Understanding Closing Costs in New York City
Closing Costs are vital for all prospective buyers and sellers in any transaction. Whether you're looking to buy your first home or selling your fifth, understanding the various New York City closing costs is helpful as you explore options.
Closing costs will vary depending on the property type and the building you purchase. Some components are fixed, and some are negotiable. Look at these as a range. Once you have a specific property in mind, your real estate attorney will be able to share specific documentation and statements.
Buyer Closing Costs
Below is a description of the buyer closing costs. For a buyer closing cost calculator for NYC, check out this calculator I made below:
Mansion Tax:
The Mansion Tax is a fixed tax levied by New York City on all purchases over a million dollars. (Yes, I realize that most of these are not mansions. This was instituted in 1989 when the average purchase price of a home was $183,200.) The Mansion Tax is on a sliding scale depending on the value of your purchase.
Mansion Tax Breakdown
Mortgage Recording Tax:
The Mortgage Recording Tax is a tax on the total mortgage amount for purchases of Real Property. The tax is levied by the state of New York and the various counties in New York City. An interesting note is that because purchasing a co-op is technically shares in a corporation and is not real property, the mortgage recording tax does not apply. For a purchase in New York City, the mortgage recording tax starts at 1.8% on all mortgages under $500K. Over $500K, it is 1.925%. Great news: if you’re buying a townhouse, you will also receive $30 off that 1.925%. (Yes, some sarcasm may not come through my blog post.)
This is a nice one to consider if you evaluate co-ops and condos. For a million-dollar purchase, assuming 20% down, you’ll save around $15,000 in closing costs on a co-op versus a condo.
Transfer Taxes
Transfer taxes are discussed when purchasing new developments or a sponsor unit. In a resale, the seller pays transfer taxes. In a purchase from a sponsor, the buyer pays transfer taxes unless they are negotiated otherwise. (Negotiations will vary depending on the market and the building—ask your real estate agent if you’re unsure. Or send me a note if you’re in the market.)
Real Estate Attorney
A real estate attorney is essential to any transaction in New York City. They are a fantastic advocate in the process and ensure you are prepared for any risk for your purchase. Real estate attorneys also charge a flat fee per transaction. Any real estate attorney who charges by the hour is someone you should treat with suspicion.
A realistic range is $3,000-$5,000 here. Service matters significantly in this transaction, and a budget option could be risky.
Title Insurance, Title Search & Recording Fees:
This one varies greatly depending on the property. You will also pay more in title fees and insurance for any real property purchase (aka not a co-op). For a condo or townhouse, a lower-end starting place is .6%.
If you have a particular property in mind in the NYC area, I work with a great title company that will provide quotes in just a few hours.
Additional Building Associated Closing Costs (Varies widely by building)
Move-In Fee
Contribution to working capital or reserve fund
Building management fee
Questionnaire for management
Contribution to the Superintendent’s Residence
Associated Mortgage-Related Closing Costs (Varies by lender)
Appraisal
Banks Attorney
UCC-1 Filing
Mortgage Recording Fee
Closer Pick Up
Seller Closing Costs
Transfer Taxes
In a resale, the seller pays transfer taxes. New York City and New York State charge transfer taxes and are fixed amounts. There are two different price tiers for each below.
Broker’s Commission
Most New York City transactions involve a listing agent (or seller’s agent) and a buyer’s agent. As you interview listing agents, the commission percentage will be essential to the discussion. From the high-end brokerages in New York City, 6% is the typical broker’s commission fee. I could write a whole fee for what you get for this 6%, but that’s a different post. For now, include a brokers commission fee in your calculations for closing costs as you explore selling your home.
Real Estate Attorney
A real estate attorney is essential to any transaction in New York City. They are a fantastic advocate in the process and ensure you are prepared for any risk for your purchase. Real estate attorneys also charge a flat fee per transaction. Any real estate attorney who charges by the hour is someone you should treat with suspicion.
A realistic range is $3,000-$5,000 here. Service matters significantly in this transaction, and a budget option could be risky.
Flip Tax
A flip tax is not really a tax—it is an assessment from a co-op building. While the name might not make sense, it’s the one that everyone uses. Flip taxes are only for co-ops and vary in terms of the amount charged. Some buildings try to charge flip taxes to the buyer, a cost that is often negotiated during the contract process.
If you’re considering selling your apartment in a co-op building, your management company will be the best place to start to understand any potential flip taxes and costs for you as a prospective seller.
Associated Mortgage Fees for the Building (Varies)
Move out Fees
Working capital contribution
Management Fee for Closing
Associated Mortgage Fees for the Loan (Varies)
Pay-Off Bank Fees
E-Tax Filing
Capital Gains Tax (Varies)
This is not really a closing cost, and it’s incredibly complex, so consult your accountant. I bring this up here because I like to plan and don’t like my clients being surprised. A few general pieces to know: if there are gains from your purchase price to your sales price, you may be subject to NYS Capital Gains Tax Withholding: 8.82% of taxable gain on sale (Only applicable to non-NY residents) or Federal Withholding Tax (FIRPTA): 10% - 15% of the sale price if the seller is non-U.S. resident. (Additional taxes on capital gain associated with the sale of real estate, including Federal, State, and specialized Medicare tax, may apply. Consult with your tax professional to ensure compliance with all applicable tax regulations. Corcoran is not a licensed tax advisor.)
There are options for 1031 exchanges with a like-for-like property purchase. Again, consult your accountant.
Have any other questions about closing costs? Send me a note and let’s chat.
Katie