Judging from the comments I've received lately, it seems time to revisit the issue of the New Jersey "Exit Tax," or as it is know to the State, The Gross Income Tax (GIT) Withholding on Real Estate.  First of all, some clarification about the panoply of taxes levied by New Jersey on the sale of real estate.

There are three taxes related directly to the sale of real estate in New Jersey.  There is the "mansion" tax, a 1% tax supposedly paid by the buyer of any property with a sale price over $1,000,000. 

The next tax is the Realty Transfer Fee (RTF).  It was established many years ago as a fee that was passed along to county clerk offices to fund the entry of data into local records.  It started out very modestly, but like the nose of the camel, no one really whacked it hard enough to keep the tax (or the camel) out, so it has now grown.  The camel is in the tent, and we are all suffering from its fleas.  The fleas (or fleece, if you please) amounts to nearly 1% of the sale price. Hmmmm.   I guess the mansion tax was established to make it possible for buyers to share the tax pain equitably with sellers.  The New Jersey Association of Realtors® has been working mightily to keep a lid on this tax and even to roll it back.  The lid is on, but the rollback seems unlikely.

Finally, there is the Gross Income Tax Withholding on Real Estate.  In its simplest form it requires an out-of-state seller (or one moving out of the state) to "make an estimated gross income tax payment on the gain from the sale or transfer of real property as a condition of recording the deed." (Public Law 2004, C. 55).  The key to computing this tax is a form called "Seller's Residency Certification/Exemption," know also as the GIT/REP-3.  There are 8 conditions on the form that get the seller off the hook.

The most significant one (for this market, at least) is number 7: "The gain from the sale will not be recognized for Federal income tax purposes under Internal Revenue Code Section 721, 1031, 1033...."  In other words, if a married couple has lived in the property as their primary residence for two of the past five years, property gain up to $500,000 does not incur tax.  If the Feds don't tax it, New Jersey won't.

That's it in a rather large nutshell.  However, I am not an attorney, nor an accountant - I don't even play one on TV.  For the final word on this anyone likely to be affected would do well to consult an tax attorney or accountant.

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If this entry is helpful, let me know.  I list and sell real estate for a living (for 30 years), and I would be pleased if you would consider me for your real estate sales or purchases.

As the home sales market heats up in Hillsborough, New Jersey, some interesting trends are developing.  Breaking the market down into five price ranges, Entry (<$300,000), Low Middle ($300-500,000), Middle ($500-750,000), Upper Middle ($750,000-1,000,000) and Upper ($1,000,000+), there are a couple of surprises.  The most active range is not the Entry, but rather the Low Middle, where the ratio of pending sales (not yet closed) has reached 27% (compared to 25% for the Entry Level) of the total of actives and pendings, even though the pendings in this range constitute a third of all pendings in Hillsborough.

What seems to be happening is that although properties under $300,000 are more affordable, the fact that they are chiefly townhomes and condos makes them less attractive to those who can afford a little bit more to get into a single-family home.  This could force prices further downward in the townhome and condo market while pushing upward on single family homes at the lower end.  This is not an unusual occurrence.  Townhomes, and especially condos, are the first to suffer price declines and the last to benefit by improving markets.

Overall, the pending/active ratio is currently 20%, rising from about 17% of a month or so ago.  We're a long way away from the 52% of four years ago, when the market was very hot and very favorable to sellers, but there is ample evidence that we will see substantial increases over the next few months.

Buyers need to pay attention at this point, before the market gets away from them.  Work with a Realtor® who knows the market.

Amidst the recent doom and gloom associated with the "national real estate market" for January (!), you need to shed your gloomy face and get up to date. 

In the month of March the homes market in Hillsborough  marched strongly forward after a horrible January and a good February.  The number of sales made in March 2009 was more than 17% higher than the same month in 2008.  The average list price of those homes that went under contract was also up - from$353,753 in 2008 to $380,140 in 2009.  This last factoid really means nothing, but I thought it was necessary to toss it in anyway. 

The inventory of unsold homes on April 1 was down about 8% over last year, but up about 6% over the preceding month - a seasonal occurrence.  Most promising is that fact that the supply/demand ratio (listings taken divided by sales made) stayed firmly at 59% for the second month in a row.  That means that for every 100 listings taken in that month 59 sales were made (not closed).  Moreover, the absorption rate slipped nearly six weeks, to 6.1 months, a point where the market is said to be in balance.  June and July are usually the months where we see the lowest absorption rate, as inventories decline as sales increase.

Overall, the real estate market in Hillsborough seems to be improving significantly, and we could see some upward pressure on prices as interest rates push buyers off the fence they've been sitting on.