When negotiating towards a final offer price on an NYC property, both buyers and sellers should have a reasonable idea of what their closing costs will be. This is difficult to estimate, potentially running into hundreds of thousands of dollars which will be added onto the purchase or sale of a property. Worst of all is that both buyers and sellers alike tend to underestimate those final closing costs. Whether you’re buying or selling, you’ll need a good overview of closing costs and how they are calculated before you get involved in the NYC real estate market.
How much to budget for closing costs in NYC
Closing costs in NYC are usually 2-6% of the purchase for buyers. The final bill is based on a number of factors such as property type (co-op or condo), level of financing, purchase price and whether or not the property is a new construction.
If your purchasing a condo the closing costs will be higher. For a start, you’ll need to cover title insurance. This is set by New York State and comes with a number of administrative charges which all together come to about $3,000 to $4,000. Then there are the extra costs if you’ll need a mortgage. Bank fees run from $2,000 to $3,000 while bank attorney fees and the appraisal go from $500 upwards. If the loan is over $500,000, you’ll need to cover a mortgage tax of 1.925%, for loans under $500,000 it’s 1.8%, something which only applies to condos.
Whether you’re buying a co-op or condo, you’ll need to pay your attorney’s fees, which can range from $2,000 to $5,000. If the deal is a little more complicated than usual – for instance, you want to set up an LLC to purchase a condo as a foreigner – than attorney costs will go even higher as you require more specialized assistance.
The closing costs for sellers are much higher. Sellers should budget for closing costs of at least 8-10% of the sales price. A large part of this will be to cover the brokers’ commission of 6% (split equally between listing and buyer’s brokers). Other costs include the transfer tax of 1.825% for sales of over $500,000 or 1.4% for those under $500,000. Both of which apply equally to condos and co-ops. The same goes for attorney fees which go up, depending on the complexity of the deal, from $2,000 to $2,500.
For co-op sellers, another thing to account for is the flip tax. This is a tax of roughly 2% which usually falls on the sellers. The building will say who they consider the flip tax to be payable by. However, it is possible to negotiate this.
1. Mansion tax
If the property is purchased at over $1,000,000 an extra 1% mansion tax is added, to be paid by the buyer. For instance, a property sold for 1.87 million would have a mansion tax of $18,700. It’s not uncommon in negotiations for the purchase price to get knocked just below the $1 million mark to avoid this tax.
2. The sponsors closing costs
A big expense for buyers of new construction properties is that they are responsible for the developers closing costs. This includes transfer fees, the attorney’s fees and, if applicable, their units share of the sponsor’s apartment. This also applies to sponsors in co-op apartments. Depending on the purchase price, this can all add up to hundreds of thousands of dollars.
3. Building Fees
Each co-op and condo is different in the fees they apply. Most co-ops and condos have move-in and move-out fees that range in price from a few hundred to a couple thousand dollars. Board application fees range on average from $500 to $700. When making your board application, they will send you a list of what’s needed, and the fees involved. Buyers should read this carefully, so they fully understand what they’re getting into.
Both buyers and sellers should carefully consider all potential closing costs. Even with the best research, you’ll only get an approximate estimate. You won’t know the final bill until closing day. This useful calculator allows you to quickly get an estimate and comparison of closing costs for different types of properties.