By Christine M. Dalena, Esq.

In 1995, the New Jersey Supreme Court held that neither buyers nor sellers of residential real estate are required to use an attorney to handle real estate closings. There are, however, compelling reasons to retain an attorney when involved in a real estate matter. Solid legal advice helps ensure that the transaction proceed to a successful close, without compromising the legal rights of any of the parties involved.

The purchase or sale of real estate, home or property, is often the largest investment that people make during a lifetime. There are serious consequences for non-performance or breach of contract. Buyers and sellers of real estate should be aware that there is enhanced risk in transferring real estate without the legal expertise of an attorney. Errors and commissions can result in forfeiture of deposit funds and in the possibility of extensive legal fees associated with litigation that results.

New Jersey is one of the few states that permits parties to enter into a valid binding contract, which then becomes subject to review and approval by respective attorneys even after the contract is fully executed. If the parties, with assistance of legal counsel, cannot reach an agreement on the terms and conditions of their contract after it is signed by both buyer and seller, the contract becomes null and void and any monies that have been advanced by the buyer must be returned.

Residential real estate contracts that have been drawn by a realtor are – by law – subject to attorney review and approval. The three-day review process is the first of several hurdles that must be surmounted before the transaction can be completed. It begins the day after the attorneys have received the actual singed contracts. Weekends and legal holidays do not count toward the three days.

During the contract review period – prior to final approval– the sellers can continue to show the property to prospective buyers and accept additional offers. In the current real estate market, it is not uncommon for multiple offers to be made on the same property due to a lack of inventory, growing demand for housing, and low interest rates.

Once the attorney review process has been completed, other contract contingencies must be addressed before the buyer is obligated to close on the purchase of the property. They include mortgage approval, home inspection issues, termite and pest control issues, radon evaluation, flood zone considerations, underground oil tank issues, and lead paint concerns. Attorneys experienced in real estate transactions are best qualified to help both buyers and sellers navigate the contingency course.

Probably the most valuable service the attorney performs is to review the status of the title to the property, as well as ordering and reviewing a survey (legal description) of the property. The information obtained will assure that the size of the property has been accurately stated and will provide other information such as title and zoning issues, that could affect the future value of the property. Situations in which easements or restrictions are not disclosed prior to entering into the contract of sale occur frequently. If the property cannot be used for its intended purpose or is somehow restricted, the buyer may have the absolute right to terminate the contract and receive all monies advanced.

All parties involved in a contract for purchase or sale of real estate are well advised to consider seriously having legal representation during the course of a real estate transaction to ensure that the proper precautions have been taken leading to a successful outcome.

(The authors are the Co-chairs of the Morris County Bar Association Real Estate Committee.)