Knowing the NJ seller closing costs is equally important as preparing, marketing, and selling your home. If you don’t know your closing costs in NJ, you are unlikely to know the net amount you can expect from selling your house and be at a disadvantage. It may also affect the time your home spends on the market. For example, if the calculation of your closing costs goes wrong and you are expecting to pay more than the actual amount, you will be less obliged to accept an offer that is lower than your expectation.
Here are typical NJ seller closing costs that you can expect to incur:
One of the most significant NJ seller closing costs is the real estate agent commission for both the buyer’s and seller’s agent. In New Jersey, there is no set amount and hence the commission is negotiable. Typically, most sellers can expect to pay around 5%-7%. A few sellers sometimes try to negotiate a commission under 5%, but there are both advantages and disadvantages to each end of the commission spectrum. It is important to note that half of the commissioned amount is used as part of marketing the property to other real estate agents.
For example, if a seller has agreed to a 7% commission, 3.5% would be marketed as a commission split paid to the buyer’s real estate agent (if they brought the buyer). Inevitably, some sellers want to take advantage of every possible angle when selling their home. Let’s say if most properties are offering either a 2.5% split or 3% split to the buyer’s agent, the seller who’s offering a 3.5% split will be at an advantage, as it is higher than the preferred commission split. Such deals entice more agents to sell his property over others.
On the other hand, some sellers are not concerned with a competitive split and simply want to try and save money by offering relatively less commission. There is nothing wrong with this approach and continues to work well for both sellers and buyers. However, if the commission is too low, you may lose potential opportunities to sell your house. Besides, it will ultimately work against you by taking more time to sell and possibly selling at a lower price. In any case, the commission in New Jersey is fully negotiable. It is also important to consider all the factors before deciding the amount of commission to offer as part of selling your home.
New Jersey Realty Transfer Tax
The New Jersey Realty Transfer Tax, established in 1968, is a state-imposed fee to offset the costs related to tracking real estate transactions. In New Jersey, a seller is responsible for paying this tax at the closing. The tax is calculated based on the value of the property, and the fee schedule can be found on the New Jersey State Division of Taxations website. To give an example, if you sold your house at $550,000, you would need to pay a Realty Transfer Fee of $4,655. Different rates will apply if the property is worth less or greater than $350,000. Also, the tax may be partially exempted for senior citizens aged 62 or above, blind persons, disabled persons, and low- and moderate-income housing. However, for a thorough understanding of the tax and its application, I suggest you talk to your tax professional or real estate agent.
New Jersey Exit Tax
The New Jersey exit tax is a “withholding” or “estimated” tax that is paid in advance if the seller is moving out of state or currently resides out of state. Clearly, it applies to out-of-state property owners. Home sellers will need to pay the New Jersey exit tax of either 8.97% of the profit from the sale of their home or 2% of the selling price. Although there are several exemptions to the tax, it will be best to talk to a tax specialist and inspect your specific solution. As an out-of-state seller or someone who will be moving out of state, it is good to be prepared for any possible additional tax on the sale of your home. You can check this link for more details on these costs.
Seller’s Attorney Fees and/or Seller Side Title Fees
In New Jersey, many home sellers opt to use an attorney. The fees for an attorney can range from $800-$1,500 for handling the sale of your home. He/she will provide you with the advantage of customizing the sales contract that fits your needs. Experienced home sellers are unlikely to use an attorney. However, if you are not comfortable interpreting the sales contract, it is recommended to hire an attorney to reap more benefits from what may be the biggest asset you own. If not an attorney, you can hire a title company to directly hand over the seller side title work required to sell
your home. This includes preparing the deed, handling the mortgage payoff, among other tasks. The cost of title work can range between $175 and $250. It is pertinent to note that the title company cannot make any contractual changes or provide any legal advice.
Township Inspection Fee
Most commonly referred to as the “certificate of occupancy”, the township inspection goes by different names depending on the town. This falls under the NJ seller closing costs umbrella, as a seller is responsible for obtaining this certificate from the town. Under this certificate, a township official comes to your home and inspects whether it is fit for occupancy by the new owner. Each town has different guidelines based on specific requirements. Thus, it is important to ask your agent or check with your town about these needs.
Just keep in mind that some towns mandate no open permits on the property, the installation of smoke and carbon monoxide detectors, and the presence of a fire extinguisher in the home. It typically costs $100-$200 to apply for the certificate of occupancy. Additionally, you will have to pay for any repair that the town may require to issue a clear certificate. Once again, the certificate of occupancy is town specific, and it is best to check with your town.
Recap of Potential Seller’s Closing Costs in New Jersey
The closing costs for sellers typically include:
• Settling of any liens or judgments against the property
• Tax for property or deed transfer
• New Jersey Exit Tax (out of state sellers only)
• Recording fees
• Agent commissions
• Township Certificate of Occupancy
• Repairs needed for Certificate of Occupancy
• Issues discovered by the inspections
• Attorney or Seller Side Title Fees
Furthermore, there may be other closing costs that buyers and sellers agree to split between them.
Talk to Your Agent About NJ Seller Closing Costs
NJ seller closing costs can undoubtedly add up to a sizeable chunk of change. Therefore, it is important to talk to your agent about all the closing costs before you sell your house. A good agent can sometimes negotiate a better deal on closing costs by getting the other party to agree to take on some of the expense.
If you don’t have an agent, and you would like to chat about the NJ seller closing costs, or have other questions about selling your NJ home, contact Avallon Real Estate Group below: