Most contracts to buy and sell residential real estate are prepared by real estate brokers. When a broker prepared contract of sale is signed by a buyer and seller, both the buyer and the seller have the right to consult an attorney who can then “disapprove” the contract for any reason or no reason at all and terminate the contract of sale. Any monies paid on deposit by the buyer would be fully refunded. This right to terminate the contract is available to both buyer and seller provided it is exercised within three (3) days of the parties’ receipt fully signed contracts. Weekend days and holidays do not count as one of the three days of the attorney review period, nor does the day the buyer and seller first receive a copy of the fully signed contract of sale. For example, if the buyer and the seller receive fully signed copies of the broker prepared contract of sale on a Thursday, the attorney review period would begin on Friday and terminate at the end of the following Tuesday.
Why, you may ask, is there such an attorney review period? Because without it, such a contract of sale would be legally binding on both parties when signed. A party signing such a sales agreement prepared by a real estate agent might not fully realize that they are signing a binding legal document. The contract of sale is of primary importance to the real estate transaction. It is the document which lays out each party’s responsibilities from the time it is signed until closing of title. It is important that the parties understand what their obligations and rights are before agreeing to be bound by them.
The right to attorney review, which applies to real estate broker prepared contracts involving residential real estate in New Jersey, was created by the New Jersey Supreme Court. The right to attorney review applies to contracts prepared by licensed real estate brokers and sales people for residential real estate containing one to four dwelling units and for the sale of vacant one-family lots in sales which provide the realtor with a commission or other fee interest. The attorney review provisions also apply to documents prepared by a real estate broker or sales person which materially modify the original contract.
If neither the buyer nor the seller exercises their right to have an attorney review the contract within the three day review period, the contract will be binding on both parties. If the parties do retain the services of an attorney to review the contract, and neither party’s attorney disapproves the contract, the contract will be binding as well. The parties can agree to extend the attorney review period if desired. If the contract is disapproved and thus terminated, it will remain terminated until such time as the parties and their attorneys can negotiate changes which will make the contract acceptable. This negotiation process may exceed the initial three (3) day review period.