Whether you’re selling your home or looking to buy property, closing costs are an important expense you need to budget for as they can take quite a bite out of your wallet. These costs cover bank, attorney, and building fees, as well as title insurance and mortgage taxes. While some closing costs are standard across the US, others are specific to New York City and to apartment types (ie., condos, co-ops, new construction, etc.). So break your calculator and factor in these required costs for closing your next real estate transaction in NYC:
What you can expect to pay as a buyer in closings costs on NYC real estate properties.
Condo, co-ops and townhouses: For buyers, closing costs are usually between 2 and 3 percent of the total price of the property although these percentages can vary outside of these ranges. It’s always important to work with an experienced attorney to get your closing costs as low as possible. If the home is over $1 million, closing costs could jump between 3 and 4 percent. If the property is brand new, closing costs could rise as much as 5 percent.
Bank fees: If you’re taking out a mortgage to help finance the purchase of your home, you may be expected to pay roughly $2,000 or $3,000 in bank fees. What’s included in your total bank fee is your bank’s attorney fees, the mortgage application and processing fee, bank loan origination fees, as well as fees for credit reports and verification of employment.
Attorney fees: While there are many low cost real estate attorneys out there, it’s advisable to work with a reputable attorney when going through with such a large purchase. Real estate attorneys who are willing to let you pay less than $2,500 may be ones to steer clear of. With so much at stake, it is in your best interest to ensure that you are legally well represented.
Mansion tax: This fee applies to all condos, co-ops and townhouses in NYC which have a total property price of $1 million or more. For condos, co-ops or townhouses which fall between $1 million to $1.999 million, the mansion tax will be about 1 percent of the total sale price. For homes with a sale price of $25 million or more, the mansion tax may increase up to 3.9 percent of the total sale price.
Title insurance: Title insurance protects you while buying a home in case there is an issue with your new home that you hadn’t uncovered before purchasing. If you’re taking a loan out to help finance the purchase of your home, title insurance will include both the lender’s policy and the owner’s policy. In NYC, co-op buyers don’t have to include title insurance in their closing cost fees because co-ops don’t possess physical titles.
NYC/NYS mortgage recording tax: This tax is based on the total amount of the mortgage for condos or townhouses. Rates for NYC mortgage tax will be about 2.05% of your loan amount for mortgages below $500,000, while mortgages over $500,000 with a residential home for 1-3 families or an individual condo home will have a rate of about 2.175%. All other mortgages exceeding $500,000 will have a mortgage tax rate of around 2.80%.
Closing costs on new construction: As you can expect, closing costs for a newly constructed property are higher than for a second hand property. Closing costs for new construction will mainly consist of transfer taxes. Transfer taxes are usually paid for by sellers but newly constructed property is the exception. As a buyer of a new construction you’ll also be expected to pay the seller’s attorney fee (although you may be able to negotiate this beforehand), as well as the NYC state and NYC Real Property Transfer Tax filing fee.
What you can expect as a seller in closing costs on common dwellings in NYC.
Sellers typically spend more in closing costs than buyers. A standard percentage you can expect to pay is around 8 to 10 percent of the total sale price, although this can vary depending on your specific situation. Real estate broker Jay Batra at Batra Group Real Estate recommends consulting with an experienced real estate attorney to help guide you through selling your home, as there are many factors that may come into play. Seller closing costs include:
Brokerage fees: Fees you pay to your broker are typically the lion’s share of your closing costs, at around 6 percent. Broker fees can really add up depending on the sale price of the property.
Transfer taxes: If your home’s total sale price is over $500,000, you can expect to pay state and city transfer taxes at a rate of 1.825 percent. If your home’s total sale price is under the $500,000 you can expect to pay a combined state and city transfer tax of 1.4 percent. Importantly, if your apartment or home’s total sale price is over $3 million, your city and state transfer taxes will increase by 0.25 percent.
Transfer fees (also called flip taxes): Specific to NYC, flip taxes apply to co-op apartments as well as condos, and are typically paid by the seller. Flip taxes can usually be negotiated depending on the market. You can expect to pay around 1 to 2 percent in flip taxes but can end up paying upwards of 3 to 5 percent in the total sale price when selling your co-op or condo in NYC.
Building fees: Fees you can expect to pay to the building you’ll be moving from include a move-out fee as well as a move-in fee for the next resident (which you will be refunded for later). Building fees are typically around $1,000 for the move-out free and another $1,000 for the refundable move-in fee.
Attorney fees: You can expect additional real estate attorney fees to be around $2,500 to $3,000 for a typical closing cost deal.
As mentioned, some closing costs can be negotiated with the help of a reputable real estate attorney. A generally wise decision in buying or selling your home in NYC is to set aside an additional $2,000 for extra closing costs as “miscellaneous fees” which may come up unexpectedly.
Closing costs are a necessary final step in the real estate sales process. While costs can vary, it is important to budget for these costs as best as you can before making or accepting an offer, so that you can ensure you are covered financially.
For more information on buying and selling real estate in New York City, contact Batra Group at (646) 202-1877.