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After months of searching and days of negotiating, it’s finally time to close on your New York City apartment. At this point, you’ve found your ideal home, assembled a board package (if purchasing a resale condo or co-op), passed the board’s interview in case of a coop, and you feel good about your investment. Although you might think that the closing just consists of wrapping up a few details, there are still a few hurdles to overcome.
You should also have completed the essential walkthrough with your agent; if you haven’t done so yet, then don’t move forward with closing the sale until you’ve done so. It’s essential that your agent confirms that everything is as it should be and that your new apartment doesn’t have any huge problems that have heretofore gone unnoticed.
During the closing, you as the buyer will (of course) be giving the agreed-upon amount of money to the seller. In return, you either receive a deed (for a condo) or a proprietary lease (for a co-op). In reality, two closings may be happening at this stage—a closing for the sale, and possibly a closing of your loan on the mortgage.
The location of this closing could be at one of a few different places: the managing agent’s office, an attorney’s office, a broker’s office, or possibly even another place where the sale is officially recorded. You (the buyer) and the seller both will usually be in attendance along with both sets of attorneys. Additionally, a closing agent, your real estate agents, and maybe a mortgage company representative will be there as well. Some insurance deals also might have to happen at this stage—just be sure you’ve gone over all these things with your attorney beforehand.
As the buyer, you’ll need to come with whatever monies have been prescribed by your purchase application and the sales contract. If you’re moving into a condo or co-op, you’ll have to pay for these things:
● move-in fee
● attorney fees
● filing fees
● flip tax (in some cases when purchasing a co-op)
● maintenance adjustment and appraisal (depending on the specific circumstances)
Assuming you’re financing, you’ll also need to have a recognition agreement, and you’ll have to pay a loan origination fee and a UCC-1 filing fee. You may even need to pay out for pre-paid mortgage interest.
Your attorney will provide you with a closing statement that itemizes costs paid both by you and the seller. It will also list how much money they get after all brokers fees, attorney’s fees, flip taxes, and everything else that is paid. The closing statement will also specify the transaction’s various “debits and credits” as they pertain to the buyer and seller. All of these will need to be paid via certified checks.
The real property transfer tax (which the seller usually pays) also will be given at this stage of the transaction. If the property in question costs more than one million dollars, you’ll also have to pay a “mansion tax” that comes out to 1 percent of the property’s purchase price. Considering that this tax generated more than $259 million in the 2012-2013 fiscal year, according to the New York Post, it’s clear that this tax is becoming increasingly common in NYC.
If either side is unprepared, you may find that your closing will take a ridiculous amount of time to complete. Be sure that you carefully review the process with your attorneys to prevent this from happening. Take care that you have all the right checks lined up and that you know what all the documents mean. Assuming you’re on the same page as the seller, though, the process should more or less be painless.
The turning point in any closing, of course, will be when you finally receive the keys to your new property. Although you’ll likely end up changing all the locks right away, the symbolic significance nonetheless will still offer closure to the process. The deed and mortgage will then be recorded in the public records by your attorneys, and the purchase of your new home will be closed officially.
UNDERSTANDING THE BUYER’S CLOSING COSTS
If financing, your lender must prepare a good faith estimate of all settlement costs before the closing, but the title company or other entity calculates the exact amount you are required to bring to closing. Be sure to get a cashier’s check for your share of the costs a few days before the settlement date.
Common real estate closing costs charged to buyers include:
● Down payment
● Loan origination fees
● Appraisal fee
● Credit Report
● Private mortgage insurance premium (if financing more than 90%)
● Property tax and homeowner’s insurance escrow
● Title insurance
● Deed recording fees
● Inspection fees—building inspection, termites, etc.
● Notary fees
● Prorated costs such as utilities and property taxes*
*Since these costs are usually paid on a monthly or annual basis, you may pay for some services used by the seller before they moved. Similarly, some costs are paid in advance of services being used. Proration allows the buyer and the seller to balance these accounts so that each only pays for the services they used.
YOUR CLOSING DOCUMENTS
● The Real Estate Settlement Procedures Act (RESPA) statement, also called the HUD-1 statement, itemizes all closing costs. You’ll need this document for income tax purposes, and when you sell your property.
● The Truth in Lending Statement spells out the terms of your mortgage loan.
● The mortgage and the note, two separate documents, explain the legal terms of your mortgage obligation and agreed-upon repayment terms.
● The deed, which transfers ownership to you.
● Affidavits affirming various statements made by either party. For example, the sellers often sign an affidavit stating they have not incurred any liens on the property.
● Riders/amendments to the sales contract that affect your rights. For example, if you buy a condo, there may be a rider outlining the condo association’s rules and restrictions.
● Insurance policies to provide a record and proof of your coverage.