How Much Are Buyer and Seller Closing Costs in NYC?

Closing costs are fees and expenses incurred by buyers and sellers to finalize a real estate transaction. These costs extend beyond the property’s purchase price, encompassing charges for services that facilitate the transfer of ownership and the securing of financing. They cover taxes, legal fees, and administrative charges. Understanding these financial obligations is important when engaging in real estate transactions, particularly in New York City.

Buyer Closing Costs in NYC

Purchasing property in New York City involves several specific closing costs for buyers, which can represent a significant percentage of the total transaction.

Mortgage Recording Tax

One of the most substantial expenses is the Mortgage Recording Tax, which applies when a buyer obtains a mortgage to finance a property. This tax is imposed by both New York State and New York City for the privilege of recording a mortgage on real property. For loans under $500,000, the combined rate is 1.8%; for loans of $500,000 or more, it increases to 1.925% of the loan amount. This tax applies only to real property, such as condos and houses, and does not apply to cooperative apartments.

Mansion Tax

Another notable cost for buyers is the Mansion Tax, a progressive real estate transfer tax applied to residential properties with a purchase price of $1 million or more. This tax is paid by the buyer and starts at 1% for properties between $1 million and $1.999 million. The rate increases incrementally, reaching up to 3.9% for properties valued at $25 million or more. This tax applies regardless of the property’s size, meaning a small apartment priced over the threshold would still be subject to it.

Title Insurance

Title insurance is a necessary expense for buyers of condos and townhouses, protecting both the lender and the buyer from potential claims against the property’s title. The lender’s policy safeguards the mortgage holder’s investment, while the owner’s policy protects the buyer’s equity against defects in the title. The cost of title insurance in New York City is around 0.45% of the purchase price for condos and townhouses, but it is not required for cooperative purchases. A title search is conducted to ensure no outstanding liens or claims exist before the insurance is issued.

Lender Fees

Lender fees are charges associated with processing and underwriting a mortgage loan. A loan origination fee, often 0.5% to 1% of the loan amount, covers administrative costs. An appraisal fee, typically $250 to $450 in NYC, is paid for an independent property valuation. Additional fees include a credit report fee ($30 to $150) and a document preparation fee (usually $100 or less).

Attorney Fees

Buyers engage their own real estate attorney to navigate an NYC property transaction. Attorney fees for buyers generally range from $2,000 to $3,500 for standard residential purchases. More complex transactions, such as those involving luxury properties or new developments, may incur higher legal fees, potentially exceeding $5,000. The attorney reviews contracts, conducts due diligence, and represents the buyer at closing.

Building-Specific Fees

For cooperative or condominium units, various building-specific fees are common. These include co-op or condo application fees ($500 to $700), move-in fees (several hundred to a couple of thousand dollars), and managing agent or co-op attorney fees (around $1,500). These fees cover administrative costs associated with the board’s review and approval process.

Additional Buyer Costs

Additional buyer costs include inspection fees for home and pest inspections, which help identify potential property issues. While not always mandatory, these inspections are highly recommended. A survey fee may apply if a property survey is required to confirm boundaries. Recording fees, generally $20 to $250, are paid to the local government for registering the deed and mortgage.

Escrow and Adjustments

Buyers often establish escrow accounts to prepay recurring property expenses, including property taxes and homeowner’s insurance premiums. Adjustments for utilities, common charges, and other prorated expenses are also calculated at closing.

Seller Closing Costs in NYC

Sellers in New York City also incur a distinct set of closing costs, with real estate transfer taxes often representing a significant portion.

New York State Transfer Tax

The New York State Transfer Tax is imposed on the conveyance of real property when the consideration exceeds $500. The basic rate is $2.00 per $500 of consideration for homes under $1 million, which translates to a 0.4% rate.

New York City Real Property Transfer Tax (RPTT)

New York City imposes its own Real Property Transfer Tax (RPTT) on sales of real property. For residential sales, the NYC transfer tax rate is 1% of the sale price if the value is $500,000 or less. If the sale price is more than $500,000, the rate increases to 1.425%. Higher rates apply for commercial properties or transfers of controlling interests in entities owning property.

Real Estate Broker Commissions

Real estate broker commissions are typically the largest expense for sellers. In New York, the average real estate commission rate is approximately 5.36% of the home’s sale price. This fee is generally split between the listing agent and the buyer’s agent. While commission rates can vary, they often range from 4% to 6% in New York City.

Attorney Fees

Sellers hire their own attorney to represent their interests throughout the transaction. Seller attorney fees in NYC generally range from $2,000 to $3,500 for a standard residential sale. The attorney drafts and reviews contracts, ensures all legal requirements are met, and facilitates the closing.

Mortgage Payoff and Liens

Sellers with an outstanding mortgage must pay the remaining balance in full at closing to clear the lien on the property. Any outstanding liens or judgments, such as unpaid taxes or contractor liens, must also be satisfied before the title can be transferred to the buyer.

Building-Specific Fees

For sellers of cooperative or condominium units, certain building-specific fees may apply. A “flip tax” is a fee imposed by some co-op or condo boards on the sale of a unit, ranging from 1% to 3% of the sale price and is sometimes negotiable between parties. Other charges might include move-out fees, common charge arrears, and stock transfer agent fees for co-op sales. Recording fees for mortgage satisfaction are also incurred.

Estimating Your Total Closing Costs in NYC

Estimating total closing costs in New York City requires considering the cumulative effect of various fees and taxes for both buyers and sellers.

Buyer Costs

For buyers, total closing costs typically range from 2% to 5% of the purchase price. However, in the NYC market, particularly with the inclusion of the mortgage recording tax and mansion tax, buyer closing costs can often fall between 2% and 4% of the sale price. These percentages can fluctuate based on whether a mortgage is obtained and the specific property type.

Seller Costs

Seller closing costs in New York City are generally higher than buyer costs, often ranging from 8% to 10% of the sale price. This higher percentage is largely due to significant expenses such as real estate broker commissions and transfer taxes. The overall amount for both parties is influenced by factors like the purchase price, the loan amount (for buyers), whether the property is a co-op, condo, or house, and if it is new construction, which can sometimes involve additional fees like sponsor attorney fees.

Disclosure Documents

Buyers receive a Loan Estimate (LE) from their lender shortly after applying for a mortgage, which provides an estimate of their closing costs and loan terms. Later in the process, typically at least three business days before closing, buyers receive a Closing Disclosure (CD). This five-page document outlines the final terms of the mortgage loan and all associated fees and costs. It is important for buyers to compare the Closing Disclosure with their initial Loan Estimate to identify any significant discrepancies. Sellers usually receive a detailed closing statement from their attorney, itemizing all the expenses and credits associated with the sale.