Packing Up Your NJ Home? You’re On the Hook for These Seller Closing Costs

You’re ready to put your New Jersey home on the market, but there’s one worry holding you back — the cost. How much will the closing fees eat into your profit?

With the help of top real estate agent Daren Sautter, former president of the Burlington and Camden County Association of Realtors®, we drill down into the typical closing costs New Jersey homeowners can expect to pay when selling a home — and help you figure out how much profit you’ll walk away with.

Let’s explore a breakdown of what New Jersey homeowners can expect to pay at closing.

A NJ home seller researching closing costs on a computer.
Source: (Sarah PflugBurst)

NJ sellers are on the hook for these closing costs

Along with the purchase price, homeowners can generally negotiate closing fees with the buyer. These are the fees and costs New Jersey sellers are typically responsible for:

Mortgage loan payoff

While technically not a closing fee, you’ll need to pay off any existing loan balances held against your home in order to transfer the title to the buyer.

You’ll work with your settlement agent to request a payoff statement from your lender for an accurate payoff amount. This amount won’t be the same as the balance on your last mortgage statement. The payoff statement includes per diem loan interest due up until the date of settlement and payoff, along with any outstanding fees such as a prepayment penalty or late payments.

And there’s no cost to obtain your payoff figures — New Jersey state law prohibits charging a fee for providing home loan payoff information.

Property taxes

According to state statute, homeowners are responsible for paying property tax from January 1 up to the home sale date.

In certain cases, you’ll receive a credit for property tax from the buyer. In other cases, you’ll owe. According to Sautter, whether you’ll owe depends on your settlement date and when you made the last tax payment on your home.

New Jersey homeowners receive a tax bill annually in June. And payments are due quarterly, on the first day of the second month in each quarter. For example, the first quarter payment, which covers January through March, is due by the first of February.

Calculating your property tax proration

Let’s say your settlement date falls on January 15th, before the February 1st quarterly due date. You haven’t submitted the February payment, which the buyer will be responsible for after the sale. At settlement, you would owe the buyer for property tax from January 1st through the 15th.

If your settlement date were to fall after you submitted the quarterly payment, the opposite would be true. Let’s say settlement fell on March 3rd. The buyer would credit you for property from March 4th until the end of the quarterly billing cycle, March 31st.

If the math sounds confusing, don’t worry. Sautter notes that the settlement agent calculates the appropriate tax prorations and breaks down the details in the settlement documents.

If your lender collects property tax from you, the lender could owe you a refund

If your lender collects and holds your property tax payment in an escrow account, scrutinize your loan payoff statement. Did the lender deduct the escrow account from your payoff amount? If not, you should expect a refund for the property tax amount (and insurance, if your lender collects for that, too) directly from your lender after settlement. In general, federal regulation requires lenders to release escrow balances within 20 days of paying off a loan.

Loan reconveyance fee

Some lenders charge a fee to draw up the legal document that releases the mortgage lien from the property. Sellers can expect to pay $50 to $65 for a loan reconveyance.

Reconveyance recording fee

After the lender generates the document that releases the mortgage lien from the property, you must record the reconveyance at the local public records office to make it official. Recording a mortgage release in New Jersey costs around $30 for the first page and $10 for any additional pages.

New Jersey state realty transfer fee (RTF)

Established in 1968, New Jersey’s RTF applies to most real estate title transfers. You can’t record a transfer deed without it. The state calculates RTF based on the property sales price. To determine your RTF, check the New Jersey Division of Taxation’s fee transfer schedule. The New Jersey Realtors® website also offers a fee estimate calculator.

Most home sales are subject to RTF, but some exceptions exist. The transfer of real property between a parent and child, for example, does not require RTF.

If you’re selling a $1 million home, keep the NJ mansion tax in mind

When the purchase price of a home exceeds $1 million, the buyer must pay an additional tax of 1% of the purchase price, commonly referred to as a “mansion tax.” While the seller isn’t on the hook for this additional tax, pricing your home just under the $1 million threshold could make your home sale more palatable for some buyers.

Real estate agent commission

Your real estate agent works in your corner to get the best price for your home while walking you through the complex process of selling. As compensation for their expertise, most full-service listing agents charge between 5% and 6% of the sales price, which they typically share with the buyer’s agent. Commissions vary from broker to broker, and sellers can negotiate this fee.

Wondering what listing agents in your area charge to sell a home? HomeLight aggregates data from home transactions to calculate average agent commissions. Enter your city into our real estate agent commission calculator to discover how much it will cost to hire a top agent in your market.

Settlement agent fee

In New Jersey, your settlement agent will be either a title officer or attorney. “We’re almost like two separate states,” says Sautter.

Most of the people in northern New Jersey use an attorney, and the attorney handles settlement. Most of the people in south Jersey use a title company.”

Whether you hire a title agent or attorney, the settlement process remains essentially the same, notes Sautter.

The settlement agent acts as an impartial intermediary for your home sale, collecting required funds from both the buyer and seller. Then the agent disburses those funds as appropriate, based on terms listed in the purchase agreement.

According to Sautter, buyers and sellers customarily split this fee. The settlement room fee generally costs around $500, he says. When splitting with the buyer, the seller is usually responsible for half, or $250.

Notary fee

In order to officially transfer ownership to the buyer, the seller signs the transfer document, which is notarized before it’s recorded at the local public records office. Notary fees range between $35 and $50, says Sautter.

Certificate of smoke alarm, carbon monoxide alarm, and fire extinguisher compliance

The New Jersey fire code stipulates that the sale of a residential home of up to two family structures requires a Certificate of Smoke Alarm, Carbon Monoxide Alarm, and Portable Fire Extinguisher Compliance (CSACMAPFEC). Clearance requirements vary depending on your municipality or township, says Sautter, as does the fee. A CSACMAPFEC, sometimes referred to as a certificate of occupancy, usually costs around $110 to $120.

Middleship Township, for instance, requires a certificate of occupancy with a flat fee of $150 for the certificate and $15 for filing in 2021. Hillsborough Township, on the other hand, charges between $50 and $160 for clearance. The fee changes based on how far in advance a change of occupancy will occur. For CSACMAPFEC requests made less than four business days from the settlement, the township charges $160 as of 2021. For requests submitted more than ten business days prior, the township charges $50.

An HVAC unit repaired before selling a home in New Jersey.
Source: (Carlos Lindner / Unsplash)

Other closing expenses that apply to some NJ home sellers

Every real estate transaction is a little different, and some closing costs don’t apply in every situation. From negotiated seller credits to whether or not you’re a New Jersey resident, these are common fees that some sellers should plan to pay for.

Seller credits

In New Jersey, buyers in a balanced real estate market or a buyer’s market often negotiate for seller concessions toward closing costs, says Sautter.

Buyers often employ this tactic to manage their outgoing cash flow when buying, which can include a hefty down payment of 20% of the purchase price. Buyers also benefit if they’re paying off consumer debt (such as car loans and credit card bills) to qualify for the mortgage.

Along with a closing cost credit, buyers could also negotiate a seller credit based on issues discovered during the home inspection period. If a material defect exists, such as an inoperable HVAC system, the buyer could request a seller credit to repair or replace the unit.

Attorney fee

While you aren’t required to hire an attorney for your home sale, New Jersey homeowners usually opt for a lawyer to prepare the transfer deed, says Sautter. The fee for this service typically ranges between $100 and $150. For homeowners who retain an attorney for legal counsel on their home sale, which can average $1,000 to $1,500, the fee usually includes deed preparation.

Overnight fee

If you have a home loan that needs to be paid off at closing, many settlement agents will charge an overnight fee to send the payoff amount to your lender. Overnight fees can run between $25 to $50 per loan payoff, Sautter notes.

Wire fee

If you’re due funds at closing and you request a bank wire versus a paper check, your settlement agent will usually pass along this bank fee. Expect to pay between $25 and $35 to have your closing funds wired to your bank account, says Sautter.

HOA fees

When you sell your home, you’re required to disclose to the buyer whether the property is located in a homeowners association. As part of this disclosure requirement, sellers need to provide buyers with a copy of the governing association documents: master deed and bylaws, articles of incorporation, rules and regulations, and financial statements.

But there’s no need to rifle through your file cabinets or computer drive looking for a copy. For a fee, the homeowner association’s manager generates a resale package that includes the governing documents, along with a resale certificate that discloses any outstanding owner dues or upcoming assessments.

Sautter notes that every homeowner association has its own requirements and fees for transferring the association account to a new owner. According to New Jersey community management company FirstService Residential, the buyer often requests and pays for association documents. These fees can range from $200 to $600.

However, sellers are responsible for recurring HOA fees up to the date of settlement. These HOA fees often run between $200 and $400 per month (or more in swanky communities).

Public water payment and sewer prorations

Similar to property taxes, Sautter says that sellers will also need to pay for public sewer proration and water fees. “Your real estate agent [arranges for] the water company to come out,” on the closing date, he notes. Then the water company reads the meter and generates a final bill to be paid at settlement.

Public sewer billing prorations may differ depending on your municipality. Morris Township, for example, mails sewer bills annually. Payments are due twice yearly. When selling, Morris Township homeowners must deliver a copy of the bill to the buyer at closing. Sellers should provide their settlement agent with a copy of their sewer bill to prorate the fee on the final closing statement.

Private well water test

If your home relies on a private water source, not public, you’re not subject to a water bill proration. Instead, New Jersey regulations require homeowners with a private well to have the well water tested prior to selling the property. According to Matus Law Group, the seller typically pays for this fee. Cost varies by lab, and homeowners can expect to pay between $450 and $650 for private well testing.

Gross income tax (GIT) withholding for non-New Jersey residents

While New Jersey doesn’t have an exit tax, the state withholds 2% of the sale price as an estimated gross income tax for non-resident sellers. Expect to pay the GIT withholding whether or not you net a gain in income on the sale. Non-residents must submit the GIT payment to the Division of Taxation at, or before, the settlement date.

A computer used to determine closing costs in New Jersey.

Estimate your net proceeds after closing costs

Want an estimate of how much you could pocket after you sell? HomeLight’s Net Proceeds Calculator takes your estimated closing costs and home preparation expenses into account, giving you an estimate of what it will cost to sell your home. The calculator also provides an estimate of your net proceeds.

You’ll find a breakdown of your closing costs on the settlement statement

For a detailed breakdown of closing costs, obtain an estimated settlement statement from the title officer or attorney handling your sale before you’re due to close. Also referred to as a closing disclosure, the settlement statement breaks down all of the closing costs the seller and buyer are responsible for. The document also tallies up how much you’ll net after closing.

Reviewing a copy of your closing disclosure in advance also gives you a chance to catch potential errors — preventing last-minute surprises at the closing table.

Header Image Source: (Matt Donders / Unsplash)