The Town Broker

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!

Tags: attrorney review, real estate transaction, sales contract

This entry was posted on Friday, April 23rd, 2010 at 6:30 am and is filed under Buyers, Real Estate 101, Sellers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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