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Archive for April, 2010
Real Estate Stuff You Should Understand
I’m beginning to see a pattern in my posts. Whether I’m working with buyers or sellers, people get confused about the various aspects of the real estate transaction. It’s pretty understandable really. You buy or sell a home…what…every 10 years or so? How could you remember everything? (It’s kind of like when I bought my wife’s engagement ring 20 years ago. I knew everything there was to know about “cut, color, carat and clarity”…but do I still remember?!?)
I deal with this stuff 24/7. And that inspires me to write…
Real Estate Stuff You Should Understand.
To this end, I’m introducing a new blog category. It’s called “Stuff I Think You Should Understand“, and you’ll find it on the left margin of the site. Here you’ll find posts that address key components of the real estate transaction. Whether the issue is attorney review, security deposits, or the rules of agency, I hope you’ll find something here of value. I plan to add to it regularly…
Feel free to review these posts and share your thoughts. If there is a topic that you’d like me to address, I’d love to hear about it! Just post your request in the contact me section of this site, and I’ll get to it as soon as I can!
Pet Security Deposits: Are They Legal?
The question came up again yesterday afternoon: Is it legal for landlord’s to take an additional security deposit to cover pet damage? It’s a question that came up so frequently when I was managing, that I thought I’d explain it here.
Pet Security Deposits ARE Legal.
First of all…a landlord is not required to allow pets in their rental property. They decide to do so (or not) at their own discretion. A landlord can also set limitations on the type and size of the pet that they would allow in the home. Hey…they still own the home, so it’s their call.
If a landlord does decide to allow pets, there is nothing specifically illegal about collecting additional security to cover pet damage. What could create problems is the amount of the additional security. I think this is where the issue sometimes gets confused.
NJ Law states that the most a landlord can collect in security is an amount equal to 1 1/2 month’s rent. There is no exception to this. It can be held as a general security deposit, a pet security deposit, or even a combination of the two.
So if the landlord requires an initial security deposit equal to 1 1/2 months rent, they can’t legally ask for an additional amount to cover pet damage. If however the landlord requires a smaller amount for security…say 1 month…then they could legally ask for an additional deposit. But the TOTAL of all money held in security cannot exceed the 1 1/2 month limit.
So in the end, pet security deposits are legal in NJ… as long as the landlord doesn’t collect too much. If you have questions about security deposits, or anything else related to a real estate transaction, please feel free to contact me. I’d be happy to help!!
Bad MLS Photos
When you’re selling your home, first impressions count!! Just because you have a camera, doesn’t mean you should take your own pictures. If it’s true that a picture says a thousand words, then I’d LOVE to hear what these are saying!!
The following shots were taken from active listings posted in the Garden State Multiple Listing Service. The property addresses have been left out to protect the innocent.
I may have to make this a regular feature on this blog…
Homes For Sale in Westfield & Surrounding Communities.
Buying or Selling A NJ Home? The Basics of Attorney Review (Part 2)
As a practicing broker, I find that one of the most misunderstood aspects of the real estate transaction is what’s know as the ”attorney review clause”. Is it a requirement to have an attorney review the sales contract? What’s all this about the attorney review lasting for 3-days?
In Part 1 of this series, I reviewed WHY we have an Attorney Review process in New Jersey. Today I want to briefly explain how it works.
Attorney Review Is Like Opening and Closing a Window.
I once heard the attorney review clause described this way, and the analogy made sense to me. When a buyer and seller enter into a properly executed contract, it becomes legally binding upon all the parties. It’s like closing and locking a window. But an attorney is allowed to unlock the window for you. S/he does this by canceling the contract as written, and proposing changes. Once this is done, the window is open again…and the contract is no longer binding.
All kinds of things can happen if you leave your window open all week…so it’s generally not a good idea to do that. The same holds true with the attorney review period.
Once the contract has been cancelled under the attorney review clause, it’s really cancelled! Either party can change their mind and walk away, and they don’t need to give a reason. But in most instances, the buyer and seller want the deal to happen, so their lawyers make whatever changes they see fit, and then everyone agrees to make the contract binding again. The process of re-closing and locking the window is known as closing attorney review.
Attorney Review Does NOT Last 3 Days!
This is the most common misconception that I come across. Remember…the attorney review clause exists so that you have enough time to get a proper legal review of an agent-prepared contract. You are given 3 business days to retain an attorney and make any changes…or the contract stands as written. (Yes…this also applies if you’re buying a short sale and need to wait for bank approval. Get the review done within 3 days…or trust me, you’ll have problems!!) But once the attorney “unlocks the window”, it stays “unlocked” until all the parties agree to close it. I’ve seen attorney review periods that have lasted hours, and others that have lasted weeks. In some rare instances, the deal goes all the way to closing without EVER formally ending the review period! Which brings me to my last point…
Use A Real Estate Attorney!
Please understand…retaining legal counsel is optional in New Jersey. But if you do decide to get counsel, PLEASE use an attorney who specializes in real estate law!! I KNOW that everyone has a cousin or neighbor who is a lawyer that will handle the closing on the cheap. But they usually mess things up (IMHO). Would you go to a dermatologist for cardiac surgery? How about letting the anesthesiologist handle the plastic surgery? Probably not, right?
Real estate law is a specialty. Fail to recognize this fact at your own peril. Feel free to contact me if you want the names of some excellent local real estate attorneys!
Buying or Selling A NJ Home? The Basics of Attorney Review (Part 1)
As a practicing broker, I find that one of the most misunderstood aspects of the real estate transaction is what’s know as the ”attorney review clause”. Is it a requirement to have an attorney review the sales contract? What’s all this about the attorney review lasting for 3-days?
In this 2-part series, I’ll briefly review the basics of NJ’s attorney review process – why it exists, and how it works.
Selling A Home And The Unauthorized Practice Of Law
Historically, preparing contracts has been considered the practice of law, and has been the responsibility of attorneys. When real estate brokers and their agents began preparing real estate contracts for their clients, the NJ Bar Association cried foul. After many years of litigation, the Bar Association and the NJ Association of Realtors reached a settlement.
The settlement allowed brokers and their agents to fill in the blanks on an approved, standard contract for the following types of transactions:
- Contracts for the sale of 1 to 4 – family homes,
- Contracts for the sale of vacant, 1-family lots,
- Lease contracts for residential dwelling for terms of 1 year or more.
(Brokers and their agents can represent clients in other types of transactions…multi-parcel lots, apartment buildings, commercial property, etc., but they cannot prepare the contract of sale.)
One of the purposes of the attorney review clause is to allow agents to expedite the preparation and signing of the contract and avoid any delays which might occur if an attorney was not available. Consumers would be given an opportunity to retain an attorney “after the fact”. The brokerage community in the state was generally happy with this compromise.
In 1995 however, the NJ Supreme Court rendered a decision which held that several of the services being performed by brokers and their agents DID constitute the unauthorized practice of law. In their ruling they stated that consumers would be well served to retain an attorney and obtain proper legal advice. But they also ruled that it was it was in the consumers interest to have the right to decide whether or not to retain an attorney.
The outcome of this decision is that all contracts prepared by a broker or agent MUST include a notice to buyers and sellers. This document commonly referred to as the “Opinion 26 Notice” (named after the court case which addressed the unauthorized practice of law by brokers/agents), MUST be signed BEFORE signing the contract of sale. It explains the following:
- Who the broker is representing in the transaction,
- The fact that only an attorney can provide legal counsel. No legal advice will be provided by brokers, their agents or representatives of title companies,
- The importance of the contract in the transaction, the important services that can ONLY be provided by an attorney, and the risks associated with buying or selling a home without legal representation,
The Opinion 26 Notice also states that there will be a 3-day “cooling off period” in which buyers and sellers have the right to hire an attorney to review and edit the agent-prepared contract. The contract becomes binding as written if no changes are made during this time.
Interestingly, there is still a geographic divide in New Jersey, with most transactions involving attorneys in the northern part of the state, and far fewer in the southern part.
So that answers the question “why is there an attorney review clause”. In Part-2 of this series, I’ll get into the “nitty-gritty” of how the attorney review process actually works.
Honey, I Shrunk The House.
Home Sizes Decrease As Boomers Enter Retirement Age
The average American home size has been decreasing in recent years. The reason? More boomers are retiring and don’t need the extra space. Check out this month’s National Market Report from Keller Williams for details.
The House I’m Buying Just Exploded! What Happens Next?!
Imagine this: You’re days away from closing on the purchase of your new home. Then, the unthinkable happens. Utility workers hit a gas line in the yard, and the house explodes!!
Well for one unfortunate home buyer in our area, that’s exactly what happened this week. The picture on the left is all that remains of the home being purchased by Gilberto Estupinan.
The good news is that there were no serious injuries. But the question several of my friends asked me is: What happens next? Does he still have to buy the house?!
Buying A Home and Risk Of Loss
The short answer is probably not. Now let me be clear…I’m NOT a lawyer. Heck, I don’t even play one on TV. But I can give you a loose “broker’s interpretation” of contract law as I understand it.
When buyers and sellers enter into a binding contract, the buyer establishes what’s known as equitable title in the home. That is…they have an ownership interest in the property, but haven’t taken possession until closing. And since they have an ownership interest, they assume the risk and rewards that come with owning the property.That would be really cool if they found a diamond mine or struck oil on the land. But if you’re Mr. Estupinan in our situation above, it could really stink!
Risk Of Loss Is On The Seller
If you’re working with a Realtor or a good real estate attorney, you’ll probably be covered. The standard NJ real estate contract redirects the risk of loss back to the seller. Section #15 of the standard contract reads as follows:
“The risk of loss or damage to the property by fire or otherwise, except ordinary wear and tear, is on the seller until closing.”
So the simple rule of thumb is this: Until you get the keys at the closing table, you’re probably not at risk for a loss like this. (Oh and BTW…this is why your lender requires proof of insurance before they let you walk out of the closing!)
Just pray that lightning doesn’t strike on the way home!
Home For Sale – 3 Douglass Drive, Princeton NJ 08540
3 Douglass Drive, Princeton NJ 08540
$529,000/ 4 br/ 2.1 Baths/ 0.71 AC/ Full Finished Basement
PRINCETON mailing address & South Brunswick taxes! Situated on a wooded lot in one of the most desirable areas in So. Brunswick, this lovely 4 Br Colonial home backs to preserved land. This nicely updated home features HW floors, finished basement, abundant storage space, fenced in property and professional landscaping. Enjoy the serenity of the park-like setting from the screened-in porch and deck. Easy access to highway transportation makes your commute a breeze! THIS IS A MUST SEE!
Click Image Below For Our Virtual Tour
See The Floor Plan Read the rest of this entry »
Mortgage Rates On The Rise
As expected, mortgage rates are on the rise this week. (Hey, I never like to say ” I told you so“, but…umm…) The average rate on a 30-year loan has jumped from about 5 percent to more than 5.3 percent in the past few days. As mortgages get more expensive, more would-be homeowners are priced out of the market. As a result, many homebuyers are now scrambling.
Mortgage Rates Are NOT Set By The Fed
It’s important to understand that contrary to popular belief, mortgage interest rates are not set by the Federal Reserve. When the big kahunas meet in Washington they typically tinker with things like the Federal Funds Rate…the rate that banks charge each other to borrow money overnight. Mortgage rates however, are set by the price of mortgage-backed securities. And recently, the Federal Government…biggest buyer for these products… stopped buying.
That left rates nowhere to go but up.
Mortgage Rates Are Like A Roller Coaster
Dan Green (one of my all time favorite mortgage guys and author of The Daily Mortgage Report has taken the actual rates of the Fannie Mae 5% bond and plotted it as a roller coaster ride. The true-to-life mapping represents the rate changes during the period from 5/08 – 3/10 when the Fed was buying mortgage backed securities, and keeping mortgage rates artificially low. Come along for the ride, but I’ll warn you…bring your Dramamine!
The Take Away… If you’re in the housing market as a buyer OR a seller, mortgage rates have a huge impact on how things will turn out. If you want to know how today’s rates will impact your ability to buy or sell in this market, give me a call.
Mountainside NJ Home Sales – March 2010
Mountainside NJ Home Sales – March 2010
(The following data is provided by the Garden State Multiple Listing Service, LLC. It is deemed to be reliable, but is not guaranteed.)
- Average List Price For Active Listings = $843,521
- Number of New Listings Entering Market = 22
- Number of Listings Placed Under Contract = 4
- Absorption Rate = 8.2 Months
- Number of Sales Closed During Month = 2
- Average Original List Price = $744,950
- Average Sale Price = $717,500
- Average OLP/SP Ratio = 96.32%
- Average Days on Market = 64
The Following Is The List of Closed Home Sales Sorted by Closing Date
If you have any question about this information, please feel free to contact me!
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