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How Can Three-Day Review Protect My Rights On Real Estate Contract in New Jersey?

After you make an offer to buy a house and the seller accepts that offer, a pre-printed form of contract is usually prepared by a realtor setting forth the essential terms and is singed by both the buyer and seller. Usually, an initial deposit is provided with an additional deposit to be paid within about ten days of the contract date. Once that process is concluded, however, what comes next?


1. 3 Day Attorney Review Period.

After everyone has signed the aforementioned contract, the attorney review period begins. You have three days from receipt of the fully signed contract for an attorney to review it. They may choose to either disapprove or approve of it. Here, your attorney will discuss with you any concerns they have about the contract’s language and make changes to the contract. The attorneys for the buyer and seller typically negotiate different terms and reach an amended agreement or an additional provision (referred to a rider) to the contract.

The attorneys also may just render the contract null and void if one of the parties decides that they now want out of the deal. Critically, you must understand that if the contract is not disapproved within the attorney review period, you are stuck to the terms of the contract as written. Thus, you must contact an attorney immediately after signing the contract, meet with the attorney, and make any changes to the contract that best protect your rights. After both attorneys confer and make any changes to the contract, then the new terms of the revised deal are enacted.

2. Standard Attorney Review Clause.

In New Jersey, the attorney review clause as approved by the New Jersey Supreme Court and used in many realtor contracts is as follows:

a. Study by Attorney

The Buyer or the Seller may choose to have an attorney study this contract. If an attorney is consulted, the attorney must complete his or her review of the contract within a three-day period. This contract will be legally binding at the end of this three-day period unless an attorney for the Buyer or the Seller reviews and disapproves of the contract.

b. Counting the Time

You count the three days from the date of delivery of the signed contract to the Buyer and the Seller, You do not count Saturdays, Sundays or legal holidays. The Buyer and the Seller may agree in writing to extend the three-day period for attorney review.

c. Notice of Disapproval

If an attorney for the Buyer or the Seller reviews and disapproves of this contract, the attorney must notify the REALTOR(S) and the other party named in this contract within the three-day period. Otherwise, this contract will be legally binding as written. The attorney must send the notice of disapproval to the REALTOR(S) by certified mail, by telegram, or by delivering it personally. The telegram or certified letter will be effective upon sending. The personal deliver will be effective upon delivery to the REALTOR(S) office. The attorney may also, but need not, inform the REALTOR(S) of any suggested revision(s) in the contract that would make it satisfactory.

The requirements for the attorney review are also set forth in the New Jersey Administrative Code 11:5-6.2, entitled Counting Time and Options Under the Attorney Review Clause.

All realtor prepared contracts must contain a three-day attorney review period. Under this clause, the Buyer or Seller may choose to have an attorney review their contract. The contract will be legally binding at the expiration of the three-day period unless an attorney for either party reviews and disapproves of the terms of the contract.

In terms of counting time or calculating the expiration of the three-day attorney review period, you do not count the date of delivery of the fully executed agreement to all parties and you do not count Saturdays, Sundays or legal holidays.

If an attorney for the Buyer or the Seller reviews and disapproves of the terms of the contract, the attorney must notify the realtors and the other party named in the contract within the three-day time period, otherwise, the contract will become legally binding as written. The notice of disapproval must be sent by certified mail, by telegram or by delivering it personally. The telegram or certified letter is effective upon the date that the telegram or letter was sent. Personal delivery is, of course, effective upon the date of the deliver to the realtor’s office. If the attorney disapproves of the contract, the contract becomes null and void and the parties have no further obligation to each other with regard to the sale or purchase of the property. In the alternative, the attorney may inform the realtor of suggested changes to the contract that will make the contract satisfactory and the contract will become binding only if the other party agrees to the suggested changes.”

Please note that the attorney review clause is only applicable to real estate broker prepared contracts and is not applicable and does not have to be included in the contract that is prepared by an attorney.”

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3. Requirements on Type of Notice On Attorney Review.

So long as the actual notice of disapproval is received within the three-day attorney-review period by a method of communication commonly used in the real estate industry, the notice of disapproval is considered valid. This is important in modern times. Thus, the New Jersey Supreme Court has held that an attorney's notice of disapproval of a real estate contract may be transmitted by fax, e-mail, personal delivery, or overnight mail with proof of delivery. Notice by overnight mail will be effective upon mailing. Keep in mind, however, that the attorney-review period within which this notice must be sent remains three business days. Conley v. Guerrero, 228 N.J. 339 (2017).

4. Contract Contingencies and Terms to Protect You.

The contract should contain certain terms and for your protection. As a buyer, you need home inspection clauses covering the:

(a) Structure
(b) Roof
(c) Electrical
(d) Plumbing
(d) Heating and cooling systems
(e) Appliances
(f) Wood destroying insects
(g) Environmental contaminants (i.e. radon, lead paint, mold etc.)
(h) Septic
(i) Any other potential problem areas or concerns with the property.

If you are obtaining a loan, you should also have a mortgage contingency, which makes the purchase contingent upon your obtaining a mortgage commitment with certain terms. Thus, if you cannot obtain the mortgage you can cancel the contract without penalty or losing a deposit. You must review with your attorney all of your concerns about your situation to determine the clauses that should go in the contract.

As a seller, you need to discuss with the your attorney contract terms as to title ownership, known problems as to condition of property, deposit monies of buyers, likelihood of buyer’s ability to close, whether property in flood zone, lease and tenancy information, existing warranties, settlement date, survey issues, tax and utility issues. Keep in mind that issues discussed in this paragraph are only examples and each real estate transaction has its own unique issues that may need to be addressed.


5. Home Inspections.

A buyer should always order a home inspection. The contract should provide a date by which to get the results to the seller. Depending on the home inspection clauses, you should have certain minimum rights with respect to inspection issues, such as the ability to make demands or get out of the contract. Make sure you have a qualified home inspector that can complete his report in time.

6. Mortgage.

As a buyer, you are usually required to make a good faith effort to apply for a mortgage immediately. You must pay close attention to the mortgage contingency clause carefully. You have to make sure that the mortgage contingency clauses does not provide for a waiver of rights if you do not cancel the contract because you could not obtain the mortgage by a certain date.

Reviewing any mortgage commitment once you obtain it is critical. Go over the rate and terms and make sure they are as represented by the bank or mortgage broker. This could be the largest financial transaction of your life and it is worth the time. The commitment will have specific requirements that need to be met prior to closing a loan so your attorney must be provided a copy.

7. Title and Survey.

A title search must be ordered on the property by the buyer to make sure title is clear of any liens. Typically, the buyer’s attorney will order after all inspections are resolved and you have received a mortgage commitment from your lender. The title company that performs the search will also provide title insurance on the property. The lender will require this insurance and protects you interest and the lender’s interest in the property.

A survey is a legal description on the property performed by a professional land surveyor. The survey is to make sure you are purchasing the proper parcel and to determine if there are any encroachments, easements or zoning violations.

8. Closing

After all of the above issues are worked through, , a closing date can be scheduled. A closing statement is with all of the figures is provided a within days of the closing. Sometimes, those figures change right up to the closing. The buyer is advised about the amount of funds to bring to closing. In any real estate transaction there are closing costs, such as real estate broker fees, title company fees, bank fees, recording fees, homeowner’s insurance, survey, attorney fees, home inspection credits, realty transfer costs, water and sewer bills. Some of these costs are the buyer and some the seller. Prior to closing your lender has to provide a Good Faith Estimate of the costs of the financing and other closing costs.

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9. Post-Closing

After the closing, the buyer’s attorney of the title company performing the closing sends the mortgage pay off to the seller’s mortgage lender and records the deed and mortgage and discharges the seller’s mortgage, if any, and pays off any other liens or encumbrances. The buyer’s attorney must provide necessary documents to the title company in order to obtain a proper title policy.

Purchasing and selling a home are the biggest financial transactions of people’s lives. You should have an attorney to protect your rights. The cost to an attorney is minimal compared to the risk of not having one. Please feel free to call one of our New Jersey attorneys to discuss your case to see if we can help.


John J. Scura III

John fights hard for his clients and tries to educate them so they understand what is going on with their particular legal problem. John has been Certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or other type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.

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