Glossary of Real Estate Terms for New Jersey

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Glossary of Terms for Purchase of Residential Property in NJ

AppraisalAn assessment of the property’s value conducted by a licensed appraiser to determine its fair market value. The appraisal is typically required by the lender to ensure the property’s value aligns with the loan amount.
AssociationA homeowners’ association or condominium association responsible for managing and maintaining common areas and enforcing rules and regulations in a development or community. Buyers in a development or condominium should be aware of the association’s governing documents and any associated fees or dues.
Attorney ReviewThe initial phase of a real estate transaction in New Jersey, starting within three business days from the date the last party signs and delivers the contracts. During this period, either attorney in the transaction may cancel the contracts or initiate changes to them by sending a letter to the other side within three business days. The Attorney Review process continues until both parties reach an agreement.
By-LawsRules and regulations governing the operation and management of a homeowners’ association or condominium association. By-laws may include provisions related to property usage, common areas, assessments, and association membership. Buyers should review these before the end of the Attorney Review to determine any restrictions on property usage.
Certificate of OccupancyA document issued by the local municipal authorities indicating that a property meets all building codes and is suitable for occupancy. The issuance of a Certificate of Occupancy is evidence of substantial completion in the case of new construction properties. If the builder receives a Certificate of Occupancy, they can force the buyer to close on the property, even if there are some incomplete items that need to be addressed later.
Closing CostsThe various fees and expenses incurred during the real estate transaction’s closing process. Closing costs include charges for title insurance, attorney fees, appraisal fees, survey fees, recording fees, and more. Buyers should be prepared for these costs, which typically amount to approximately 3% of the property’s purchase price.
Closing DateThe date specified in the contract when the finalization of the real estate transaction occurs. In New Jersey, the closing date is not always an absolute deadline, and both parties may have some flexibility within certain limits. For resale properties, either party can delay the closing for up to 10 days without facing financial consequences. However, for new construction properties, the closing date is typically determined by the builder and may be subject to delays beyond the control of the buyer.
CondominiumA type of residential property that is part of a multi-unit complex, where each unit is individually owned, and common areas are shared among all unit owners. Condominium ownership typically includes membership in a condominium association.
Conditions, Covenants & Restrictions (CC&Rs)Rules and restrictions imposed on properties within a development by a homeowners’ association or a builder. CC&Rs may include limitations on property use, architectural guidelines, and maintenance responsibilities. Buyers should review these documents before the end of the Attorney Review to understand any restrictions that may affect their intended use of the property.
Corner MarkersPhysical markers placed on the boundaries of a property to indicate its legal boundaries and ownership. A surveyor may use corner markers to establish the property lines accurately.
Engineering InspectionA thorough inspection of the property’s structural and mechanical components conducted by a licensed engineer or home inspector. The engineering inspection helps identify any significant defects or potential issues with the property.
EIFS (Exterior Insulation Finishing System) InspectorA certified inspector specialized in examining synthetic/artificial stucco systems on buildings.
Home InspectionAn evaluation of the property’s condition, systems, and structures conducted by a qualified home inspector. The home inspection helps buyers identify potential problems and make informed decisions about the purchase.
Homeowners InsuranceAn insurance policy that protects the buyer’s property and belongings from damages and liabilities. Lenders usually require a homeowner’s insurance policy with a one-year paid receipt before closing. The policy should have a mortgagee clause naming the lender and providing its address.
Invasive InspectionA comprehensive inspection of certain property components that may require some disassembly or access to concealed areas. Invasive inspections are often used for septic systems and other critical components.
Legal FeesThe fees charged by the buyer’s attorney for legal services related to the real estate transaction. Legal fees may vary based on the complexity of the transaction and additional services required by the buyer.
LienA legal claim or encumbrance on a property to secure the payment of a debt. Buyers should ensure that the property they are purchasing is free from any outstanding liens that could affect their ownership rights.
Loan ProcessThe process of applying for a mortgage loan, which includes providing necessary financial documents, obtaining a mortgage commitment from the lender, and finalizing the loan terms.
Marital StatusThe legal status of the buyer concerning marriage. In New Jersey, marital status can have implications for property ownership and may require the provision of divorce judgments and settlement agreements if relevant to the buyer’s situation.
Mortgage CommitmentA formal offer from the lender to provide a mortgage loan to the buyer. The mortgage commitment outlines the terms of the loan, including the loan amount, interest rate, and conditions that must be met before closing. It is an essential document in the closing process and is usually required before the closing can take place.
Mortgage ContingencyA condition in the contract that allows the buyer to back out of the transaction if they are unable to secure a mortgage within a specified timeframe. It provides protection to the buyer in case they are unable to obtain financing for the purchase.
Mortgage Origination/Discount FeesFees charged by the lender for processing and underwriting the mortgage loan. Buyers should be aware of these fees, which can be included in the closing costs.
Mortgage Rate LockAn agreement between the borrower and the lender to secure a specific interest rate for a set period, usually until the closing date. It ensures that the borrower receives the agreed-upon interest rate even if market rates fluctuate.
New ConstructionA residential property that is newly built and has not been previously occupied. The purchase of new construction properties often involves different considerations and contract terms compared to purchasing a resale property.
Open Public Record Act (OPRA) SearchA search conducted to obtain public records related to the property, such as permits and approvals for construction, from the municipality.
PermitAn official authorization issued by local government agencies for specific construction or renovation work on the property. Buyers should ensure that all necessary permits were obtained for any work done on the property.
Post-Closing Punch ListA list of incomplete or defective items that the buyer can request the builder to address after the closing.
Power of AttorneyA legal document that grants one person (the “attorney-in-fact”) the authority to act on behalf of another person (the “principal”) in specific matters, such as closing a real estate transaction. In New Jersey, lenders may or may not accept Powers of Attorney, and they may require review and approval in advance if they do accept them. It’s important to discuss the use of a Power of Attorney with the lender and the attorney involved in the transaction.
Prepaid InterestThe interest accrued on the mortgage loan from the closing date to the end of the month. Buyers need to pay this amount at the closing.
Public SewerA municipal sewer system that carries wastewater away from residential properties to a treatment facility. Buyers should be aware of whether the property is connected to a public sewer or relies on a septic system.
Purchasing Property with a WellA property that relies on a well for its water supply. Buyers should conduct a well inspection to ensure the well is functioning correctly and provides safe drinking water.
Resale PropertyA residential property that has been previously owned and occupied by someone else. The purchase of a resale property may involve additional considerations compared to new construction properties.
Recording FeesFees charged by the county clerk’s office for recording and filing documents related to the property’s sale and ownership.
Septic System InspectionAn inspection of the property’s septic system to assess its condition and functionality.
Single-Family DwellingA stand-alone residential property designed to accommodate one family. Single-family dwellings are not part of multi-unit complexes or shared ownership communities.
SurveyA professional survey of the property’s boundaries, structures, and other relevant features. A survey ensures that the property lines are accurately defined and helps identify any encroachments or boundary issues.
Title CompanyA company responsible for conducting title searches, managing closing logistics, and issuing title insurance policies. The title company ensures that the property’s title is clear and provides protection against any title-related issues.
Title InsuranceInsurance that protects the buyer and lender from financial loss due to defects in the property’s title or any undiscovered liens or encumbrances.
Township Building Department InspectionInspections conducted by the municipal building department during the construction process to ensure that the property meets building codes and regulations. These inspections culminate in the issuance of a Certificate of Occupancy for new construction properties.
Woodboring Insect CertificationAn inspection to check for the presence of wood-boring insects, such as termites, that could damage the property’s wooden structures. Some lenders may require this certification before closing.

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Anthony Spallone
December 27, 2020
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Jason Pawlikowski
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