Understanding Real Estate Settlement Statements in New Jersey

Real Estate Lawyers Explain Fundamentals of Settlement Statements when Buying or Selling a Home in NJ

A settlement statement summarizes the expenses and credits to the homebuyer. It is an itemized list of costs and credits, including the property’s price, taxes, the real estate agent’s commission, and the amount the buyer borrows. The buyer can see how much money is due at closing, and the seller can see how much net proceeds they will receive in the sale.  The mortgage lender, title company, or real estate attorney usually provides it to the buyer and seller.  The settlement statement is also known as a closing statement, HUD-1, or ALTA (America Land Title Association) settlement.  This statement is not used in cases of a reverse mortgage, a home equity line of credit, a loan obtained through a homebuyer assistance program, or a loan for a mobile home that does not include real estate.  This statement is legally required as part of the Truth In Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).  RESPA’s purpose is to provide a method to inform consumers and lower the risk of abusive practices during the real estate process.  Because it promotes transparency by providing understandable information about the settlement costs, it prevents buyers from paying unnecessary fees.

For experienced legal assistance with real estate settlement statements across Ocean and Monmouth Counties, contact the attorneys at Bronzino Law Firm. Our firm serves clients in Toms River, Brick, Lakewood, Jackson, Manchester, Berkeley Township, Middletown, Freehold, Long Branch, Neptune, Marlboro, and other communities in the Jersey Shore area. We can answer your questions and protect your interests throughout the process of your real estate transaction. Get started today by contacting us at (732) 812-3102 for a free, no obligation consultation.

Unraveling Your Settlement Statement: Key Features

Details in the Buyer’s Section

The buyer’s section details the costs and credits for the party purchasing the property.  The long list of items to be paid is surprising to first-time buyers.  The average cost to close a purchase agreement for the buyers is 2% to 5% of the purchase price.   This varies, depending upon the property’s value and any agreements with the seller regarding who will pay for what.  The buyer’s section includes the purchase price, appraisal fees, homeowner’s insurance, prepaid property taxes (state and local), the earnest money deposit, and loan origination fees.

Components of the Seller’s Section

The seller’s section has the sale price, real estate agent commission, title insurance, attorney’s fees, and any outstanding mortgage balance.  There are also shared costs between the buyer and seller, including transfer taxes, escrow, and recording fees.

Loan and Title Fees Outlined in the Real Estate Settlement Statement

Loan-related fees are charged to the borrower and range from origination fees paid to the lender for processing the loan application to points, which are prepaid interest to lower the interest rate for the mortgage.  The seller is responsible for title-related charges such as insurance and a title search.  The title search is a review of public records to verify the ownership of the property and to ensure it is free of liens or encumbrances. A settlement fee covers the administrative costs during the closing process.  The local government levies property taxes based on the property’s value.  New Jersey also applies a transfer tax of 1% of the sale price if it is under $1 million and 2% if it is greater.

Additional Protections to Ensure Fairness and Transparency for Buyers and Sellers

The Real Estate Consumer Protection Act passed in New Jersey on August 1, 2024, provides additional protections to consumers buying or selling a property.  It was enacted to give the buying and selling process more transparency to ensure a fair transaction.  For example, seller disclosure statements (SDS) are now obligatory.  This statement lists any defects such as water damage, infestations, or structural problems that allow a buyer to make a well-informed decision.  The Act requires real estate agents and brokers to have a written agreement with potential buyers that outlines the financial and legal relationship between the buyer and agent in the case that they continue to work together through the property’s purchase.

Another change is when conducting an open house, the seller’s agent must disclose their role in representing the seller.  Buyers can still take on the agent in a dual role, but disclosure allows the buyer to make an informed decision.  The last section of the Act emphasizes the concept of a designated agency, which allows two agents from the same brokerage company to represent the buyer and seller separately.  This permits both parties to have an agent representing them in the negotiation process, removing any concerns about a fair settlement. Before closing, an attorney review is required.  The buyer and seller’s respective attorneys review and modify a purchase and sale agreement, which becomes fully binding after three business days.

Lastly, in New Jersey, buyers and sellers typically negotiate the closing costs.  The seller may cover some of the buyer’s costs to make the deal more attractive.

Contact our South Jersey Law Firm for Guidance on Real Estate Settlements Statements for Your Transaction

Buying a house is probably the most important purchase you will make.  As with any significant purchase, reading the contract line by line is vital.  If there is something you disagree with or don’t understand, speak with your real estate attorney immediately.  Any changes you are unfamiliar with or discrepancies with what was previously agreed to should be addressed.  New Jersey does not require an attorney to buy or sell.  Still, your real estate agent cannot give you legal advice, so it is essential to hire one from start to finish to protect your rights (and money).

Our real estate lawyers at Bronzino Law Firm understand your concerns regarding your real estate transaction in Barnegat Light, Beach Haven, Harvey Cedars, Island Heights, Lacey Township, Allenhurst, Asbury Park, Belmar, Bradley Beach, and across Monmouth and Ocean County. We will work with you step by step to protect your rights.  Real estate transactions have several moving parts and require great attention to detail.  You need someone whose experience and reputation speak for themselves. Contact us today by calling (732) 812-3102 for a complimentary consultation.