New Jersey is unique when it comes to real estate contracts. In New Jersey, Realtors prepare purchase agreements, or offers, which only ripen into binding contracts once they survive attorney review.
Why are real estate contracts subject to attorney review in New Jersey? According to Robert McNally, Esq., a real estate attorney in Somerville, NJ, “Contracts are subject to attorney review because there was a question as to whether or not Realtors handling contract signings and explanation of terms would constitute the unauthorized practice of law. Thus, the NJ Bar Association and the NJAR worked in connection to create the Opinion 26 memorandum outlining that buyers and sellers have the right to have their contracts reviewed by an attorney within three business days of the delivery of the contract to both parties.”
The three day attorney review period commences when both Buyer and Seller sign the contract and receive a fully executed copy. Weekends and holidays are not included in the three day period.During this time, “attorneys suggest changes to the contract that better protect their clients from the signing of the contract until the closing date,” McNally says. “Generally one or two letters from each side proposing changes and addressing changes suggested by the other side to the transaction are needed to be reviewed/discussed by the attorney and his/her client(s). Upon agreement by both sides to any and all changes to the contract, the parties will acknowledge that in writing in order to complete attorney review.”
According to McNally, “common changes to the contract in attorney review include: extending the time to complete inspections and extending the time to obtain the buyer’s mortgage commitment. This is so because the form contract used by the various real estate agencies generally talks of the time for inspections being counted from the day the contract is signed. Because attorney review can take three days (or sometimes longer, depending on the situation) it is better for the attorneys to agree that the contingency time periods shall start from the day that attorney review is completed. Contract changes may also include a contingency if the buyer needs to sell their current house in order to perform on the purchase contract. Some contract changes may also contemplate the requirement that Sellers present permits and final approvals for all changes made to the property.”
Only after attorney review is formally concluded in writing is the contract binding. In the event that the parties cannot come to a meeting of the minds during attorney review, either party may terminate the sale without recourse. In that case, the Buyer would be entitled to a refund of his deposit, and the Seller would be free to re-market the property to other prospective Buyers.
Assuming that your offer survives attorney review, the next step is for the Buyer to schedule a home inspection.