Closing costs are all the costs associated with buying or selling a house. The fees account for everything from real estate broker commissions to credit checks and title searches on the new owners, appraisals of the property, and any other costs associated with the home sale.
Continue reading this guide for everything you need to know about typical closing costs in NJ.
Table of Contents
Average Closing Costs in NJ
Who Pays Closing Costs in NJ?
New Jersey Seller Closing Costs
New Jersey Buyer Closing Costs
How Can I Reduce Closing Costs?
NJ Closing Costs Bottom Line
Average Closing Costs in NJ
In New Jersey, average closing costs for homebuyers typically range from 2% to 5% of the purchase price, while sellers can expect to pay around 6% to 8%, primarily due to real estate agent commissions.
For a home priced at $400,000, buyers might incur costs between $8,000 and $20,000, encompassing loan origination fees, appraisal fees, title insurance, settlement fees, and prepaid expenses such as homeowners insurance and property taxes.
Sellers, on the other hand, might pay between $24,000 and $32,000, which includes agent commissions, state transfer taxes, and attorney fees. These figures can vary based on the specifics of the transaction, the property's location, and the negotiations between the buyer and seller.
It’s advisable for both parties to seek detailed estimates from their real estate agents and attorneys to understand their individual closing costs better.
Who Pays Closing Costs in NJ?
Real estate closing costs are split between buyers and sellers in NJ. Typically, the biggest closing costs the seller pays will be transfer taxes and the real estate commission, while the buyer's biggest closing costs will be title insurance, home inspection and appraisal fees, and the mansion tax, if applicable. The seller and buyer will also both pay their respective attorney's legal fees and a number of other smaller fees.
New Jersey Seller Closing Costs
Real Estate Commission
Agent’s Commission: Typically 5% to 6% of the sale price, split between the buyer’s and seller’s agents.
Transfer Tax
State Transfer Tax: $2 per $500 of the sale price up to $350,000, and $3.35 per $500 over $350,000.
Attorney Fees
Legal Representation: $800 to $1,500.
Outstanding Liens and Prorations
- Property Taxes: Prorated for the portion of the year the seller owned the property.
- Utility Bills and HOA Fees: Prorated to the closing date.
NJ Buyer Closing Costs
Mortgage-Related Fees
- Loan Origination Fee: Typically 0.5% to 1% of the loan amount.
- Appraisal Fee: $300 to $500.
- Credit Report Fee: $30 to $50.
- Underwriting Fee: $500 to $800.
Title and Settlement Fees
- Title Search and Title Insurance: $500 to $1,500 depending on the property price.
- Settlement/Closing Fee: $500 to $1,000.
Government Fees and Taxes
- Recording Fees: $100 to $400.
- Mansion Tax: 1% of the sale price for properties over $1 million.
- Transfer Taxes: Paid by the seller in most cases, but sometimes negotiated.
Inspection Fees
- Home Inspection: $300 to $500.
- Pest Inspection: $75 to $150.
Prepaid Costs and Escrows
- Homeowners Insurance: $500 to $1,500 annually, typically prepaid for the first year.
- Property Taxes: 2 to 6 months' worth, depending on the time of year and lender requirements.
- Prepaid Interest: Varies based on loan amount and interest rate.
Attorney Fees
Legal Representation: $800 to $1,500.
How Can I Reduce Closing Costs?
Other than the seller’s contribution to your closing costs, there are other ways that you can lower them.
Applying for credit with a lender could give you money to put towards the costs. For example, you could make an agreement with the seller for them to take on some of the closing costs in exchange for repayment later at a higher interest rate.
If a seller is interested in collecting the interest, they might significantly dock your closing costs in exchange for agreeing to these payments.
Remember that closing costs should be estimated and planned for in advance of the deed transfer. A loan estimate should be given to you that will tell you in certain terms what you will be responsible for paying on closing day, followed by a closing disclosure that finalizes it.
You are ultimately responsible for this amount on closing day, so any reductions or exemptions you plan on using to reduce it, either by having the seller take responsibility for a portion of the payments or by bringing in a third party lender, have to be decided by that time.
Contact a lender or mortgage banker in New Jersey to figure out your options and see what you need to finalize to learn the amount you need to pay in closing costs and to get it as low as you can.
NJ Closing Costs Bottom Line
In New Jersey, closing costs for buyers generally range from 2% to 5% of the purchase price, while sellers typically pay 6% to 8%, mainly due to real estate commissions. Buyers and sellers should obtain detailed estimates from their lenders, attorneys, and real estate agents to better understand the specific costs associated with their transactions.
If you plan on buying a property in New Jersey but aren’t sure if you’ll be able to cover all the closing costs, speak with your agent, attorney, or banker to see what your options are. Use this guide to determine what qualifies as a closing cost in NJ, what you can be expected to pay, and who might share the burden with you with a little negotiation.