In the Concert for Sandy Relief, during his Hallelujah spoof, Adam Sandler sang about the "Hudson Brotherhood" with respect to the relationship between NY and NJ. However, despite the cordial relationship he sang about if you are considering a move between these two states, the practices relating to home sales do have some distinctions that are important to understand. In the first part of this two-part post, I am going to discuss the Contract phase of the transaction.
In the second part, I will discuss the Closing phase.
Home Inspections: In New York, the home is inspected prior to entering into a Contract of Sale. If the condition isn't satisfactory to the purchaser and the parties can't agree on repairs or a credit, the transaction doesn't proceed any further. In New Jersey, the home is inspected several days after entering into a contract and the inspection is a contingency in the contract. That is, if the purchaser is not satisfied with the condition of the home and the seller is not willing to correct the issues or provide a credit, the purchaser has the option of canceling the contract.
Contracts: In New York, the contracts are prepared and negotiated by real estate attorneys. At the time the contract is signed, the purchaser pays the downpayment. Then, the Seller countersigns it and the contract becomes binding. In New Jersey, the standard form of contract is prepared by the real estate agents. It then goes through an attorney review process where the attorneys amend and modify the form with riders. During this time period, either side can cancel the deal which happens regularly. The contract becomes binding, subject to the inspection contingencies once the attorney review concludes. The downpayment is generally paid a few days thereafter.
Liquidated Damages: Liquidated damages are an amount of money (i.e. the downpayment) that is agreed upon by the parties at the time of the contract signing that can be recovered in the case of a default. In New York, if the purchaser defaults the seller can keep the downpayment but cannot get anything more than that. In New Jersey, there are no liquidated damages so both parties must go to court to establish the damages that they are owed under the Contract.
Mortgage Tax: New York State has a mortgage tax of .75% of the mortgage amount and New York City has an additional mortgage tax of 1.05-1.175 (i.e. totaling 1.8-1.925%). Some other NY counties have additional mortgage taxes as well. There is no mortgage tax in New Jersey.
These are some of the important distinctions between New York and New Jersey house transactions. In the second part, I will provide a few differences in the closing process.
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