If you are thinking of selling a house in New Jersey, it is highly recommended to have the legal advice of a real estate attorney during this process.
Everything You Need To Know about selling A House In New Jersey In 2022
To avoid a buyer leaving the process of buying a house or to prevent legal issues, you must understand the proper way to sell property in NJ.
Requirements For selling A House In New Jersey
In New Jersey it is legal to sell a house as is (without any repairs) but you are required to inform the buyer in writing of the quality, status and safety of the property:
- Implied warranty of habitability. You cannot sell a house “as is” without the required disclosures.
- Required Disclosures. Legally, the buyer must be informed about the known and latent material defects of the home. Some defects are “latent” if they are not visible. For example, damage caused by rain that is invisible at first glance.
Common defects that are reported include:
- Violations of the municipal code.
- Any type of unsafe conditions, type of damage or known failure with the structure, home systems or other similar component.
- Material defects.
- Boundary line disputes.
- Flood risks.
Our dedicated article on flood insurance in New Jersey covers the subject in detail.
To comply with the law, the seller must:
- Ensure that the house for sale is suitable for living.
- Disclose all known or latent material defects.
- Identify how you used your home and that you did not violate any current zoning laws.
- Declare that you have not made home improvements that require permits or that you have obtained all necessary approvals for such projects.
- If the property was built before 1978, you will need to tell the buyer if it has lead paint. To do this, you must provide available reports or records on that situation.
There are aspects of a property that will not be discovered through inspections. For example, houses stigmatized by a violent crime or alleged ghosts. There is no legal obligation for the seller to proactively disclose such things, but if asked directly about them, the seller must answer honestly.
Each owner of a home for sale must file a GIT/Rep form (married people are considered a single owner). These forms help the state determine if a tax payment is required when the deed is recorded, including:
- Git/Rep 1 form, Nonresident Tax Return.
- Git/Rep 2 form, non-resident tax advance payment receipt.
- Git/Rep 3 form, certification of residence of the seller.
- Git/Rep 4 form, waives the vendor submission requirement for GIT/REP forms and payments.
- Two forms of identification.
- Closing statement.
- Title affidavit.
- Copy of the purchase contract.
- Bill of sale.
- Signed deed.
You may be required to submit Form RTF-1, Affidavit of Consideration for Seller’s Use. Additionally, also pay a real estate transfer tax at closing that we will cover later.
The seller’s property condition disclosure statement form details the systems, structures, or other components of the property.
Although disclosure of known and latent material defects is legally required, sellers are not required to complete the disclosure form. However, it is recommended to do so.
- Reduced liability.
- Better negotiations.
- Opportunity to make home improvements.
- Fair deal for both parties.
- Better rating.
- Legal compliance.
General Process For Selling A House In New Jersey
Step 1: Find A Real Estate Expert In NJ
Selling a house in New Jersey is a complex transaction that requires time and experience for a positive result. The best way to do this is through a real estate expert in the area. At Curbelo Law we have the experience and effectiveness that these processes require.
Sellers who have the support of a real estate expert, manage to obtain 33% more than sellers who list on their own.
Step 2: When To Sell
Experts have determined that the best time to sell a property is usually between June and July. According to the Redfin data center, these months are usually the best time to sell due to:
- Selling price in the US (June).
- Speed and price of the overall process in New Jersey (July).
For more information, review our section “When is the best time to sell a house in New Jersey?” which you will find after step 8.
Step 3: Price Of The House
Comparative market analyzes look at recent properties on the market and use the data to estimate the selling price of your home.
A CMA (Comparative Market Analysis) allows you to compare homes that are similar to yours in terms of size, age, condition, and other elements that add value to the house. Real estate agents use a CMA and their experience in the real estate market to determine an appropriate price.
Step 4: List Your Home For Sale
The real estate expert will publish your house for sale on some site for it, where they will place the characteristics of the house in order to attract interested buyers:
- Attractive descriptions of your home and neighborhood: Size, age, number of bedrooms, heating, living near a park, etc. These are all important elements to highlight.
- Home Marketing: Your home will usually be listed on major real estate websites, such as Zillow and Trulia, also through a “for sale” sign in the front yard.
- Showings and open houses: Once the property is listed for sale, you must show it to the public at open houses. The real estate expert will work with you to put on the showings according to the corresponding schedule.
Step 5: Offers And Negotiations
After receiving offers and accepting one, the negotiation begins covering aspects of the sale, including closing cost, home inspection, move-in date and others.
When the buyer and seller agree, a purchase agreement is signed detailing the sale of the property and its terms and conditions.
If one of the parties does not comply with the conditions of the agreement, the sale could fail and cause legal problems.
Step 6: Appraisal And Inspection
- New Jersey home appraisals are usually ordered by the mortgage lender and are performed by licensed individuals to assess the value of the property. Lenders use it to determine how much they can approve for some type of mortgage loan.
- Home inspection in New Jersey is performed by licensed professionals who assess site conditions and check major systems and structures to locate any defects or problems with the property.
If the inspection reveals repairs that need to be completed or the appraisal is low, negotiations can be resumed. Buyers can ask sellers to cover more closing costs or lower the sales price.
Our attorney is your best option in these cases to make sure you get a fair deal.
Step 7: Paperwork And Disclosures
Before buyers sign a purchase agreement, NJ property sellers must report all problems with the property.
Consult with a real estate attorney before filing or signing documents. Attorney Carolina Curbelo will help you throughout this process.
Forms And Documents To Submit
- Copy of the purchase agreement and any addendums.
- Closing statement.
- Signed NJ property deed.
- Bill of sale.
- Title affidavit.
- 2 forms of identification.
- Ownership Disclosure Statement
- Declaration of flood zone.
- Lead-based paint disclosure.
Other possible additional documents include:
- Agreement and statement of correction.
- Closing Disclosure.
- Relevant affidavits.
- Copies of testimonials, relevant letters of attorney or trusts.
- HOA forms and guidelines.
- Home inspection results.
- Home warranty information.
- Information about the payment of the mortgage loan.
Step 8: Closing Process
The final stage of a home sale is when the legal documents are signed, the escrow company releases the funds to the seller of the property, both parties cover the expenses that have accrued, and the property is legally transferred from one owner to another.
Average New Jersey closing costs for sellers range from 1% to 3% of a home’s sales price. For example, if the price was $294,200, the seller’s closing cost would be $8,826.
What Is The Best Time To Sell A House in New Jersey?
Some properties sell better and faster at certain times of the year.
On average, the time on a home for sale in NJ is around 68 days, although this statistic varies throughout the year. Selling a house in New Jersey in June can earn you an additional 7% at closing, while selling it in February can cost you 10% at closing.
Next, we will show you the months (from higher to lower than the average) where the houses are sold to:
Single-family homes are often the most sought after for individuals with children. They are usually searched in the spring, since June would be the ideal moving date, coinciding with the end of the school year.
What Taxes Are Paid When A House Is Sold In NJ?
Sales tax is waived on home sales, but you may have to pay certain taxes, these are:
- Transfer fee. Property sellers must pay a transfer fee of 1% of the total sale price. For example, if the house sells for $300,000, you will have to pay $3,000.
- Mansion tax. Real estate purchases over $1,000,000 are taxed at 1%. Depending on the contract, the seller or the buyer will be the one who pays.
- Departure tax. Non-resident sellers are required to pay an estimated income tax of 2% of the consideration or 8.97% of the net sale proceeds, either before or at closing.
- Capital gain. Any income generated on the property must be reported as a capital gain if it does not meet the exclusion criteria:
- Only if you used the home as your primary residence and have been there for more than 2 years.
- If you meet these criteria, you can exclude up to $250,000 of the gain (married people can exclude $500,000). New Jersey taxes capital gains as ordinary income, with rates ranging from 1.4% to 10.75%.
Property Tax Relief Programs
Homeowners in NJ may be entitled to certain state tax benefits, deductions, or credits. These benefits generally include:
State And Local Income Tax Benefits
New Jersey does not allow certain deductions on Form NJ-1040, Resident Income Tax Return that may be allowed on the federal return. However, a deduction or credit is allowed based on local property taxes paid.
Homeowners may be entitled to certain benefits on NJ income tax returns. These include:
- Property tax credit.
- Property tax deduction.
As for local property taxes, there are:
- Annual property tax deduction for senior citizens and disabled persons.
- Annual deduction for veterans.
- Property tax exemption for disabled veterans.
New Jersey residents (Individuals, Trusts and Estates) selling a house use the Git/Rep 3 Residency File Form. The form is due at closing and exempts the seller from paying income tax at that time.
The seller will pay all required income tax, including those on any capital gains and sale of the property at the time the NJ-1040 is filed.
New Jersey residents who sell their home and move out of state are considered nonresidents for purposes of the sale. NJ may require an estimated tax payment at closing and the seller will need to file a non-resident tax return for any gain or loss.
Non-residents selling a house in New Jersey must complete and sign the GIT/REP-1 or GIT/REP-2 to record the deed and finalize the sale.
Non-resident sellers are required to pay estimated gross income tax of 2% of the consideration or 8.97% of the net gain from the sale, before or at closing.
For an exception, the completed form is required if the nonresident individual, trust, or estate meets one of the guarantees listed in the GIT/REP-3.
Visit our article dedicated to the New Jersey quitclaim deed for more information.
Cost Of Selling A House In New Jersey
- Title Insurance. There are two types of title insurance policies in NJ, these are:
- Title Insurance for Lenders: Ensures the lender has a front-line position on the property.
- Owner’s Title Insurance: Protects the buyer with a marketable title.
- Transfer taxes. This tax is levied on the transfer of real estate. The current state rate is calculated at 1% of the total price of the house.
- Costs associated with remedying title or survey issues. If a title issue arises, our real estate attorney will be in charge of advising you on your available options.
- Home warranties. Some sellers choose to offer home warranties to cover components or systems of a home that may present a risk to the buyer. Although it is optional, it improves the deal and attracts more buyers. In New Jersey these 1-year warranties generally range from $350 to $650.
- Municipal costs. This may include registration fees or other fees imposed by the county, city or town. In New Jersey, municipalities are required to obtain the “Township Certificate of Occupancy” which costs approximately $100.
- Other costs include :
- Lawyer fees.
- Preparation of the deed, which ranges between $100 and $150.
- Real estate agent commission.
Residential Purchase And Sale Agreements
This agreement is a contract detailing the conditions of the sale. it is recommended that it be drafted and supervised only by a real estate attorney. For the most part, the clauses are designed to protect the buyer.
The agreement must cover:
- Sale price. Amount buyer accepts, amount to be financed, and balances due at closing.
- Financing contingency. Clause that defines a schedule where the buyer must qualify for financing to buy the house. An additional clause can be included indicating that the purchase is dependent on obtaining financing. Other clauses include:
- Dates where the buyer must have applied for the mortgage.
- Dates where the buyer must have obtained a pre-qualification, pre-approval and final approval by the lender.
- Description of the property. Must describe:
- Lot/lot size.
- Size of the square meters of the house and any additional structures.
- Number of housing units.
- Rights of accesses, accessories, easements and others.
- Inspection and repair. An inspection clause dictates that the buyer has the right to inspect the property by hiring one or more inspectors or contractors to evaluate the property.
- Title, appraisal and valuation. The agreement outlines which party is responsible for title insurance and the length of time the buyer has to review and/or contest the outcome. It will be specified how much time the buyer has to locate any problem, if any, a timetable for its solution must be incorporated into the contract.
- Property. Selling a house does not mean selling everything that exists in it (appliances, lighting and so on). You must specify in the contract which items are not part of the agreement.
- Closing and move-in date. The closing date on NJ properties is around 30 days. However, this date largely depends on the lender.
- Other clauses. Owner financing, condominiums, communities of owners and others.
Escrow Process In New Jersey
When a buyer is interested in buying a property, they first make an offer to purchase. Most of the time, as part of that offer, a “security deposit” is provided which will be held by an escrow agent.
This ensures that the transaction closes on time and smoothly, this process ensures that the funds, forms, documents are accounted for and that the loan or lien has been paid as part of the transaction. The money will be held as an “escrow account.”
Escrow agents may collect:
- Insurance and fire policies.
- Loan documentation.
- Tax returns.
- Terms and conditions of sale.
- Any request for payment of services that covers escrow funds.
Common Elements In The Escrow Process
- Acquisition of titles: The seller has the absolute title to the property and the home until the transaction is finalized.
- Security deposit: Usually the buyer makes two separate deposits during this process. The first installment is the “earnings deposit” and represents the commitment to the purchase.
- Title Report: Includes the NJ property title search and results, is designed for any lien-related problem.
Additional Data In The Escrow Process
- The seller, buyer and their attorneys or real estate agents must draft the applicable terms for all parties.
- In New Jersey, security deposit amounts range from 3% to 5% minimum.
- The escrow officer keeps the documentation and will be in charge of depositing the funds.
- When an offer is accepted, the buyer will make a deposit (between 1% and 2% of the purchase).
- After a period of due diligence, the buyer makes a second security deposit (between 3% and 20%).
- If the buyer backs out of the deal without legitimate cause, they will forfeit the security deposit that goes to the seller.
- If the seller backs out of the sale, the security deposit is returned to the buyer.
- The security deposit does not end until all terms are settled and the necessary is signed.
NJ Property Sale Closing Process
When the lender notifies that everything is ready, our attorney will coordinate with all the parties involved and their agents for the “closing ceremony”.
Within 3 business days after closing, the lender will provide the buyer with a “closing disclosure” detailing the terms of the loan. It will then grant the funds that the buyer requires for the purchase. This process involves:
- The search for the title before the closing ceremony.
- The attorney or title company will prepare the paperwork for transfer of title or deed.
- Schedule of final closing dates acceptable to both parties.
- Calculation of the total amount the buyer must take it to the closing.
- End tour. It takes place the day of the closing ceremony or one day before.
- The buyer and seller will sign the closing documents and any other documents.
- The buyer remits the remaining funds in their down payment to the attorney via cashier’s check.
- Record of transaction and writing.
- Delivery of keys and legal possession of the property to the buyer.
Do I Need An Attorney To Sell A House In New Jersey?
New Jersey, unlike other states, does not require sellers to have an attorney to sell property. However, it is more than recommended and important to have it for contract review, negotiation or general real estate advice.
Real estate attorneys will be able to assist you in unconventional circumstances, such as a lease with finance or purchase option, or any litigation issues that may arise.
Curbelo Law has over 10 years of experience in the real estate practice area, so we can provide you with complete advice throughout this process and in any real estate matter.