The chronology of the events is usually as follows. First, a prospective purchaser will make an offer on a property, whether through a realtor or directly. Then the seller accepts the offer and, if a realtor is involved, a deal sheet is generated that contains the basic information concerning the transaction. It is important to note that, at this point, neither the seller nor the buyer is legally obligated to purchase or sell the property. A legal obligation would only exist if the attorneys from both sides negotiate a contract and a final form is agreed upon and signed.
The next formality is that a buyer will sign a contract and send a downpayment – typically 10% of the purchase price – to the seller’s attorney. This downpayment is also sometimes referred to in other states as “earnest money,” and this downpayment is deducted from the purchase price at closing. The next formal step is that the seller signs the contract, while the seller’s attorney deposits the downpayment to keep it safe in an attorney trust account. The fully signed contract is then returned to the buyer’s attorney. At this point, the property is formally “under contract.” The buyer then begins the process of obtaining a mortgage or financing and the buyer’s attorney begins the process of ordering title to check for liens or other encumbrances on the property.
The final step would be for the parties to schedule a closing. The buyer should keep in mind that the downpayment is still being held by the seller’s attorney (albeit in a trust account). The entire purpose of keeping the money in a trust account is for the downpayment to act as liquidated damages if the buyer defaults and tries to walk away from the deal in breach of the contract. If there are issues that prevent the buyer from closing and purchasing the property, the buyer is well advised to contact his/her attorney immediately to discuss possible solutions and next steps.
It is critical to engage an attorney who will guide you and help you throughout this process as your advocate and guide.
At Beress & Zalkind PLLC, our attorneys are experienced in all kinds of real estate transactions in New York and New Jersey. We work closely with the title company on the transaction to assist and facilitate a smooth closing.
Call us at 718 513 3500 or send us an email at firstname.lastname@example.org if you want to discuss your transaction.