Legal Question in Real Estate Law in New Jersey

Re: Help need answer asap re: acceptable closing costs.

Loan orignination fees are not prohibited and are, in fact, very common in real property financing. Some government guarantors, such as the Veteran's Administration, prohibit such fees charged to the buyer. The practical result is that in areas where there is a lot of purchases by military personel, the price of the real property is somewhat higher so that the seller can pay the charges. A buyer purchasing on his own credit needs to be aware of this because the seller will usually reduce the price of the property if he does not have to pay the "points."

The best source of information on costs is the HUD-1 statement that both buyer and seller must receive at the time of settlement. You can get a copy of the form from http://www.hudclips.org/sub_nonhud/html/pdfforms/1.pdf

Closing costs can vary considerably but are capable of estimation once the nature of the transaction and the parties are known. You are entitled to get a good faith estimate of these costs from the broker prior to settlement. If you are not dealing through a broker, your lawyer will get this estimate for you. All you have to do is ask.

Costs generally consist of (1) adjustments between buyer and seller such as for pre-paid taxes; (2) payments to service providers such as the broker; and (3) payments to the government such as for the real property transfer tax.

By far, the largest cost is usually the broker's commission. If your sale is between members of the same family, you should not need a broker at all. Buyer should always be represented by an attorney unless very experienced in real property transations. Seller can sometimes get away without that expense since seller will be satisfied by the giving of a deed and receiving the money. Title insurance costs are regulated by law and are based on the value of the property to be insured. In south Jersey, it is common for the title clerk to act as escrow agent and a nominal fee is charged for this. In north Jersey, it is common for sellers lawyer to act as escrow agent and this charge goes to the seller.

If you are looking for a rough order of magnitude estimate of closing costs, figure ten percent of the fair market value of the property. This is an estimate that a U.S. Trustee in Bankruptcy will usually accept as an estimate of total closing costs. Yours may vary, but it is a good starting point for planning.

Re: Help need answer asap re: acceptable closing costs.

While I agree with John, let's get more specific. Origination fees are legal, the amount being set by the bank or mortgage company. It's best to shop around, not only comparing rates, but also closing fees. Some fees and costs are universal, like title searches and insurance (regulated by the State), escrows, recording and mortgage payoff costs, and the like. Broker commissions vary. While the brokers try to get the "traditional" fee of 6% of the sales price, usually split between listing and selling broker, they are negotiable. There are many discount brokers out there, so it is possible that this fee can be reduced significantly. It is not required that a broker be used, so if a private deal is made between the buyer and seller, there could be no commission. Legal fees can vary, usually depending upon the complexity of the transaction and what is involved. Part of the fee determination also takes into account where the closing takes place, and the amount of travel time involved. My fees, which may be higher or lower than some other attorney, are usually $750-$800 for representing a buyer (more work is involved, especially if there is a mortgage involved) and $500-$600 for the seller. These fees may be increased if some complication arises (contract disputes and the like) or if I have to spend more than 1/2 hour or so going to a closing out of my office. The fees cover from the contract review to closing and post-closing follow-up. The fees could be slightly higher to a buyer, if a private mortgage becomes involved (seller financing) and I have to prepare the papers. Feel free to contact me directly if you have any additional questions.