of present-day complications in the closing process. A definition of "reasonable time "depends on the circumstances. A definition can be specifically set out in the agreement.

What's important is that the parties clearly understand that time is not of the essence for the closing, unless specifically made so by the parties at agreement time, or properly at a later time.

15. Place of Closing

Where the closing is to take place is a matter of negotiation. Each party usually wants the closing at his own lawyer's office, to minimize that lawyer's travel time, and thus the cost charged to the party. The mortgage lender may require, as a condition of the loan, that the closing take place at its office, the office of its attorney, or another specific place. The buyer may want the closing to take place near the property, so he can make a last-minute inspection to make sure the property is vacant, in good physical condition, and left broom-clean by the seller.

Custom as to the place of closing changes from time to time. Increasing costs and complication in the mortgage lending practice has led many parties to agree that closing will take place at the law office of the buyer's attorney, whose staff deals with the mortgage. Many say it should be in the community where the property is located. It is a more current practice that closings be held remotely, with approved documents signed and held in escrow, so closings are now often set for the office of the title company selected by the buyer and acting as escrow agent for all parties.

Convention, and costs to the parties, guide negotiation as to the time and place of closing. The language in the contract controls, not custom. Since the covid or pandemic custom has evolved that closing are often conducted remotely. Documents are prepared in advance and delivered by a delivery service. If there is anything to discuss Zoom and Face Time usually are available. Such arrangements should be provided for in the agreement.

16. Real Estate Broker Commissions

The real estate broker historically was working for, and was paid by, the seller of property. The relationship of the broker and the seller is established in the listing agreement. The listing agreement sets out the rules, rights, and obligations between the seller and the broker. It provides for the commission, which is usually a percentage of the purchase price. It also provides that the listing broker does or does not have a fiduciary duty to the seller.

The real estate broker or salesperson who found the buyer for the property has usually worked closely with the buyer, and may have limited contact with the seller.

It is very rare that the broker working with the buyer is actually an agent working for the buyer and is thus paid byhim. Brokers today want to be dual agents. In that role they do not owe more of a duty to one party than to the other and they are free to list a property of one customer and sell it to another customer.

If signed by both the seller of the property and the broker, the sales agreement between the seller and the buyer can modify that listing agreement. It may do so in terms of any of the provisions found in the listing agreement, including the time for the commission payment and the amount.

The commission is usually paid at the time of closing, but only if a closing actually takes place. The agreement may provide for a lien on the property in favor of the broker, and the broker form of contract does so provide, until the commission is paid.

Conclusion

As you can see by the subjects discussed, the parties to a residential real estate transfer must consider many possibilities, and many issues. They must identify and talk about questionable items. The goal is to work it out and write it down. When problems are discussed in advance, solutions can be built into the agreement in clear language understood by all. The more that gets ironed out beforehand, the smoother the final transaction.

Full use should be made of professionals. This recording or post is not a substitute for professional advice from a qualified lawyer. Both parties benefit from professional inspections of the property. Costs to correct deficiencies, and cancellation options, should be written into the agreement. Much can be negotiated. Terms of payment are always negotiable. So are closing details, and the timing of events.

The parties can't just assume that everything will go smoothly. The way to assure that everything goes smoothly is to assume it won't, and to provide contingencies and conditions in the contract to deal with possible problems.

Here's one quick way to sum it all up:

When in doubt, put it in writing. When not in doubt, put it in writing anyway!

If you have questions about a specific transaction, get together with a qualified lawyer. There are several in our community. I am always available to take a telephone call or return a call if a message is left. (908-782-5317) or reply to an email (lbr@lawroth.com)

Good luck with your transaction.