By Justin Liva, Mojo House BuyersThe price on your contract isn't the amount you walk away with. Between the contract and the check, a handful of costs come out of the seller's side of the settlement statement. Knowing them ahead of time keeps closing day from being a surprise and lets you compare offers on what you actually keep.
Here are the items that can show up on a New Jersey seller's side. Your attorney or settlement agent will give you the exact figures for your sale.
Your mortgage payoff
If you have a mortgage or home equity line, it gets paid off at closing from your proceeds. The payoff is not the same as the balance on your last statement. The CFPB explains that a payoff amount includes interest due through the day you pay the loan off, and it may include unpaid fees or a prepayment penalty.
You, or someone acting for you such as your attorney, can ask your servicer for a payoff statement in writing. Under the federal rule in Regulation Z, section 1026.36(c)(3), for most home loans the servicer has to send an accurate payoff statement within a reasonable time and no later than seven business days after a written request, with some exceptions such as loans in bankruptcy or foreclosure. If there are other liens or judgments, ask your attorney how they'll be handled before closing.
The realty transfer fee
New Jersey imposes the realty transfer fee on the seller, and the Division's guide to buying or selling a home says it's paid at closing. The Division of Taxation says it's calculated on the consideration in the deed, in bands, with different rate tables for sales at or below $350,000 and above it.
To give you a feel for the size, here's the standard-rate math on a $400,000 sale using the Division's table for sales over $350,000:
- First $150,000 at $2.90 per $500: $870
- Next $50,000 at $4.25 per $500: $425
- Remaining $200,000 at $4.80 per $500: $1,920
That's about $3,215. Reduced rates apply for qualifying senior citizens, blind or disabled sellers, and low and moderate income housing, and certain transfers are fully exempt.
On sales over $1,000,000, the Division adds a graduated percent fee that the seller is also responsible for, starting at 1% of the total consideration and rising in steps to 3.5% above $3,500,000. Our realty transfer fee guide covers the rules in more detail. Have your attorney confirm the exact fee for your deed.
Property tax and utility prorations
Property taxes can be split between buyer and seller at closing, and the federal rules for the Closing Disclosure (12 CFR 1026.38) include lines for exactly that. In New Jersey towns on a calendar fiscal year, N.J.S.A. 54:4-66 sets four installment dates: February 1, May 1, August 1 and November 1. Prorated taxes you've prepaid show up as a reimbursement from the buyer, and prorated taxes you haven't paid show up as a charge to you.
Water and sewer charges are another item to ask about, since your town or utility sets how a final bill is handled when you sell.
Smoke and carbon monoxide certificate
According to the Department of Community Affairs, New Jersey's fire code requires a certificate of smoke alarm compliance before a one- or two-family home can be sold, and the owner gets it through the local municipality. Ask your town about the fee and how far ahead you need to book the inspection. Your town may also have its own resale inspection or certificate of occupancy requirement. Call the municipal office early, because a failed inspection can push your closing.
Attorney fees
If you hire a real estate attorney to review the contract, work through title issues, prepare the deed and represent you at closing, that fee is part of your cost. It varies by attorney and by how complicated the sale is, so ask for a quote before you sign anything.
Agent commission, if you list
If you sell through a broker, the commission comes from your listing agreement and reduces what you take home. The Department of Banking and Insurance points out that consumers can always try to negotiate the rate. When you sell directly to me, there's no agent commission at all.
Estimated tax for out-of-state sellers
This isn't a fee, but it does reduce the check you take home on closing day. Nonresident sellers generally make an estimated New Jersey income tax payment at closing. The Division of Taxation's FAQ sets it at the gain times 10.75%, with a minimum of 2% of the consideration, unless an exemption applies. You may be able to recover some of it when you file. The nonresident seller guide explains the forms, and your accountant can tell you what applies to you.
Repairs and credits
On a listing, the buyer's inspection can lead to a request for repairs or a credit at closing, and any credit you agree to comes out of your proceeds. When I buy a house as-is, there's no repair negotiation after the fact. I buy in any condition, and you can leave behind whatever you don't want; I handle the cleanout after the sale.
Who pays what depends on the deal
Some of these costs are set by law, like the seller paying the realty transfer fee. Others are open to negotiation. In my own purchases, there's no fixed rule. Sometimes I cover certain closing costs, and sometimes the seller does. It depends on the deal, so ask me about it when we talk numbers.
When you compare offers, line them up on net proceeds: price minus payoff, transfer fee, commission, repairs or credits, and whatever closing costs each buyer expects you to cover. For a side-by-side of listing and selling direct, see the agent vs. cash buyer guide or the comparison page.
If you'd like a written number to plug into that math, my offer is free and carries no obligation. You can request one here.