Selling a house in New Jersey

If you are planning on selling a house in New Jersey, it is more than advisable to have the legal advice of a real estate attorney during this process.

Whether selling or buying a house in New Jersey, the NJ real estate attorney at Curbelo Law can help. 

Everything You Need To Know About Selling A House In New Jersey In 2024

The Redfin and Zillow portals agree that it is a good time to sell a house in New Jersey. This is because home prices have increased in recent years. 

Additionally, to avoid home buyer’s remorse, or legal issues, sellers must understand the proper way to sell property in NJ. With that said, let’s get started.

Requirements To Sell A House In New Jersey

In New Jersey it is legal to sell a house as is (without any repairs). However, sellers are required to inform the buyer in writing of the quality, health and safety of the property. In addition, provide the following:

1. Implicit guarantee of habitability. You cannot sell a house as-is in New Jersey without the required disclosures.
2. Required Disclosures. Legally, the buyer must be informed of known and latent material defects in the home. For example, damage caused by rain, since it is invisible at first glance.

On the other hand, common defects that are disclosed include:

• Municipal code violations.
• Any type of unsafe conditions, damage or known failure to the structure, home systems or other similar component.
• Material defects.
• Boundary line disputes.
• Flood risks.

Seller’s Obligations

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.
• State that you have not made any home improvements that require permits or that you have obtained all necessary approvals for such projects.
• If the home was built before 1978, you will need to tell the buyer if it has lead paint. To do this, you must provide reports or records available about 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 these aspects. However, asked directly about them, the seller must answer honestly.

Documents Required 

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.

Additional documents:

• 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.

Disclosure Form

The Property Condition Disclosure Statement form details the systems, structures, and other components of the home. Although sellers are not required to complete this form, it is recommended that they do so.

Disclosure Benefits

• Reduced liability.
• Better negotiations.
• Opportunity to make home improvements.
• Fair treatment for both parties.
• Best 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 outcome. Therefore, the best way to do it is through a real estate expert in the area like Carolina T. Curbelo, who has more than 10 years of successful real estate management in the state of New Jersey.

Generally, sellers who have the support of a real estate expert manage to obtain 33% more profits than sellers who do it on their own. 

Step 2: Know When To Sell

Experts believe that the best time to sell a property is usually between June and July. According to the Redfin data center, this is because they are months with a good sales price and speed in procedures

Step 3: Know The Price Of The House

Comparative market analysis (CMA) analyzes recent properties on the market and uses the data to estimate the sales price of a home. 

A CMA allows you to compare similar homes in terms of size, age, condition and other elements that add value. On the other hand, real estate agents use a CMA and their experience 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: Listen To Offers And Make Negotiations

When the seller receives offers and accepts one, the negotiation begins. This process covers aspects of the sale, such as closing cost, home inspection and others. Once the buyer and seller agree, a purchase agreement is signed detailing the sale of the property, the 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: Perform 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.

On the other hand, the home inspection in New Jersey is performed by licensed professionals who evaluate the site conditions and check the structure to locate any problems.

Step 7: Complete 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.
• Closing statement. 
• Signed NJ property deed.
• Sales invoice.
• Affidavit of title.
• Two forms of identification. 

For disclosures:

• 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 power of attorney letters or trusts. 
• HOA Forms and Guidelines.
• Home inspection results.
• Home warranty information.
• Information about the payment of the mortgage loan. 

Step 8: Complete The Closing Process

The final stage of selling a house in New Jersey occurs when:

• Legal documents are signed, 
• The escrow company delivers the funds to the seller of the property, 
• Both parties cover the expenses that have accrued, and 
• Ownership is legally transferred from one owner to another.

Average closing costs in New Jersey for sellers range from 5% to 10% of a home’s sales price. For example, if the price was $400,000, the seller’s closing cost at 10% would be $40,000.

What Is The Best Time To Sell A House In New Jersey?

We have previously talked about June and July but it is worth noting that choosing the ideal time to sell a house depends on the seller’s objectives. However, there is a more favorable month to maximize net income, as well as a more favorable period to achieve a faster sale. For example:

• Best month to sell a property by the highest price. According to Realtor.com, June stands out as the most optimal month to sell properties in New Jersey. This is because in this month, the average sales price tends to exceed $470,000, exceeding the average sales price by $29,000. 
• Best month to sell a property quickly. July usually stands out as the most optimal month to obtain a better price for a property. This happens because between April and July, houses remain on the market for less time. 

It should be noted that these data are only an average, since the ideal time to sell also depends on the specific situation and location of the property.

What Taxes Are Paid When Selling A House In New Jersey?

Sales tax does not apply on home sales, but sellers may be required to pay the following:

• New Jersey real estate transfer fee. It is 1% of the total sale price. For example, if the house sells for $300,000, you would pay $3,000.
• New Jersey 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. Sellers are required to pay income tax. This can be 2% of the consideration or 8.97% of the net profit from the sale.
• Capital gain. Any income generated on the property must be declared as capital gain if it does not meet the exclusion criteria:
  • Only if you used the home as your primary residence and have stayed there for more than 2 years. If you meet these criteria, up to $250,000 of the gain can be excluded. 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:

• Homestead Benefits Program . 
• Senior Freeze Program (property tax refund).

Interested in knowing more about property tax appeals? Check our blog named “Property tax appeal lawyer in NJ“.

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 their NJ income tax returns. These include:

• Property tax credit.
• Property tax deduction.

Regarding local property taxes, there are:

• Annual property tax deduction for seniors and disabled people.
• Annual deduction for veterans.
• Property tax exemption for disabled veterans.

Resident Taxpayers

In New Jersey, residents selling a house use the Git/Rep 3 form, which expires at closing and exempts the seller from paying income taxes at that time. However, the seller must pay all necessary taxes, including capital gains, when filing the NJ-1040 return. 

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-Resident Taxpayers

Non-residents selling a house in New Jersey must complete and sign the GIT/REP-1 or GIT/REP-2 to record the quitclaim deed in New Jersey and complete the sale.

Non-resident sellers are required to pay estimated gross income tax of 2% of the consideration or 8.97% of the net profit from the sale, before or at the time of closing.

For an exception, the completed form is required if the individual, trust, or nonresident estate meets one of the safeguards listed in the GIT/REP-3.

Cost Of Selling A House In New Jersey

1. Title insurance. There are two types of title insurance policies in New Jersey, these are:
   1. Lender Title Insurance: Ensures that the lender has a first-line position on the property.
   2. Owner’s Title Insurance: Protects the buyer with a marketable title.
2. 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 home.
3. Costs associated with remedying title or survey issues. If a problem arises with the property title, our real estate attorney will be in charge of advising you on your options.
4. Home guarantees. Some sellers offer home warranties to cover components or systems in a home that present a risk to the buyer. Although it is optional, it improves the deal and attracts more buyers.
5. Municipal costs. This may include registration or other fees imposed by the county, city or town. In New Jersey, municipalities require obtaining the “Certificate of Occupancy” which costs approximately $200.
6. Other costs include:
   1. Attorney fees.
   2. Preparation of the deed, and
   3. 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:

1. Sale price. Amount buyer accepts, amount to be financed, and balances due at closing.
2. 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.
3. 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.
   • Basement.
   • Rights of accesses, accessories, easements and others.
4. 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.
5. 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.
6. 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. 
7. Closing and move-in date. The closing date on NJ properties is around 30 days. However, this date largely depends on the lender.
8. 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

• Title Acquisition: The seller has absolute title to the property and the home until the transaction is completed.
• Security Deposit: Generally the buyer makes two separate deposits during this process. The first installment is the “earnest deposit” and represents the commitment to the purchase.
• Title Report: Includes NJ property title search and results. It 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 terms applicable to all parties.
• In New Jersey, escrow amounts range from 3% to 5% minimum.
• The escrow officer keeps the documentation and will be in charge of depositing the funds.
• Upon acceptance of an offer, 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, he or she will lose the earnest money 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 what is 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:

1. The search for the title before the closing ceremony.
2. The attorney or title company will prepare the paperwork for transfer of title or deed.
3. Schedule of final closing dates acceptable to both parties.
4. Calculation of the total amount the buyer must take it to the closing.
5. End tour. It takes place the day of the closing ceremony or one day before.
6. The buyer and seller will sign the closing documents and any other documents.
7. The buyer remits the remaining funds in their down payment to the attorney via cashier’s check.
8. Record of transaction and writing.
9. 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 a property. However, it is more than recommended and key 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 financing or purchase option, or any litigation issues that may arise.

You have extensive information in our “Real estate litigation attorney in New Jersey” section or in the “Landlord-tenant disputes in NJ” page.

Curbelo Law has more than 10 years of experience in the real estate practice area, so we can provide you with complete advice throughout this process.