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Who Pays Real Estate Closing Costs in New Jersey?

Last updated on: December 11, 2023

When you’re buying or selling a house, closing costs are an important factor to consider. These are extra costs that come in addition to the home’s price. While they might seem complicated at first, understanding them can help you plan your budget better. In New Jersey, closing costs can be quite varied. 

If you are buying or selling a home in New Jersey, keep in mind although some closing costs can be negotiable between a buyer and seller, most are typically paid by one or the other. Before you make any decisions, it is important to consult with an experienced New Jersey real estate attorney. Call the Matus Law Group at (732) 281-0060 to schedule an appointment today.

How Much are Closing Costs in NJ

In New Jersey, the closing costs that home buyers and sellers need to bear encompass a range of expenses. For buyers, these costs generally fall between 2% to 5% of the home’s purchase price. These costs cover various charges including loan origination, appraisal, credit report, title search, and title insurance fees.

On the other hand, sellers usually face costs ranging from 5% to 8% of the sale price. The major component of these costs is the realtor’s commission, which typically amounts to 6% of the selling price. Additional costs, making up the remainder, may include fees for legal services, title transfer, and other associated expenses.

Let’s take an $800,000 home as an example. A buyer with a mortgage may pay around 3% or $24,000 in closing costs. Conversely, a seller could face up to 8% or $64,000 in closing costs, inclusive of the real estate commission.

It’s important to note that these figures are average ranges, and actual costs can vary based on factors like the type of loan, property value, sale contingencies, and local regulations. Always consult with a local real estate expert or a skilled attorney to get a more accurate estimate of closing costs.

Typical Seller’s Closing Costs

During the course of a real estate transaction, there are closing costs that are typically paid by or credited to the buyer by the seller. Typical costs paid by the seller at closing are:

  • Mortgage payoff, accrued interest, and recording of the satisfaction — if the seller had a mortgage on the home, this is paid off from the proceeds of the closing.
  • Real estate commissions
  • State, county, and city transfer taxes or stamps — depending on the home’s sale price, this figure is a percentage of that amount.
  • Well water inspection — the PWTA requires that well water is tested prior to the closing
  • Smoke detector/carbon monoxide certificate — the seller must obtain a certificate in compliance with New Jersey Fire Code.
  • Prorated adjustment for property taxes for the year.
  • Prorated adjustment for any homeowners association dues and transfer fees
Closing Cost Description Explanation
Mortgage Payoff Paying off any existing mortgage on the property.
Real Estate Commissions Commissions paid to real estate agents for their services.
Transfer Taxes or Stamps Taxes or stamps required by state, county, and city authorities.
Well Water Inspection Testing well water to comply with regulations (if applicable).
Smoke Detector/Carbon Monoxide Cert. Obtaining a compliance certificate as per local fire codes.
Property Tax Adjustment Prorated adjustment for property taxes based on the closing date.
Homeowners Association Fees Prorated adjustment for any dues and transfer fees (if applicable).

Typical Buyer’s Closing Costs

The buyer’s closing costs will vary depending on whether the buyer is getting a mortgage, who the lender is, and what type of loan it is. When a buyer applies for a mortgage, the lender is required to give them what is called a good-faith estimate of their closing costs. Some are paid at closing and some are paid in advance. Typical closing costs paid by the buyer are:

  • Costs associated with closing and title insurance such as the title search, title insurance premiums for the buyer’s policy as well as the mortgage holder’s, administrative fees charged by the closing office, and the property survey
  • Costs associated with the mortgage such as application fee, mortgage points, appraisal, prepaid interest, private mortgage insurance, recording fees, and other miscellaneous costs
  • Inspection costs such as a radon inspection, wood destroying insect inspection, roof inspection, septic inspection, and oil tank inspection as they are required or applicable
  • Prorated adjustment for property taxes for the year.
  • Prorated homeowners association dues and transfer fees
  • Escrow for homeowners insurance
  • Escrow for property taxes
  • Mansion tax (if applicable)

Can the Seller Pay Some of the Buyer’s Closing Costs?

Whether the seller can pay a portion of the buyer’s closing costs will depend on the lender that the buyer is using. With most loans, the seller can contribute some amount toward the buyer’s costs. Depending on the mortgage this can vary from around 3 percent to 6 percent.

In most cases, however, the market will determine whether a seller chooses to contribute to a buyer’s closing costs. If the market is very competitive, the seller will have little incentive to pay a buyer’s closing costs. Conversely, in a down real estate market, a seller may offer to offset a buyer’s costs or offer other concessions to attract buyers.

Getting the Assistance of a New Jersey Real Estate Attorney

A real estate transaction is one of the largest investments of a lifetime…and most expensive. You never want to pay more than necessary. Getting the assistance of a New Jersey real estate lawyer can ensure that. At the Matus Law Group, we will guide you through your real estate transaction, review your contract, and ensure that the lender has properly disclosed the closing costs you are paying. If you are a seller, we can make sure that your contract and title documents are properly drafted, executed, and filed. Contact us to learn more.

Christine Matus

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Christine Matus
Christine Matus

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