Your real estate attorney in New Jersey does much more than merely review the real estate contract to ensure it is fair and reasonable. Real estate attorneys are vitally important pieces of the increasingly complex real estate puzzle and you will rest easy knowing a talented, hardworking legal practitioner is fiercely advocating for your interest all the way through the closing. Here’s a quick look at a few tips from our New Jersey real estate law firm that will help you land your dream home at a fair price without a lengthy wait.
Use an Escalator Clause
Escalator clauses were not used that frequently in decades past though they have become quite the important strategic tools for winning real estate bidding wars in 2021. The housing market in New Jersey and the rest of the country has never been hotter. Even if you were to submit an all cash bid 10% to 20% higher than the ask price, there is no guarantee it would be accepted.
Thankfully, escalator clauses are available to ensure your dream home does not slip out of your grasp. Add an escalator clause to your NJ real estate offer and you will have the right to match other higher offers up to a ceiling referred to as the “cap.”
As an example, if you were to submit an offer with an escalator clause capped at $250,000 for a home listed at $235,000 and someone else bids $247,000, your offer would move up to an increment (typically $1,000) greater than $247,000. An extra thousand dollars would be tacked on to this next highest offer, resulting in you purchasing the home for $248,000. However, if there is a competing bid above the cap figure of your escalator clause, your clause would not be triggered and you would lose out on the home.
Obtain Legal Assistance Right Away
You will need the assistance of a NJ real estate attorney as soon as you start home shopping. Your attorney will help craft the language of your real estate contract. If your home fails or passes inspection, your attorney will take the necessary ensuing action to either cancel the contract or move it forward to the next step of the process. If you were to delay hiring an attorney, your home buying process would also be delayed, possibly causing the seller to move on to offers submitted by potential buyers who are more adequately prepared.
Determine how Much Home You can Really Afford
Buying a three-story McMansion in the suburbs of New Jersey might not be financially prudent. You and your family might be better served with a ranch home far away from the city center. Keep in mind, you will have closing costs, taxes, attorney costs, home inspection costs, repairs and additional expenses after buying a home. Spend some time creating a realistic budget and stick to that budget throughout the home buying process to ensure you are not house rich and cash poor on move-in day.
If you crunch the numbers and determine your down payment will be less than 20% of the sale price, you will end up paying private mortgage insurance (PMI) in addition to your mortgage interest rate. This means buying the house will prove even more expensive than initially anticipated.
Meet With a Lender Before Home Shopping
Plenty of real estate agents refuse to show a home unless the prospective buyer shows proof of mortgage pre-qualification or pre-approval from a lending institution. If you cannot qualify for a mortgage, you should not invest your time looking at homes on the market. Obtain proof of financial backing from a mortgage lender and you will be taken seriously by NJ real estate agents as well as local home sellers.
Bid in Context
Context and timing are more important than most assume, especially when it comes to buying a New Jersey house. The market is blazing hot now thanks to low mortgage interest rates, the massive millennial age cohort reaching their 30s and the record shortage of available homes for sale. Add in the soaring price of lumber and buying a new home becomes even more challenging. This means bidding the ask price for a local NJ home probably won’t get the job done. Even if the home fails inspection, needs repairs and is more than a century old, it will probably sell above the ask price.
Tack on another 10% to 25% above the ask price and you might emerge as the winner. If possible, make an all cash offer to sweeten the deal that much more for the seller. Sellers prefer all cash offers as they expedite the closing timeline and are that much less likely to fall through in the days and weeks ahead.
Do Your Part to Expedite the Closing Process
It might take your lender upwards of a month and a half to provide the green light for the closing. In the meantime, your lender will likely request an abundance of documentation ranging from bank statements to tax returns, proof of income, credit reports and more. Instead of scrambling to organize and present this paperwork to the lender after it is requested, be proactive by providing it at the start of the process. This way, if your lender drags its feet and ends up waiting until the final week or days to give you the all clear to close, you will know you have done everything in your power to expedite the process.
Contact Bavagnoli & Bavagnoli Today
The assistance of our real estate attorney in New Jersey has the potential to save you thousands or even tens of thousands of dollars. Contact us today to find out more about how we can help you buy or sell a home in New Jersey. You can reach Bavagnoli & Bavagnoli by phone at (973) 785-9522. You can also contact us online by completing our contact form.