Articles Posted in Real Estate

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A law known as “Chapter 91” allows municipal property tax assessor’s to request income and expense information from a New Jersey property owner in order to assist in determining property “values” for its tax assessment. While this, standing alone, does not seem overly burdensome, if the property owners fail to respond to the assessor’s request pursuant to Chapter 91, property owners are barred from appealing their property tax assessment.

However, the law has strict provisions which must be followed by municipal assessors and taxpayers. The municipal assessor must send the request for income and expense information in writing, and the request must be sent via certified mail. The assessor must include a copy of the applicable statute with the written request. Moreover, the assessor’s request can only be made for properties which are producing income. The property owner must respond in writing to the assessor’s request within 45 days, and if he fails to do so, will not be permitted to file an appeal of the assessment. However, if the taxpayer fails to respond, the municipal assessor is still required to determine the full and fair market value of the property utilizing all available information. Additionally, the statute does include an exception, wherein if the property owner had good cause for being unable to provide the requested information, the applicable county tax board may take that into consideration.

Courts have construed the requirements imposed on the municipal tax assessor very strictly, due to the property owner’s resultant loss of the right to appeal if she fails to respond. New Jersey’s Tax Court has ruled that if the assessor does not comply with every requirement of the statute, “renders the statute inapplicable.” SAIJ Realty, Inc. v. Town of Kearny, 8 N.J.Tax 191, 197 (Tax 1986), including the provisions requiring the request be sent by certified mail and that a copy of the statute be included with the request. However, if the municipality meets the requirements of the law, the burden shifts to require the property owner to strictly comply with her obligations under the law, particularly responding in writing within 45 days.

New Jersey courts have consistently construed the law against property owners even in situations where it seems unjust. For example, even if the assessor’s request is overbroad or illegal, as long as the assessor has met the statute’s requirements, a property owner’s failure to respond can still result in loss of the right to appeal. The taxpayer is then required to respond to those requests which are not objectionable and advise the municipal assessor as to why the remaining requests are improper. Moreover, a property owner must still respond the properly sent request even if the request is made of a non-incoming producing property. The Tax Court has even held that failure to respond to a request, even when the request is made as to non-income producing property, will result in the taxpayer’s loss of its right to appeal the assessment. Furthermore, the Appellate Division of New Jersey’s Superior Court upheld the loss of the right to appeal where the taxpayer sent a response after the 45 days had expired. The Appellate Division also ruled that an appeal was properly dismissed where the requested information was provided to the attorney for the municipality, but not the assessor. These decisions were all justified because of the important governmental interest and the statute’s mandatory wording.
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Thumbnail image for watching-time-860275-s.jpgIf you own property in Monmouth County the property tax appeal deadline has changed. While the new date in the rest of the state remains April 1st, Monmouth County has volunteered to test out a new law changing the appeal date to January 15, 2014 or within 45 days of the bulk mailing of the municipal assessments, whichever is later. If your property is in Monmouth County and you did not file your petition to appeal your property tax assessment on or before January 15th, you will not be able to file and appeal this year unless the notice was mailed within the last 45 days or there was a town-wide revaluation.

New legislation was enacted and the governor signed into law, P.L. 2013, c. 15, creating a demonstration program which allows up to four counties to opt into the new law, two in the first two years and two more in the following two years. At the present time, only one county has opted in, Monmouth County.

This is a significant change because the deadline to file a petition to appeal a property tax assessment in the rest of the state of New Jersey remains April 1, or within 45 days of the bulk mailing of the property tax cards, whichever is later. While property tax cards are traditionally been mailed out in February, most Monmouth County municipalities have already mailed out their property tax cards. The appeals hearings in participating counties are expected to be conducted by the end of April.

The stated purpose of the new law is to establish a collaborative system of property assessment between the county board of taxation and the municipal assessors which it is hoped will result reductions in cost and increases in accuracy and consistency of assessments. The stated purpose of the change in the appeal deadline is to assist in municipal budgeting and to more evenly distribute tax losses to municipalities which result from tax appeals across the various governmental entities on whose behalf taxes are collected (i.e. school, county). However, the change appears suspiciously timed to limit property owners’ right to challenge their assessments and make more money for the towns.
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Thumbnail image for property tax.jpgNow is the time to start thinking about appealing your property taxes.

The amount of property taxes a homeowner pays under New Jersey property tax law is determined by the municipal assessment. The lower the assessment, the lower the property taxes. While you cannot actually appeal the taxes you owe, New Jersey law allows you to appeal the assessment. The tax assessment of your property should reflect the fair market value of your home, which is adjusted by the municipality’s equalization ratio. The municipality is allowed a margin of error of fifteen percent. So, if your assessment is more than 15% over the equalized fair market value of your property, you should appeal your property taxes.

The first step is determining if your equalized assessment is more than fifteen percent above fair market value. First, you need a good approximation of the fair market value of your property – perhaps you know the sales prices of similar homes in your neighborhood, or a local realtor may be able to give you a rough estimate of the fair market value of your house, then you have a place to start. Next, you will receive a property assessment notice from the municipality which includes the assessed value of your property. Then, you need to check the equalization ratio for your municipality. Your assessment must then be equalized by applying the correct equalization ratio. Once you have applied the equalization ratio to the assessed value, you will know what the municipality believes is the fair market value of your property. If that number is more than fifteen percent above what you believe the fair market value to be, you should proceed to file a tax appeal petition.

At this point, you will need evidence to back up your assertion of your property’s fair market value. The best evidence is an appraisal by a certified appraiser who, if necessary, could testify at the tax appeal hearing. You can attempt to appeal your property taxes supported only by evidence of comparable recent sales, but the municipality can much more easily dismiss that evidence based on distinctions between your property and the each recent sale, or based upon facts surrounding the sale. For instance, it may have been a distressed sale where the seller was forced to accept a lower than market value price.
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Community associations are an important part of New Jersey’s housing environment. There are three main types of community associations in New Jersey: condominium associations, cooperative boards (“co-ops”), and homeowners associations. Condominium associations are the most common.

When a person buys a condominium, they are buying title to the property unit, such as an apartment or townhouse. However, title to the “common elements,” such as the land, the building exterior, recreational facilities, and parking lots or spaces, are held by the buyer together with all the other owners in common throughout the condominium association. When an new owner buys a unit, she automatically becomes a member of the condominium association, which exists to maintain the common elements. This membership is typically not optional.

The association is responsible for the administration and management of the condominium property, meaning the areas and activities of common interest to the unit owners. The operations of the condominium association are run by its board of trustees, made up of owners who are elected by the association membership. The association must maintain accounting records in accordance with generally accepting accounting principles and must be made available for inspection by unit owners at reasonable times. When a condominium association is first created, owner-control of the board is phased in during development of the property, and the owners take after 75 percent of the units are sold.
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Thumbnail image for stock-photo-17214080-mortgage-loan.jpgRecently, many potential home buyers have been seeking (“FHA”) loans. FHA lenders will finance up to 96.5 percent of the purchase price for a property, and many buyers are attracted by the low down payment required to purchase a home (3.5 percent). Additionally, FHA lenders will allow a seller’s concession in the contract for sale of up to 6 percent of the purchase price. For example, if a property is being sold for $400,000 with a 3 percent sellers concession, the seller will pay $12,000 of the buyer’s closing costs, and the buyer will only need to pay $14,000 up front on the purchase price. If a buyer is obtaining a conventional mortgage, it will typically require at least 10 percent down at closing, or $40,000. The purchase of a home with an FHA loan which is structured with a seller’s concession can enable people who would otherwise not qualify to be able to purchase a home.

Additionally, FHA loans are assumable, which means the loan can be transferred to a qualified buyer when the home is sold, thus avoiding the costs associated with a new mortgage. Additionally, the new buyers can retain the low rate provided in the first loan. However, the transfer of an FHA mortgage can be a more difficult process than actually obtaining a new mortgage.

FHA loans, however, have disadvantages as well. FHA loans require borrowers to pay significant mortgage insurance premiums. There is at the onset of the loan, a fee equal to 1.75 percent of the principal amount of the loan. This can be rolled into the mortgage, however it increases the monthly payment. The borrowers will also be required to pay annual mortgage insurance premiums which are significantly higher than the mortgage insurance premiums required by convention loan for loans which exceed 80 percent of the value of the property. Additionally, if an FHA borrower makes a down payment toward the purchase which is less than 10 percent of the value of the property, the mortgage insurance will be required for the life of the loan. If an FHA borrower makes a down payment which is equal to or greater than 10 percent, the borrower can cancel the mortgage insurance after 11 years.

On a conventional mortgage, once the loan to value ratio is below 80 percent, the borrower no longer has to carry mortgage insurance. In a rising real estate market, this can happen quite quickly. Moreover, usually, when the outstanding balance on the loan reaches 78 percent of the home’s value at the time of the mortgage, the mortgage insurance must be cancelled even if the current value of the home has dropped. For this option, the borrower must not be in default on the mortgage, having made his or her payments on time throughout the life of the loan, and the 78 percent value must be reached through normal amortization of the loan, not by additional unscheduled payments being made by the borrowers.
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1341259_cosy_rural_cottage.jpgStandard form real estate contracts in New Jersey usually contain a provision that a home is being sold in “as is” condition. This is essentially an indication that the seller feels that the contract sale price takes into consideration the condition of the home and the seller does not intend to make any repairs to the property. However, buyers generally have a right under a separate provision of the contract to conduct inspections of the property to ascertain its condition. If the buyer is not satisfied with the condition of the property for the contract price, they can often still request repairs and may cancel the contract if the Seller fails to make them. Further, these clauses often provide that the buyer accepts the property in its “as is” condition at the closing and the seller will not be held responsible for defects discovered by the buyer afterward.

This does not, however, mean that a seller can intentionally misrepresent the condition of the property. Courts have held that if a seller knowingly makes a material misrepresentation they can be found liable for common law fraud if the seller intends the buyer rely on the misrepresentation, the buyer does indeed rely on it, and the buyer suffers damages as a result of it. If this occurs, the buyer may be able to cancel the contract or seek damages from the seller.

New Jersey courts have found that failing to disclose certain types of conditions will constitute material misrepresentations. If a seller fails to disclose a condition which is latent (not currently visible or obvious) and plays a vital role in the buyer’s decision to purchase the property, the seller may be liable for damages. For example, in Weintraub v. Krobatsch, although the buyers found the condition of a home acceptable during their home inspection, when they visited the property on another occasion they were able to see that the property suffered from an insect infestation. The inspection was during the day and the subsequent visit was at night. The buyers refused to close. As the insect activity only occurred at night, this was a latent defect which was not observable during the day. The court found that the failure to disclose this information to the buyers was an intentional and material misrepresentation, and therefore the buyer was permitted to cancel he contract.

Real estate brokers have responsibilities for not making misrepresentations as well. Arguably their responsibility is even greater than that of the seller if the condition is known to the real estate broker, as they can be subject to the Consumer Fraud Act. The New Jersey Division of Consumer Affairs publishes a property condition disclosure form which should be completed by a seller of real property. Under the Consumer Fraud Act, real estate brokers will only be liable for misrepresentations of sellers if they had actual knowledge of the condition or failed to make a reasonable inquiry as to whether the information provided was false. The reasonable inquiry can be satisfied by a home inspection report by a qualified inspector, the report of a governmental official, or by a seller’s property disclosure statement – provided the buyer is advised that the information came from the seller themselves. The seller’s real estate broker can also be held liable for the failure to disclosure a defective condition if it was a latent condition known to the broker, and the broker, intentionally concealed the condition with the purpose that the buyer would rely on the concealment of the condition.
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If you are in the market for a new home, you may not be aware of the legal principle of “procuring cause,” but many New Jersey realtors are painfully aware of the ramifications of it. In the swirl of open houses and realtors involved in finally deciding upon a home, procuring cause helps determine which realtor is entitled to profit from the sale.

New Jersey law acknowledges that more than one real estate broker may be involved in developing the interest of a potential buyer in a home, and that often “one reaps what another sows.” Ordinary services that do not result in a home sale are considered the cost of doing business. Procuring cause enters in when the broker brings together a buyer and an owner with “no substantial break in the ensuing negotiations,” at which time the broker is considered to be the “efficient cause of the sale” and entitled to a commission. Further, New Jersey courts have found that negotiations do not need to be uninterrupted if the broker can establish his or her continuity in bringing the transaction to a conclusion. But a broker may be denied commission if negotiations break off and the broker abandons his or her efforts or if there is a “substantial break” in the negotiations and the broker does not help conclude the transaction.

Understandably, what counts as a “substantial break” can be the source of controversy and even litigation. Courts have found that a potential buyer’s passivity does not necessarily equal purposeful abandonment. Also, a seller’s acceptance of different terms than those in the listing agreement does not interrupt procuring cause. Further complicating the issue are sales occurring after expiration of an extension period in an exclusive listing agreement. Some courts look for evidence of “meeting of the minds” between seller and buyer or otherwise evidence of bad faith in deciding whether to apply the procuring cause doctrine. The area can be thorny, and all sides need effective legal representation.

Procuring cause finds its roots in contract law and the equitable principle that a person should not be allowed to enrich himself unjustly at the expense of another. Courts look for evidence of notice that a real estate broker expected payment when performing services and have allowed brokers to recover for services even though a contract may prove unenforceable because of lack of agreement on essential terms such as the amount of the broker’s commission. Courts rely heavily on terms of contracts drafted between buyers and sellers and will try to enforce them first before looking to other legal principles.
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estate sale.jpgIn addition to the usual issues which come up when you are purchasing real estate, such as the contract review, home inspections, negotiations, and applying for a mortgage if necessary, when you purchase real estate from an estate there are some additional concerns.

When the owner of the property has died prior to entering into a contract of sale, and the property is being sold by an estate, the first question is: Who has the power to sell the property?

The person who has the power to enter into a contract for sale is usually the executor. If the deceased owner had a will and the property is passing with the residuary estate, (the residuary estate is what is left after specific bequests), the executor can do everything needed to effectuate the sale. It will be necessary during the contract period to obtain the death certificate, a copy of the will and the letters testamentary (the document from the surrogate’s court appointing the executor). The buyer’s attorney should insist that these documents are provided within a short time period after the contract is finalized.

However, if you obtain a copy of the will and see that the property passes by specific bequest to specific named beneficiaries, then not only does the executor need to be involved in the sale, but also under the New Jersey Real Estate law the beneficiaries must join in the sale. This can only be determined by seeing a copy of the probated will. When real estate is devised by specific bequest, it can create significant delays as the beneficiaries may be scattered throughout country, or even out of the country. In this case, the beneficiaries must all agree to sell real property on the terms and conditions in the contract, they must all agree to the resolution of any issues throughout the contract period, including home inspection negotiations. The seller’s attorney will need to seek the consent of each beneficiary for attorney review changes, home inspection repairs requests, etc. Each of the specific bequest beneficiaries must also execute the closing documents. Clearly, a purchase is more difficult if there is a specific bequest of real estate. However, if the buyer is represented by an attorney who understands the issues involved, these issues can be effectively managed.
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stock-photo-412835-refinance.jpgNew Jersey imposes a “realty transfer fee” on the sale of property. Sellers of real estate in New Jersey are often surprised by this fee, which is akin to a sales tax. The amount of realty transfer fee changes with the sales price, it is about half a percent for houses selling for $225,000, and increases to about one percent for sales of $1,000,000, as the sales prices go higher, the realty transfer fee continues to increase. You can check the realty transfer fee for a particular sales price using an online calculator.

http://www.realstorynj.com/sellers/realty-transfer-fee-calculator The realty transfer fee, along with the mansion tax, must be paid to the county clerk of the county where the property is located simultaneously with the recording of the deed.

If a home is sold for more than one million dollars it is also subject to the mansion tax in addition to the realty transfer fee. The mansion tax requires the buyer to pay a tax of one percent of the purchase price. Properties which are subject to the mansion tax include residential property, farm property with a house and commercial property. Properties which are not subject to the mansion tax include vacant land, farm property with no residence, farm property which qualifies for farmland assessments, industrial property and apartment buildings with five or more units, cemeteries, public schools, churches and certain properties owned by charitable organizations.

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1387277_decorative_villa_architecture.jpgWhen you sell your house for less than you owe on your mortgage it is referred to as a “short sale”. This is one option available when you find you can no longer make your mortgage payments, and the outstanding principal balance on your mortgage is higher than the fair market value of your house. The offer must be submitted to your lender, along with a detailed statement of all the costs of the sale and any other items which must be paid when the house is sold. The short sale can only proceed if it is approved by the lender. In other words, the lender must agree to accept less than what is owed on the mortgage. In the current economic climate, short sales are occurring with greater frequency. When a homeowner cannot make the mortgage payments on his home, this option relieves the homeowner of the burden of those payments. The alternatives are often foreclosure by the lender, bankruptcy or, if the homeowner qualifies, a mortgage modification.

The buyer of a short sale property typically gets a good value, he buys the property at its fair market value, but pays less in a depressed real estate market than if the house were listed for sale by the homeowner – as the homeowner would have to seek a price that is sufficient to cover repayment of his current mortgage balance. When the market rebounds, a short sale buyer can typically sell the property for a significantly higher price than he paid. There are, however, a few things to keep in mind.

A homeowner seeking a short sale is typically in financial distress. The homeowner seeks a short sale because he cannot make his mortgage payments. The short seller will not have the resources to make repairs, and it is likely that maintenance and repair of the home have been deferred due to his financial situation. The short sale lender will be accepting less money than they are owed on the property, and the lender will be unwilling to make any repairs. The short sale buyer must therefore be prepared to purchase the home in “as is” condition. The buyer can expect to invest additional monies repairing the home after the purchase.