Seller Tax Issues

Sellers are faced with their own issues most of them tax issues.  First there are taxes to consider.  A realty Transfer Tax is assessed for all New Jersey Homes unless you are exempt. form the tax.  A Mansion Tax is also assessed on homes selling for more than One Million Dollars.

New Jersey Transfer tax:  Varies based on price and tax status (seniors, disability)

See here For a Chart of the Transfer Tax 

Homes over $1 million add $5/$500 surtax

Commercial sales over $1 million have 1% feeCounty: up to 0.1% additional tax 0.4% - 1.21%, based on value1.0%, 1.0%0.1%

Sellers of Commercial Property are subject to a tax escrow set by the Department Of Taxation.  A Bulk Sale Notification must be filed for all income producing properties and rental properties if larger than two family even if owner occupied. 

Seller Disclosure Issues

Sellers are required to disclose known defects of the condition of the premises or the surrounding area if it is reasonable that a purchaser would consider the facts material to the transaction.   Sellers must disclose facts and defects that are 1) latent, 2) not reasonably observable to the buyer and 3) significant to the buyer’s decision to purchase Correa v. Maggiore 196 N.J. Super. 273 (App. Div. 1984).

Real Estate Brokers also have a duty to disclose the known and material facts a buyer may rely upon.  Such material facts have been previously determined to be defective septic systems and even a tennis court to be constructed on an neighbor's property. 

New Home Sellers are required to inform buyers of an extensive list of offsite conditions such as electrical transformers and airport safety zones.   The duty is satisfied by providing the municipality name and informing the buyer that the list is published at the town hall.  

Well Water Issues

New Jersey Laws require that testing be completed prior to any sale of property utilizing well water.  Every contract of sale for a property subject to the Act must include a provision requiring the testing as a condition of the sale. A closing of the title of sale on a real property that is subject to the Act may not occur unless both the buyer and seller have received and reviewed a copy of the water test results, and have signed a paper certifying that they have received and reviewed a copy of the results.Every time a rental property subject to the Act is leased, a written copy of the most recent test results must be given to the lessee. For more information visit the New Jersey Department of Environmental Protection site.

Short Sale Tax Issues

The mortgage debt relief provisions for homeowners in the federal tax code, first enacted in 2007, expired at midnight on December 31, 2012. But the fiscal cliff bill enacted at the 13th hour by the Congress extended the relief through the end of 2013.Because there are still huge numbers of financially distressed homeowners with underwater mortgages, this was one of the biggest issues in the fiscal cliff debate. Had Congress not acted, the tax code would have reverted to its pre-2007 treatment of mortgage principal reductions or cancellations by lenders, whether through loan modifications, short sales, deeds-in-lieu, or foreclosures.That means that all principal balances unpaid by the homeowner and forgiven by the lender would have been treated as ordinary income to the homeowner. For example, if a lender wrote off $200,000 of mortgage debt to facilitate a loan modification or short sale, the borrower or seller would have been taxed on that $200,000 at regular marginal rates, just as if he or she had earned it as wages.  For more information see the IRS Information page concerning debt forgiveness and the Publication Concerning Foreclosures.  If you are in financial stress and need to get rid of your debts visit our Bankruptcy Website for further information.