What is the New Jersey Realty Transfer Fee?

By: ROS Team October 14, 2021

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The NJ realty transfer fee has been in place since 1968, but not everyone understands it or even knows what it is. Here’s a simple guide that can help you calculate your total transfer tax obligation in New Jersey.

What is the Realty Transfer Fee?

The realty transfer fee NJ is the price buyers and sellers pay to transfer property. The transfer fees document title transfers between property owners to buyers. The fee is usually 1% of the total transaction value, and the fee is calculated, paid, and recorded when the deed is recorded.

The Realty Transfer Fee does the following:

  • It offsets the cost of tracking and documenting the state’s real estate agreements each year;
  • It provides an incentive for sellers to transfer their property from New Jersey to another state to receive a lower real estate transfer fee; and
  • It also provides a significant financial benefit to the State of New Jersey.

It is important that anyone who is considering purchasing or selling property in New Jersey know about this fee, how to calculate it, and who’s responsible for paying it.

New Jersey’s realty transfer fee calculation varies according to the property’s market worth. The amount can sometimes change if the ratio between the market value and the assessed property value fluctuates significantly. The fee is the same in each of New Jersey’s 21 counties, and the money is placed in the state treasury ten days after it is received.

Who Pays the Realty Transfer Fee?

The New Jersey realty transfer tax is payable upon the deed’s transfer. It is applied to Class 4A business properties, Class 2 residential homes, and Class 3A farm holdings.

Realty Transfer Fee

  • Class 2 Residential Homes

A plot of land that has a house on it is defined as Class 2 residential. The larger the home, the higher the transfer fee.

  • Class 3A Farm Property

Transfer fees are payable for Class 3A farmland. However, some exclusions exist. For instance, land that was purchased solely to produce goods (there are no structures or buildings) is not assessed as a transfer tax.

  • Class 4A Business Property

Class 4A business property is any commercial property that generates income from the land alone. This property type is liable for the reassessment of the property’s assessed value and includes shopping malls, offices, restaurants, grocery stores, and theaters. If the property itself does not generate revenue. The industrial complexes and amenities cannot be taxed even if a for-profit company owns them.

Knowing these distinctions will help you grasp whether or not the property you’re buying is subject to the real estate transfer fee so that you can plan accordingly.

Calculating the Realty Transfer Fee

The New Jersey transfer charge is usually 1% of the total purchase price of the property. To calculate the fee, simply calculate 1% of the total sales price of the property.

calculating Realty Transfer Fee

New Jersey Realty Transfer Fee Exemptions

Federal agencies, their subsidiaries, and institutions like being part of the U.S. Armed Forces and tend to sell the property as a result of being deployed on active duty outside of New Jersey. These may be exempt from paying the NJ transfer tax. The exemption is in exchange for a debt discharge, which means no tax is required on the land or the property. This also includes any transfers done as part of a will.

Fee Exemptions

Cooperative enterprises may also relocate assets, turn premises into condos, or combine shareholder interests. These include agricultural, electric, retail, housing, and financial unions. The New Jersey real estate transfer fee is waived in each of these scenarios.

Dealing with the Mansion Tax

The New Jersey mansion tax is the transfer fee applied to properties valued at $1 million or more, and usually includes Class 2 and Class 4A residential and commercial properties. The tax represents 1% of the overall sale, except in specific cases like conveyances pursuant to the federal bankruptcy act, transactions in which a contract to sell real property is executed without the property being used or occupied; transactions in which an option to purchase real property is granted; or transfers of real estate made without compensation or in connection with a sale, such as bona fide gifts of real estate. The payment is scheduled to occur at the moment of the transfer of the funds.

Other concerns include conveyances that affirm, rectify, alter, or enhance a previous conveyance without additional thought; except for transfers of the real property that makes up the cooperative residences to a cooperative housing corporation to accomplish a purely legal change of identity or form of ownership or organization, no change in beneficial ownership occurs.

Contract to Purchase Real Estate

A contract to purchase real estate with the use or occupancy thereof, where the consideration is less than $200,000 and such property was used solely by the grantor as his personal residence and consists of a one, two, or three family house; an individual residential condominium unit; or the sale of stock in a cooperative housing corporation associated with the grant or transfer of a property right.

Providing tax-free NY real estate to START-UP NY program participants located in such locations. As permitted by economic development statute article twenty-one, to enterprises located in those areas.

It also varies from conveyances to the United Nations, the United States of America, the state of New York, or any of its instrumentalities, agencies, or political subdivisions (or any public company, including one formed under an agreement or compact with another state or the Dominion of Canada) and conveyances that are or were used to secure the payment of a debt or other obligation.

Conclusion

A seller’s property can be considerably affected by the New Jersey realty transfer fee.  Although it may influence the property’s value, it results in some loss of profit. Nearly all residential and commercial properties must pay this fee with some exceptions. Such as apartment complexes, unoccupied parcels of land, and farms that don’t have residential structures.

Buyers can save thousands of dollars just by understanding the fees and how they are applied to property values. Do your research when you find a property to determine whether or not. It is subject to the mansion tax or the New Jersey real estate transfer fee.