Opinion ID: 2183644
Heading Depth: 1
Heading Rank: 2

Heading: The South Jersey Practice

Text: Although the variations are numerous, the South Jersey practice complained of typically involves residential real estate closings in which neither buyer nor seller is represented by counsel, and contrasts most sharply with the North Jersey practice if one assumes both parties are represented there. Obviously, that is not always the case: the record shows that about sixty percent of the buyers and about sixty-five percent of the sellers in South Jersey are not represented by counsel. In North Jersey, only one half of one percent of buyers, and fourteen percent of sellers, proceed without counsel. In North Jersey, when both seller and buyer are represented by counsel, they sign nothing, agree to nothing, expend nothing, without the advice of competent counsel. If, initially without counsel, they sign a contract of sale prepared by the broker, they ordinarily then retain counsel who can revoke that contract in accordance with the three-day attorney review clause. They are protected, and they pay for that protection. The seller in North Jersey spends on average $750 in attorney fees, and the buyer in North Jersey spends on average $1,000. The buyer in South Jersey who chooses to proceed without representation spends nothing. The South Jersey seller whose attorney does no more than prepare the deed and affidavit of title, usually without even consulting with the seller, spends about $90. South Jersey buyers and sellers who are represented throughout the process, including closing, pay an average of $650 and $350, respectively. [2] Savings obviously do not determine the outcome of this case; they are but one factor in the mix of competing considerations. The typical South Jersey transaction starts with the seller engaging a broker who is ordinarily a member of the multiple listing system. The first broker to find an apparently willing buyer gets in touch with the seller and ultimately negotiates a sale price agreeable to both. The potential buyer requires financing arrangements which are often made by the broker. Before the execution of any sales contract the broker puts the buyer in touch with a mortgage company to determine if the buyer qualifies for the needed loan. At this preliminary stage, no legal obligations of any kind are likely to have been created, except for those that arise from the brokerage relationship itself. Assuming the preliminary understanding between the seller and buyer remains in effect, the broker will present the seller with the standard form of contract used in that area (usually a New Jersey Association of Realtors Standard Form of Real Estate Contract). That form includes, pursuant to our opinion in New Jersey State Bar Association v. New Jersey Association of Realtor Boards, 93 N.J. 470, 461 A. 2d 1112 (1983), notice that the attorney for either party can cancel the contract within three business days. If the seller signs the contract, and does not within three days retain counsel, the seller will have become legally bound to perform numerous obligations without the benefit of any legal advice whatsoever, some of which may turn out to be onerous, some costly, some requiring unanticipated expense, and some beyond the power of the seller to perform, with the potential of substantial liability for such nonperformance. Many sellers will not understand just what those obligations are, and just what the risks are. Not only has the seller not retained a lawyer, the only person qualified to explain those risks. Worse yet, the only one the seller has had any contact with in the matter is the broker, whose commission depends entirely on consummation of the transaction, and whose interest is primarily  in some cases it is fair to say exclusively  to get the contract signed and the deal closed. After the seller signs the contract, the broker delivers it to the buyer for execution. The buyer may not know if the description of the property is precisely that assumed to be the subject of the purchase. The buyer may have no idea if the title described in the contract is that with which he would be satisfied, no sound understanding of what the numerous obligations on the part of the seller mean, and no fair comprehension of whether all of the possible and practical concerns of a buyer have been addressed by the contract. No lawyer is present to advise or inform the buyer; indeed, there is no one who has the buyer's interest at heart, only the broker, whose interests are generally in conflict with the buyer's. Although the record does not dispose of the issue, and although Judge Miller explicitly left it undecided, he noted concern that the broker, through his or her actions, may lead the buyer to believe that the broker is looking out for the buyer's interests. Therefore, without independent advice, the buyer signs the contract. If no attorney is retained within three days, the buyer is bound by all of its terms. For both seller and buyer, it is that contract that substantially determines all of their rights and duties. Neither one of them can be regarded as adequately informed of the import of what they signed or indeed of its importance. At that point the broker, who represents only the seller and clearly has an interest in conflict with that of the buyer (the broker's interest is in consummation of the sale, the buyer's in making certain that the sale does not close unless the buyer is fully protected) performs a series of acts on behalf of the buyer, and is the only person available as a practical matter to explain their significance to the buyer. The broker orders a binder for title insurance, or a title commitment to make sure that the buyer is going to get good title. The buyer has no idea, and hopefully never will have, whether the broker ordered the right kind of title search, a fairly esoteric question that only an experienced attorney can determine. The broker also orders numerous inspection and other reports, all primarily of interest to the buyer, to make certain that not only is the title good, but that there are no other problems affecting the premises, the house and their use. Those reports can have substantial legal consequences for both seller and buyer. For example, at what threshold dollar amount of required repairs should the seller (or the buyer) be able to cancel the contract? At what dollar amount should the buyer ignore the repairs? At what dollar amount should the buyer be able to compel the seller to make the repairs, and within what time frame? At this stage of the transaction the help of a lawyer could be invaluable, and the advice of a broker problematic. The seller in the meantime is happy to hear from no one, for it suggests there are no problems. Eventually, the seller is told that a deed will be arriving drafted by an attorney selected by the broker, the instrument that our decisions clearly require may be drafted only by the seller's attorney. Cape May County Bar Ass'n v. Ludlam, 45 N.J. 121, 211 A. 2d 780 (1965). Of course, the purpose of that ruling was to assure competent counsel in the drafting of such a uniquely legal document, but competent always meant counsel who understood the entire transaction. In South Jersey, the attorney selected by the broker, while theoretically representing the seller, may be primarily interested in the broker, the source of the attorney's client and the likely source of future clients, and consequently primarily interested in completing the sale. That attorney is likely to prepare a deed satisfactory to the title company  in fact that attorney often does not even contact the seller. He or she may have no idea of anything in the contract of sale other than the description of the land and the fact that a certain kind of deed is required. No advice on the substance of the transaction comes from such an attorney even though the seller may get the impression that, since an attorney drafted the deed, the seller's interests are somehow being protected. In fact, the only protection those interests ever received, other than those that happened to appear in the form contract, is in the numbers inserted in that contract, the total purchase price, the down payment, and the closing date, for those are probably the only terms of that contract fully understood by the seller. The buyer's position is even worse when the closing occurs. The seller will at least know that he or she got paid. Legal training is not required for that fact, even though there is no practical assurance that the seller will not thereafter be sued. The buyer, on the other hand, wants something that is largely incomprehensible to almost all buyers, good and marketable title, one that will not result in problems in the future. What the buyer gets before closing is a title binder, a piece of paper that may suggest something about the quality of the seller's title, but that is very much in need of explanation for any substantial understanding of its meaning. The title company is required to mail to the unrepresented buyer notice of any exceptions or conditions associated with the title insurance policy. N.J.S.A. 17:46B-9. This notice, which must be sent five days prior to the closing, must also notify the buyer of the right to review the title commitment with an attorney. Ibid. If the buyer chooses not to retain an attorney, there is no one to give the buyer that understanding other than the broker and the title agent. The broker's knowledge will often be inadequate, and the conflicting interest apparent. The title company similarly has a conflicting interest, for it too is interested in completion of the transaction, the sine qua non of its title premium. But the title company is also interested in good title, for it is guaranteeing that to the mortgage company, as well as to the buyer. Good title, however, may be one on which the title company and the mortgagee are willing to take a risk, but one on which a buyer might or should not be willing to, if the buyer knew what the risk was. Again, there is no one to tell the buyer what those risks are, and in some cases the explicit exceptions found in a title policy, those matters that the title company will not guarantee, are of the greatest importance. The significance of those matters is conceded by all to be something that only attorneys can give advice on, and it is contended by all that they never give such advice. Yet such exceptions exist, and title still closes, and the buyer is totally unrepresented by counsel. One must assume that somewhere, somehow, the buyer is satisfied that there is nothing to worry about, leading to the inescapable conclusion that either the broker or the title officer provides some modicum of assurance or explanation. The day for closing arrives and everyone meets, usually at the offices of the title company. Seller and buyer are there, each without an attorney; the broker is there, and the title officer is there, representing both the title company and the mortgagee. The funds are there. And the critical legal documents are also on hand: the mortgage and the note, usually prepared by the mortgagee; the deed, along with the affidavit of title, prepared by the attorney selected by the broker or by the title company; the settlement statement, usually prepared by the title company, indicating how much is owed, what deductions should be made for taxes and other costs and what credits are due; and the final marked-up title binder, which evidences the obligation of the title company to issue a title policy to the buyer, and which at that point is probably practically meaningless to the buyer. All are executed and delivered, along with other documents, and the funds are delivered or held in escrow until the title company arranges to pay off prior mortgages and liens. It would take a volume to describe each and every risk to which the seller and buyer have exposed themselves without adequate knowledge. But it takes a very short sentence to describe what apparently occurs: the deal closes, satisfactory to buyer and seller in practically all cases, satisfactory both at the closing and thereafter.