Closing costs usually run between 2%- 5% of the purchase price for the buyer and anywhere from 8% - 10% of the transaction for the seller. 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, but instead, you are buying shares of a corporation. You'll receive a document that's called a co-op proprietary lease that controls your occupancy in the apartment. This unique form of ownership incurs different closing costs from a condominium or single-family home.
Buyers can expect to pay the following fees when purchasing a property in New York City.
Buyer’s Attorney’s Fees: Your attorney’s fees will be approximately $1,500- $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 finances of the building are deemed adequate, 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 0-1% of the loan amount) If you need a mortgage, you will have to pay various bank fees associated with obtaining the mortgage. These fees can include but are not limited to the appraisal fee, 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 typically range anywhere from $500 - $1,500+. Additionally, most buildings have board application fees, which can run from $500 to $1,500+. If you are purchasing a single-family home, you will not incur these fees.
Mansion tax: Up until July 2019, this used to be an extra 1% tax paid by the buyer, which applied to any purchase over $1 million. Nowadays there’s a new progressive mansion tax in NYC, with properties priced between $1,000,000 and $1,999,999 still being taxed at the 1% rate while properties priced above $2 million are subject to rates ranging from 1.25% all the way to 3.9% for homes priced above $25 million.
Keep in mind that many well-informed NYC buyers will try to negotiate the purchase price of the property to just under $1 million, $2 million, and other price barriers to avoid this extra cost.
Covering the Sponsor’s fees: (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. These typically include but are not limited to their transfer taxes and attorneys’ fees. It should be noted that oftentimes, the state of the real estate market influenced who picks up these fees. In a robust sellers' market with a lot of demand, buyers should expect to foot the bill, while in a slower buyers' market, it's more likely for the developer to cover the fees.
Miscellaneous Filing & Recording fees: Approximately $150+
As an example, we'll calculate the expected fees for the buyer of a $1.5 million condo and co-op below. We'll assume there's a 30% down payment, and the property is not a new development, so there are no sponsor's fees.
|$1.5 million Co-op Buyer Closing Costs||$1.5 million Condo Buyer Closing Costs calculator|
|Mortgage Recording Tax||n/a||$20,213|
Closing costs for sellers are substantially higher than for buyers, thanks to the fact that sellers have to cover the real estate broker’s commission, which is typically 6%. This makes the real estate commission the highest closing cost for sellers.
NYC Real Estate Brokerage 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: You can expect to pay your attorney somewhere between $1,500 to $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. Some NYC HDFC coop sales may be exempt from NYC transfer taxes.
New York 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: A flip tax 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: While this technically isn’t a cost associated with selling your property, most NYC co-ops and condos charge moving fees, which you can expect to pay whenever you move in or out of your apartment. This fee can range from a $500-$2,500.
As an example, we'll calculate the expected fees for the seller of a $1.5 million apartment. Generally, the costs for selling a condo and co-op are similar, although co-ops are more likely to have a flip-tax.
|$1.5 million apartment NYC seller closing costs calculator|
|Real Estate Commission||$0-$90,000|
|NYC Transfer Tax||$21,375|
|NY State Transfer Tax||$6,000|
|Other misc. fees||$1,000-$2,000|
|Flip Tax||varies by building|
As you can see, the biggest variable when it comes to fees associated with selling property in NYC is the real estate commission. While this fee is negotiable and lowering it is certainly possible, it's unlikely that you'll be available to avoid it altogether. This is mostly because interested buyers will likely be working with a buyer agent who will expect to be compensated, so you should expect to pay at least 2.5% to a cooperative buyer agent. There's also the fact that selling a home by owner can be difficult, especially when it comes to getting sufficient marketing and exposure. Finally, you should keep in mind that if you do sell by owner, you can expect to pay anywhere from a few hundred to a few thousand dollars to market the property (this includes things like professional photos and listing on streeteasy and the New York Times). The more realistic way to save money is to try and hire an agent who will accept a lower 1-1.5% commission to sell your home. Additionally, you can ensure your listing agreement includes a reduced commission for transactions with direct buyers that don't aren't represented by a real estate agent.
Most closing costs are non-negotiable as they are fees or taxes from the city or state, but savvy buyers and sellers can negotiate with their real estate agent to save significant sums of cash. For example, buyers can work with a broker that offers a commission rebate while sellers can opt to sell with a broker who charges a lower fee.