I have a well and septic (NJ) and was told I have to convert to city hook-up before I sell. Is this correct?

It depends on the individual municipality.  there is no statewide water/sewer system.  Each individual municipal utilities department provides water and sewer to its residents.  If you bought a house hat had a well and septic because water and sewer were not available in that area, and now you are trying to sell the house but water and sewer are available, the town may try to get you to connect in order to get a certificate of occupancy for the re-sale.  check with your local municipal code enforcement officer or local municipal utilities department.