How much should I expect to pay in Closing Cost in NYC?
Closing costs usually run between 2%- 5% of the purchase price for the buyer and anywhere from 8% - 10% of the transaction for sellers. While closing costs are part of every real estate transaction, the amount and type of expenses incurred varies depending on whether you are the buyer or seller, and the type of property involved in the transactions.
NYC co-op ownership is a unique ownership structure: Approximately 75% of apartments available for sale in New York City are in cooperative buildings (“Co-ops”). Co-ops are different from condominiums (“Condos”) and single-family homes. When you buy an apartment located within a co-op building you are not buying real property. Instead, you are buying shares of a corporation. The corporation gives you what is called a proprietary lease which controls your occupancy in the apartment. This unique form of ownership incurs different closing costs from a condominium or single-family home.
What Closing Cost do Buyers Have to Pay in NYC?
Buyers can expect to pay the following fees when purchasing property in New York City.
Buyer’s Attorney’s Fees: Your attorney’s fees will be approximately $1500- $3,500. Your attorney will review the purchase contract, work with your title company and coordinate the closing with the seller’s attorney. Additionally, if you are buying a co-op or a condo, then part of your attorney’s role includes assessing the financial condition of the co-op or condo building. If both the contract and the financial conditions of the building are satisfactory, then you can make your good-faith deposit and sign the contract.
Title Insurance: Title insurance ensures your ownership rights to the property. When you buy title insurance for your property, a title company searches these records to determine and remedy, (if possible), any ownership issues that they discover. You will only pay for this policy once; however, your coverage will last for the duration of your ownership of the property.
Property inspection fees: (approximately $500-$1,000) This fee goes towards verifying the condition of a property or checking for repairs that may be necessary before your mortgage lender will agree to fund your property.
Mortgage Bank Fees: (approximately 0-3% of the loan amount) If you need a mortgage you will have to pay bank fees, which include but are not limited to the appraisal cost, credit check fees, and the bank’s attorney’s fees. The amount is based upon the purchase price of the property.
Prepaid interest: This is money you pay at closing to get the interest paid up through the first of the month on your loan.
The Mortgage Recording Tax: - technically, the rates are 2.05% for loans below 500K and 2.175% for loans over $500K. However, typically, the buyer’s lender pays 0.25% of the MRT, which makes the effective Mortgage Recording Tax rates in NYC 1.8% for loans under $500K and 1.925% for loans over 500K. Commercial properties have higher Mortgage Recording Tax Rates. Please note: Co-op buyers do not have to pay this fee.
Real Estate Tax Escrow or Maintenance Escrow: Typically, when you take out a mortgage on a property, your lender will require you to put six months of taxes in an escrow account. Similar to what lenders need, some co-ops have begun mandating that buyers hold 6-12 months of maintenance payments in escrow. This is especially true if the co-op board is unsure about the buyer’s application. The ability to put these additional funds into an escrow account may be the difference between an approval and a denial.
Move-In Fees/Building Fees: Most condo and co-op buildings charge move-in and move-out fees, which cost anywhere from $200 - $2500. Additionally, most buildings have board application fees, which can run from $500 to $700. If you are purchasing a single-family home, you will not incur these fees.
Mansion tax: This is an extra 1% tax paid by the buyer and applies to any purchase over $1 million. A well-informed NYC buyer will try to negotiate the purchase price of the property to just under $1 Million to avoid this extra cost.
The Sponsor’s Closing Costs: (for sponsor sales in co-ops and new developments) If you’re buying a new development you will probably be on the hook for some if not all of the developer’s closing costs, which includes but is not limited to their transfer taxes and attorneys’ fees.
Miscellaneous Filing & Recording fees: Approximately $150+
What Closing Cost do Sellers Have to Pay in NYC?
Closing costs for sellers are substantially more than for buyers. This is mainly because sellers have to cover the real estate broker’s commission.
NYC Broker Commission: In New York City this fee is typically 6% and is paid by the seller. However, keep in mind that you are not locked into this fee because by law it’s negotiable.
Seller’s Attorney’s Fees: $1500- $3,500
NYC Real Property Transfer Tax (RPTT) & Filing Fee (1-1.425%) You must pay the Real Property Transfer Tax (RPTT) on sales, grants, assignments, transfers or surrenders of real property in New York City. You must also pay RPTT for the sale or transfer of at least 50% of ownership in a corporation, partnership, trust, or other entity that owns/leases property and transfers of cooperative housing stock shares. The fee is 1% of the total purchase price if $500 K or less 1.425% of the total purchase price if over $500K.
NY State Transfer Tax (0.4% of gross purchase price) New York State imposes a real estate transfer tax on conveyances of real property or interests therein when the consideration exceeds $500.
Mortgage Payoff Fees: (if Applicable) This is the fee that lenders charge for processing the payoff letter request
Flip tax: This is a fee paid to a co-op corporation for selling your co-op apartment. Although you typically only see this fee when selling a co-op, some condos in New York City have this fee as well. This transfer fee is generally calculated at 2% of the gross sale price but can range from 1 to 3 percent. While the seller usually pays the fee, sometimes the buyer will pay it.
Stock Transfer Tax: (Coops Only) ($0.05/share) – the fee from transferring the stock to the new owner.
Move Out Fees: Most co-ops and condos charge moving fees when you move out of your apartment. This fee can range from a $500-$2,500.