We all know that the real estate market in New Jersey is currently hot. So much so, it is becoming exceedingly difficult for potential real estate buyers to find any “deals” or good values. While people may be attracted to different real estate auction sites, the New Jersey Appellate Division has recently ruled in Sullivan v. Max Spann Real Estate & Auction Co., A-5327-18T1, that you must be extremely careful with such auction contracts as they are not subject to the three (3) day attorney review similar to what is available in a conventional Realtors’ Contract.
Specifically, a split New Jersey appeals court has upheld an exception to the 3-day attorney-review period for homes sold at auction. The 3-day attorney-review period, which allows consumers to back out of buying a home for any reason, was established in response to lawyer objections about contracts being drafted by nonlawyers. As a compromise, the 3-day attorney review provision was implemented which allows homebuyers to back out of a contract within 3 days of signing if they change their mind about buying the property.
The Appellate Division’s majority ruled that the attorney-review period does not apply to real estate auction sales. They ruled that the buyer could not cancel the contract within 3 days of having it fully executed. The appeals court therefore found that a liquidated damages provision in the sales contract, which provided the basis for the buyer in that case to lose her $121,000 deposit, was enforceable and not invalid as a matter of law or public policy.
A realtors’ group urged the Appellate Division in an amicus brief to uphold the exception to the attorney-review period for auctions, and the New Jersey State Bar Association (NJSBA) argued in its amicus brief that the lower court should not have waived the attorney-review period.
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For now, it seems that the 3-day attorney review period does not automatically apply to auctions, but it appears that this case is heading to the Supreme Court.
If you are a buyer looking to make a bid on a home in an auction, please contact Abdou Law Offices, LLC at (732) 540-8840.
