The for sale by owner process in New Jersey can save thousands on commission, give you control and privacy, and get to market fast. Internet tools make it possible, but be prepared to put in time and effort. Are you ready to “sell my house without a realtor in New Jersey”?
This blog teaches how to do a for sale by owner (FSBO) in New Jersey. Read on to learn what you need to do to prepare, techniques to qualify buyers, for sale by owner NJ contracts, phases of the sale, and closing procedures. Selling a home by owner in New Jersey can be successful when equipped with the right strategy and knowledge.
Call us 201-389-8275 or visit the Contact Us page for experienced legal assistance from contract to close.
Step 1: Prepare for the Sale
Repair major defects prior to the sale to avoid delays.
Buyers that discover significant defects during inspection will likely request you repair it, cancel the sale, or ask for a price reduction. Lenders and municipal inspectors sometimes insist on remediating major issues.
Examples of major repairs include:
- Wiring and electrical. Double-tapped breakers, lack of ground-fault circuit interrupter (“GFCI”) near water, unlabeled breakers, and fire hazards (in particular Federal Pacific panels).
- Roof. Leaking, poor drainage, excessive deterioration, ponding, missing shingles, and ponding, chimney problems, and improper flashing.
- Mechanical, Plumbing, HVAC. Central air-conditioning, furnace, hot water heater, sump pump, septics, pipes.
- Environmental concerns. Mold, radon, asbestos, carbon monoxide, soil contamination, and underground tanks.
- Foundation. Signs of foundation defects may include slanted or uneven floors, doors and windows that don’t open/close properly, cracks and fractures in the interior/exterior walls and floors, settling or sinking of the building, damp crawl spaces, and cabinets and counters with gaps and separating from the walls.
New Jersey law requires sellers to disclose “latent material defects” to unaware buyers. Correcting these defects prior to the sale makes seller disclosures less alarming. Review our blog Selling As Is in New Jersey – Disclosure Law for a comprehensive discussion on seller disclosure.
Improved cosmetics help sell faster and for a higher price. Attractive properties draw more buyers, and competition drives increased sale proceeds and favorable contract terms (i.e. earnest deposit, inspection contingency, financing and appraisal contingency, closing date).
Exterior upgrades improve “curb appeal” which increases value 3-5% according to Consumer Reports. Landscaping and lawn maintenance, pressure washing the exterior and roof, painting the house, doors, and fencing, repairing cracks to walkways, adding window treatments, and lighting are recommended for boosting outside appearance.
Ideas for making the interior esthetically pleasing are de-cluttering and deep cleaning, removing personal items, kitchen and bathroom updates, refinishing or replacing flooring, and converting a basement or attic to living area.
Buyers, through their attorney and title company, normally request documents. Some documents may be demanded prior to entering a fully binding purchase and sale agreement, and others may be a closing requirement. Collecting anticipated documents ahead of time can prevent delays and even a sale from falling through.
Permits. Permits are generally required when installing mechanical systems (central air-conditioning, furnace, hot water heaters), making additions or conversions (new bathrooms/bedrooms, living areas, decks), or remediating environmental problems (radon systems and underground oil tanks). Buyers, lenders, and the municipality will request permits as part of approving the sale.
“Back Title”. “Back title” refers to documents received upon purchasing the property, including the deed (evidence of ownership transfer), title insurance policy (confirmation of “clear title”), and survey (map showing parcel boundaries). Provide these to the buyer early to resolve issues in advance.
Homeowner’s Association Documents. Buyers purchasing in a development conduct “due diligence” on the community itself, including asking for Master Deed or Master Declaration, articles of incorporation, by-laws, rules and regulations, budgets, statement with cash reserves, and information about fees, services, lawsuits, bankruptcies, and special assessments.
Court Records. Prior to closing, title companies will “search” the history of court filings that were connected to the property. Dismissals of any foreclosures, tax sales, bankruptcies, or ownership disputes prove the case is resolved.
Warranties and Invoices. Are recent renovations a selling point in your marketing? Show the buyer the invoices for proof, and the warranty for confidence the new renovations will be fixed if work was defective.
Intrafamily Transfers. Wills, death certificates, powers of attorney, and probate filings may be required for inheritances or “quit claims” from elderly parents to children.
Leases and Proof of Rent. Buyers acquiring property with tenants need to review the lease to understand the tenant’s rights. They also may request proof of rent to ensure the tenant is paying, and utilities to estimate profitability.
Mortgage Pay-Off. Mortgages must be paid off entirely at closing. Contact your lender for a “pay-off” statement in order estimate your net sale proceeds at closing. Knowledge of the financials assists in planning your next move.
Relocating is necessary when selling owner-occupied property. Knowing your plan in advance can help structure the sale contingencies, timing, and post-closing occupancy.
A “property sale contingency” can be used make this sale only occur if you are able to purchase another property. If you need time after closing to move, you can seek a “lease back” as tenant, or short-term “use and occupancy agreement”. If you’re in a situation with a lease beginning or ending, setting a longer/quicker closing date can save money.
Step 2: Research the Market and Set Price
Intelligently setting a list price is an important part of the for sale by owner process in New Jersey. It is solely your decision without a real estate agent to guide you.
A low asking price attracts low quality buyers or real estate investors, and you risk of a sale price below the true market value. Pricing too high may scare away buyers, make you seem unrealistic and difficult to work with, and lead to your property sitting on the market until you cut price.
A licensed appraiser can provide a qualified opinion as to the market value for approximately $500.00. Realtors also provide a free market value estimate (called a “Comparative Market Analysis”) as a free service. Online estimates such as the “Zestimate” provide a ballpark market value.
The starting point for setting a sale price is reviewing the sales of comparable properties. Data is available on Zillow and Redfin.
Focus on comps that are similar to your own in the following features:
- Distance. Physical distance from the comp from your property – under ½ mile is recommended.
- Subdivision/Neighborhood. Focus on properties in the same neighborhood. If your property is a condo or townhouse, review comps in the same community.
- Recency. Comps sold in the last 3-months are best. Beyond 6 months is of limited value.
- Living Area. Living area may be defined as the area under heating/central air-conditioning.
- Age. Year the house was built.
- Lot Size. Total square footage of the land.
- Bedrooms/Bathrooms. Count of bedrooms/bathrooms available on the property.
- Level of Renovation. Houses recently renovated will sell for more.
- Critical Amenities. Items such as pool, central air-conditioning, driveway, finished basement/attic, are substantial features.
Once you’ve identified a set of the best comps that should provide a range you can expect your property to sell for. Adjust price upwards for criteria that make your home more desirable, and downwards for less desirable. As discussed above, an appraiser or realtor can provide concrete guidance.
Active listings (as opposed to historical sales) are also a helpful indicator. If comparable properties are not selling at a particular price point, most likely you will need to price below for a swift sale. If properties are flying off the market or there is little inventory, consider listing above recent sales to capture appreciation.
Step 3: Market the Property for Sale
Selling a home by owner in New Jersey means taking on the job of the real estate agent. Advertising online is now available for free on sites such as Zillow, Trulia, and For Sale By Owner, and Craigs List.
Creating a Listing Description
Online listings will require you to submit an accompany listing description, including basic information such as bedrooms and bathrooms, square footage, lot size, heating systems, and age.
Listings also allow you to describe the property. Although highlighting key features and recent renovations is a must, accurate representations will avoid wasting time or disgruntled buyers. Disclosing major flaws in an “as is” will also save you time. Adding professional photography will allow the buyer to have a clear picture of the condition in advance of contacting you to scheduling a showing. Mention specials accommodations you will make to the buyer where applicable, such as home warranty, credits toward closing costs, seller financing, or flexible closing date.
Flat Fee Listing
A flat-fee listing allows you to access the Multiple Listing Service (“MLS”) without paying real estate agent commission. Instead of a percentage of sales price, sellers pay a fixed fee to the realtor in exchange for listing the property on MLS for a set time period. Some agents offer support services for additional fees, such as open houses, photography, and showings.
The advantage of flat-fee listing is the maximum exposure of an MLS listing, without paying listing agent commissions of 2 to 3% depending on the market. Even with a flat-fee listing, you may still pay 2 to 3% commission to the buyer’s real estate agent.
Step 4: Hire a Real Estate Attorney
Once your listing is active, offers begin to pour in. Phone calls, e-mails, and showings can feel overwhelming. You must select the best offer – a job normally reserved for realtors.
A real estate attorney can help you choose the right offer if you are selling your home without an agent. Proof of funds, pre-approvals, motivation, and essential contract terms help target legitimate buyers.
Sellers often increased their net sale proceeds as a result of our legal assistance in addressing creditors, liens/mortgages, and inspection issues:
- Seller owned condominium through an intrafamily transfer, and the buyer found a federal tax lien for over fifty-thousand dollars. Our firm contested the lien because it covered a tax period when the parents had a life estate interest, and IRS guidelines required the lien to be discharged upon the life estate terminating. The sale went through without our client paying the tax debt.
- Court judgments against the seller were found due to a bankruptcy and unpaid credit cards. Our firm opened an escrow account after closing, negotiated reduced pay-off amounts, and the liens were discharged.
- Buyer requested a price reduction due to cosmetic defects and replacement of functioning mechanical systems that were beyond their useful life. Our firm structured the sale as an “as is” sale to exclude cosmetics and functional systems from inspection. The buyer withdrew the inspection requests.
- Prior to condominium closing, the homeowners’ association charged the seller several thousand in capital and transfer fees on the settlement statement. This payment was due from the buyer, and the settlement statement was amended to remove the charge.
Review our blog Is a Real Estate Attorney Required in New Jersey? for in depth discussion of the services a legal profession will provide you.
Step 5: Qualify Prospective Buyers
Qualifying a prospective buyer will prevent wasting time with “tire-kicker” buyers or those unable to afford the property. Taking your house off the market for the deal to fall apart weeks laters is disappointing to say the least.
Judge the buyer on whether they are: (1) financially able to close; and (2) motivated to follow through on the sale.
Pre-Approval. A pre-approval sets forth how much money the buyer can borrow. Lenders evaluate income, assets, employment, and credit score, and then issue a letter stating the amount and interest rate buyer is approved for. A pre-qualification occurs without a credit check and less information – so it is not as reliable as a pre-approval. Request written proof of the buyer’s pre-approval. Ensure to compare the actual amount they are approved to cover the purchase price. Serious buyers understand a pre-approval letter
Proof of Funds. A proof of funds demonstrates the liquid cash available to the buyer. Buyers must bring an amount of money to closing, referred to as the cash to close. Cash to close includes the amount “down” on purchase price (often between 5 to 20% of price) and buyer’s closing costs (ballpark 3 to 4% of price). Verify the account holder’s name and amount available. Be wary if the proof of funds is in the name of a third party as the buyer may not have control.
Real Estate Agent. Buyers that have a Realtor is a sign they are additional serious. Realtors do not wish to waste their own time and make efforts to qualify the buyer before submitting offers and scheduling showings. Realtors also will explain the process ahead of time so there is less risk the buyer will cancel due to being overwhelmed by the process.
Motivation. Ask why the buyer is purchasing a house now. Move on quickly if the buyer discloses they are just looking (i.e. not serious). Reasons that motivate buyers include: (1) need larger space for family, friends, pets, and entertainment; (3) stable and permanent living space for family; (3) build equity paying down a mortgage, appreciation, and tax deductions; (4) privacy of not living an apartment building; (5) rental income for landlord buyers.
Negotiate Essential Terms. Speak with the buyer about the key terms of sale beyond price before drafting a formal written agreement. Essential contract terms include: earnest deposit, down-payment, mortgage type, appraisal contingency, inspection contingency, closing date, and personal property included in the sale. A high price is only as valuable as the terms that support it.
Listen carefully as you are vetting the buyer. Make sure to get straight answers to ensure you are working with a buyer that is willing and able to follow through on the purchase.
Of course, a seller should always seek to comply with Fair Housing Laws and avoid discrimination of any kind as part of choosing a buyer.
Step 6: For Sale By Owner Contract
A NJ real estate contract used in for sale by owner transactions is a written binding agreement between to transfer the home or other property. The contract sets the parties expectations and protects them both in the purchase process.
The contract sets forth the rights and obligations of the buyer and seller, and essential terms such as purchase price, closing date, financing, inspection, deed type, and property included. FSBO real estate contracts in New Jersey must be written to be effective.
Real estate contracts contain many provisions that an attorney modifies to satisfy client needs and reach a fair compromise with the other party such as:
Earnest Deposit. Earnest deposits are money placed into escrow by the buyer at the beginning of the transaction. The deposit demonstrates the buyer’s “good faith” to complete the sale. A high deposit evidences a serious offer. In New Jersey, earnest deposits normally range from 2.5 to 10% of purchase price, are held by the seller’s attorney, and are due within a week of entering the contract. The deposit is applied to the buyer’s payment at closing.
Inspection Period. Standard real estate sales provide buyers a due diligence period for buyers to inspect the property. The default period in New Jersey is fourteen days. Attorneys often draft the contract to limit inspection to functional defects, as opposed to cosmetic concerns or upgrades. Purchasers hire a licensed inspector who in addition to a general inspection, may examine for radon, termites, underground tanks, mold, and pipe deterioriation. Specialists often follow-up on the initial inspection. Once the report is received, the buyer’s attorney commonly submits a letter addressing repairs, credits, or price adjustments. The parties normally can amicably resolve inspection issues.
Financing Contingency. Financing contingencies allow buyers time to obtain a “mortgage commitment”. A mortgage commitment is document provided by lenders approving the buyer’s mortgage at an interest rate, monthly payment, and amount down at closing. The default period to obtain the mortgage commitment is thirty days. The buyer may cancel under the financing contingency if a mortgage commitment cannot be obtained. Attorneys often draft the contingency to ensure that the buyer: (1) applies for the mortgage swiftly, (2) only may cancel with a letter from the lender explaining the reason for denial, and (3) will not breach the contract if the mortgage commitment is withdrawn for reasons beyond the buyer’s control (i.e. job termination, illness, or failure by the lender).
Appraisal Contingency. An appraisal is a determination of a property’s market value. An appraisal report takes approximately seven to ten days to complete. Appraisal contingencies allow a buyer to re-negotiate or cancel if the property appraises for less than the market value. Attorneys often remove appraisal contingencies entirely or limit the contingency to only permit cancellation if there is a substantial difference in purchase price and market value. Lenders require an appraisal prior to issuing a mortgage.
Clear Title. Sellers must deliver the buyer “clear title” in standard real estate transactions. Clear title refers to purchasing without any liens, third-party claims to ownership, code violations, border disputes, or encroachments. Attorneys draft real estate contracts to allow a buyer to cancel and to re-coup costs if the seller is unable to transfer clear title.
Representations. Representations are a statement of fact inducing a party to enter a contract. Seller representations may include that no restrictions interfere with intended property use, necessary permits have been obtained, authority to make the sale, no hidden defects, systems are in working order, and no current, pending, or threatened lawsuits concerning the property exist. Buyers may represent they possess sufficient assets to close. Attorneys typically draft representations such that they require no duty to investigate, do not survive closing, and are limited to the “best of seller’s knowledge”.
Property Included and Excluded. The standard contracts require the seller to remove personal property from the interior and exterior prior to closing. Fixtures, permanent items affixed or fastened to real property, are included in the sale. Contracts can be drafted to include personal property desirable to the buyer, or that the seller wishes to leave behind as a convenience. Sellers may negotiate to keep expensive fixtures such as commercial machinery or chandeliers.
Complex Circumstances. Attorneys draft unique provisions when addressing delicate legal circumstances, such as structural defects, expedited closings, private financing, illegal or unpermitted dwellings, inheritance or divorce, closing cost concessions, adverse weather and environmental areas, tenants, underground oil tanks and soil contamination, post-closing tenancies or use and occupancy agreements, easements, short sales or foreclosures, property sale contingencies, and a suspect history of liens and transfers.
Legal Compliance. Attorneys work to ensure contracts, and the underlying sale, comply with laws including New Jersey Bulk Sales Law (N.J.S.A. 54:50-38), Lead Paint Act (N.J.S.A. 24:14A-1), New Jersey Air Safety and Zoning Act (N.J.S.A. 61:80), New Residential Construction Off-Side Conditions Disclosure Act (N.J.S.A. 46:3C-1), New Home Warranty and Builders’ Registration Act (N.J.S.A. 46:3B-1), Anti-Eviction Act (N.J.S.A. 2A:18-61.1), Fair Foreclosure Act (N.J.S.A. 2A:50-53), and state, federal, and municipal regulations on zoning, land use, and certificates of occupancy.
Step 7: Home Inspection
Imagine visiting the doctor for a check-up or bringing your car to the mechanic. A home inspection allows the buyer to hire licensed professional to evaluate the property’s physical condition, and produce a report of their findings.
Inspectors go through the interior and exterior of the house, and focus on items that are deficient, near the end of their useful life, unsafe, or not functioning properly. Inspectors may identify issues such as water damage, structural issues, old/damaged roof, damaged electrical, plumbing problems, insects and pests, and HVAC system.
The inspection contingency in the contract will lay-out the buyer and seller’s inspection rights. A seller is generally under no obligation to fix or offer credits for defects. Buyers main remedy if the seller will not make corrections/offer credits is to cancel the contract with the return of their deposit. An attorney will often place limits on the types of inspections and kinds of defects that may be raised by the buyer.
During the for sale by owner NJ process, the seller will have to arrange for inspections. In traditional sales, the realtors would attend to ensure all communications are appropriate and professional between the buyer and seller. Keep in mind the purpose of inspection is not for a professional opinion for the buyer and communications with the buyer can be kept minimal.
Step 8: Financing
Financing is next hurdle after inspection concludes. Sales cannot cross the finish line without the lender or buyer supplying the cash to the seller.
The main components of mortgage financing are the appraisal, mortgage commitment, and the clear to close.
An appraisal is required prior to issuing a mortgage commitment. An appraisal is an unbiased professional opinion of a home’s current market value.
The appraisal helps assess the lender’s risk on the loan. The property is collateral if the borrower defaults on the mortgage, so the lender ensures the loan is not too large relative to the property value.
Fannie Mae reports less than 8 % of appraisal come in low. Avoiding a low appraisal is advisable to prevent the sale from being delayed or falling. According to Bankrate:
“Before you list your property, consider having it professionally cleaned both inside and out and staged not only for prospective buyers, but for appraisers as well, he says. Don’t forget areas such as the attic, basement and garage, especially if they are unused. Clean up and mow the yard, touch up the paint and pack up your touches.”
In the event of a low appraisal, options include:
- Lower the sale to match appraisal value;
- The buyer can make up any difference in their mortgage in cash;
- Contest the appraisal by presenting additional comps to the appraiser;
- Negotiate a price in the middle of initial sale price and appraisal value.
Buyers must secure a mortgage commitment after the appraisal.
A mortgage commitment is an agreement between a buyer and lender outlining the terms of the mortgage (interest rate, years, monthly payments, and rate lock period). The buyer is officially approved. There are normally outstanding conditions to be resolved prior to closing such as additional documents, no change in credit score or income, and proof of homeowners insurance policy.
Buyers normally are contractuall required to apply for the mortgage commitment within ten days upon entering the contract, must obtain the commitment within thirty to forty-five days. The contract may be terminated, or the parties can agree to a time extension, if the mortgage commitment is delayed.
The lender may request the following of the buyer as part of the approval:
- Proof of income
- Two years of tax returns, either W-2s or 1099s
- Pay stubs for the past 30 days
- Letters explaining any gaps of employment during the last two years
- Plan for your down payment
- Two months of bank statements, if using savings
- Letters of gifted funds from friends or family
- Asset documentatioLast two months of brokerage account statements
- Debts and recurring expenses, financial history, and other obligations
- Credit reports from Experian, Equifax, and TransUnion
- Legal documents: bankruptcy, divorce, foreclosure history
Clear to Close
Clear to close means the lender has fully approved the buyer’s loan and any outstanding conditions have been satisfied. The lender will contact the attorneys and title company to schedule the closing date.
The lender will produce a “Closing Disclosure” for the buyer that includes loan terms, estimated monthly mortgage payments, closing costs, loan processing costs, cash to close amount, transaction summary, loan disclosures, and loan calculations. A separate closing disclosure is often produced that is signed by both the seller and buyer.
Step 9: Clearing Title
Title searches are conducted in virtually all real estate transactions. The title search is an examination of public records to identify the legal owner, as well as the history of deed transfers. In New Jersey, title searches are conducted by title companies and submitted to the buyer, seller, attorneys, and lender. This search also reveals open court cases, code violations, and claims on the property against present and past owners by third parties, for example, mortgages, liens, delinquent taxes, and court judgments. Title companies also underwrite a “title insurance policy” based on the results of the title search.
A real estate attorney reviews the title history to identify ownership defects. Attorneys can help resolve a defect in order for the sale to complete. Attorneys confirm that liens are paid off at closing and discharged from the public record so future sales are not negatively impacted.
Step 10: Closing
Real estate closings have numerous moving parts. Mortgage and lien holders must be paid off. “Cash to close” is received from the buyer, and net sale proceeds delivered to the seller. Lenders, realtors, and other professionals are entitled to their fees. Payment arrangements via wire or certified checks are set forth.
Settlement statements and closing disclosures showing disbursements must be approved. The attorneys will review settlement statements to confirm net sale proceeds are the correct amount after accounting for agent fees, tax and utility prorations, and pay-offs.
Closing documents, including deeds and mortgages, must be recorded in the county for full effect. Keys are transfered and utilities switched to the new owner. An experienced real estate attorney helps you navigate and understand the closing process.
Attorneys representing the seller customarily prepare a series of documents required for closing in New Jersey:
- Deed. A deed is a signed document that transfers ownership from the seller to the buyer. In New Jersey, deeds must identify the grantor/grantee, be signed by the grantor, notarized, state sale price, contain a property description, and describe the ownership interest being transferred. Deeds must be recorded to be fully enforced. Learn about deeds in our blog Valid and Enforceable Deeds in New Jersey.
- Affidavit of Title. An affidavit of title includes representations that the seller is authorized to make the sale and has not taken actions that would harm the buyer’s ownership interest after closing.
- FIRPTA Form (Foreign Investment in Real Property Tax Act). This form identifies whether the transferor is a non-resident for purposes of U.S. income taxation.
- 1099-S. The 1099-S is a tax document that reports sale proceeds to tax authorities.
- GIT/REP: New Jersey’s GIT/REP forms determine whether a tax withholding must occur at closing. There is typically no tax withholding if the property sold was a principal residence, the seller is a residential tax payer, sale consideration is under $1,000, or the seller is not required to make an estimated gross tax payment.
The for sale by owner process in New Jersey may not be for everyone. This guide described how to do a for sale by owner, but real estate agents provide valuable services in marketing, vetting incoming offers, overseeing the sale process, and managing inspections. Whether it is worth it for you to sell your house without realtor in New Jersey depends on your skills, experience, time, and personal circumstances.
This guide applies to selling a house by owner in Newark, Jersey City, Hoboken, Paterson, Elizabeth, Union City, West New York, Bayonne, East Orange, West Orange, North Bergen, Clifton, Bloomfield, New Brunswick, Atlantic City, and across Bergen County, Essex County, Hudson Couny, Union County, Morris County, Somerset County, Atlantic County, Monmouth County, Middlesex County, Ocean County, and Passaic County
Call us at 201-389-8275 or visit the Contact Us page for assistance with any real estate sales. Note: The information provided in this article is for informational purposes only and does not constitute legal advice. Readers should contact an attorney for advice on any particular legal matter.