How Much Are Closing Costs in NY for Buyers and Sellers?

Closing costs are fees and expenses incurred by both buyers and sellers during property ownership transfer. They are distinct from the purchase price and can be substantial. In New York, specific costs and their allocation vary significantly. Understanding these charges is important for anyone participating in a real estate transaction. This article details typical closing costs for buyers and sellers in New York and explores influencing factors.

Understanding Buyer Closing Costs

New York buyers face closing costs, often several percentage points of the home’s price. These expenses encompass fees related to securing a loan, ensuring clear title, and fulfilling local and state tax requirements.

Loan-related fees are a significant portion of buyer closing costs. Lenders charge for mortgage processing. These fees include:
Loan origination fees, covering administrative costs, which range from 0.5% to 3% of the loan value.
Appraisal fees, typically $300 to $1,500, to determine the property’s market value for the lender.
Credit report fees, usually $50 to $100.
Loan processing or application fees, which might be between $350 and $1,000.

Title-related fees ensure clear ownership. Title insurance, a one-time premium, protects the buyer and lender against future title claims. In New York, title insurance rates are regulated and generally range from 0.45% to 0.7% of the purchase price, paid by the buyer. A title search reviews historical records, and abstract fees cover compiling these documents. Recording fees, approximately $250 to $750, are paid to the local government to officially register the deed and mortgage.

New York State and local taxes increase buyer closing costs. The Mortgage Recording Tax (MRT) is a significant expense for buyers financing a purchase. In New York City, the MRT rate is 1.8% for loans under $500,000 and 1.925% for loans of $500,000 or more, with the lender contributing 0.25% of the mortgage amount. This tax varies by county outside of New York City.

The “Mansion Tax” is another notable tax for New York buyers. It applies to residential purchases of $1 million or more and is typically paid by the buyer. The rate for the Mansion Tax is tiered, starting at 1% for properties between $1 million and $1,999,999, and increasing progressively up to 3.9% for properties valued at $25 million or more. Buyers should also anticipate attorney fees, which in New York City can range from $2,500 to $5,000 for a standard residential transaction.

Prepaid items and escrow contributions are also buyer closing costs. Buyers typically prepay a portion of their property taxes, often two to six months’ worth, and their homeowner’s insurance premiums. These funds are usually held in an escrow account by the lender. If purchasing a co-op or condo, buyers may face specific fees such as application fees, move-in fees, and a recognition agreement fee, which can range from $200 to $400.

Understanding Seller Closing Costs

New York sellers incur various closing costs, impacting their net proceeds from a property sale. These primarily include real estate commissions, state and local transfer taxes, and legal fees.

Real estate broker commissions are typically the largest seller closing cost. In New York, the average real estate commission is around 5.36% of the home’s sale price. This amount is usually paid by the seller and split between the listing agent and the buyer’s agent. These commission rates are negotiable and can vary based on the specific services provided by the brokers.

New York State and local transfer taxes are another substantial seller expense. The New York State Real Estate Transfer Tax is generally 0.4% (or $2 per $500) of the total consideration. For residential properties in New York City valued at $3 million or more, this rate increases to 0.65%. Sellers are typically responsible for paying this state transfer tax.

New York City also imposes its Real Property Transfer Tax (RPTT), borne by the seller. For residential properties, the RPTT is 1% of the sale price for properties valued at $500,000 or less, and 1.425% for those over $500,000.

Sellers also incur attorney fees for legal representation. These fees cover services like drafting contracts, reviewing documents, and attending closing. In New York City, seller attorney fees typically range from $1,500 to $2,500 for standard residential transactions.

Sellers with an existing mortgage must pay off their remaining loan balance at closing. This includes principal, accrued interest, and bank loan satisfaction fees (around $500). Property taxes and homeowners association (HOA) fees are prorated at closing; the seller pays their share up to the closing date, and the buyer assumes responsibility thereafter. Co-op and condo sellers may also encounter specific building fees, such as “flip taxes” or move-out fees. Flip taxes, transfer fees imposed by some co-op or condo buildings, can range from 1% to 5% of the purchase price or even 10% of the seller’s profit.

Factors Influencing Closing Costs

New York closing costs are not static; they fluctuate based on transaction and property variables. These factors determine the ultimate financial outlay for both buyers and sellers.

The property’s purchase price significantly impacts percentage-based fees. Higher sale prices result in larger amounts for taxes like the New York State Real Estate Transfer Tax and the New York City Real Property Transfer Tax, calculated as a percentage of the sale price. Similarly, real estate broker commissions, typically a percentage of the sale price, increase proportionally with the home’s value. The Mansion Tax, exclusively for buyers, is also directly tied to the purchase price, with higher tiers for more expensive properties.

The loan amount and financing type also play a considerable role for buyers. The Mortgage Recording Tax, a substantial buyer cost, is calculated based on the borrowed amount; a larger mortgage results in a higher tax. Different loan programs (FHA, VA, conventional) may have varying lender fees or requirements that influence closing costs. For instance, certain government-backed loans might have specific appraisal or inspection requirements that add to expenses.

Location within New York State is another determinant. New York City, for example, has unique transfer taxes and higher Mortgage Recording Tax rates not applicable statewide. This means a Manhattan transaction will likely incur higher overall tax costs compared to a similar transaction in upstate New York. Additionally, attorney fees and other local service costs can vary by regional market.

Property type also affects closing costs. Co-ops and condos often have different fee structures than single-family homes. Co-ops, in particular, may have unique charges like “flip taxes” or specific application and recognition agreement fees, not typically found in single-family home transactions. Title insurance is generally not required for co-op purchases, which can reduce buyer costs.

While many costs are fixed or tax-related, some service-related fees can be influenced by negotiations or the choice of professionals. The fees charged by different lenders, title companies, and attorneys for similar services can also vary, providing an opportunity for potential savings through careful selection.

Estimating and Managing Closing Costs

Estimating and managing closing costs are important for a smoother real estate transaction.

For buyers, the Loan Estimate (LE) is a foundational document for understanding costs. Lenders must provide this three-page form within three business days of a loan application. The LE outlines estimated closing costs, monthly mortgage payments, and other loan details, allowing buyers to compare lender offers.

Towards the end of the process, buyers receive the Closing Disclosure (CD), a five-page document provided at least three business days before closing. The CD presents the final breakdown of all loan terms and closing costs. It is important to compare the CD with the initial LE to identify any significant discrepancies, as certain fees on the CD should not increase by more than 10% from the LE.

Both buyers and sellers should consult their real estate attorney early for a comprehensive estimate of all closing costs. Attorneys can provide insight into non-lender fees, local taxes, and other specific transaction expenses. While online calculators can offer preliminary estimates, they may not capture all the nuances of a specific New York transaction, making professional advice more reliable.

To manage and potentially reduce closing costs, buyers can explore strategies. Requesting seller credits for closing costs is a common negotiation point, particularly in a buyer’s market. Shopping for service providers (lenders, title companies, attorneys) can reveal varying fees, offering an opportunity to choose cost-effective options. Buyers should also understand how lender credits or discount points affect upfront costs versus long-term interest rates.

Sellers can manage costs primarily by negotiating real estate broker commissions, often the largest expense. Comparing commission rates from different brokers can lead to savings. Both parties benefit from a thorough review of the Loan Estimate and Closing Disclosure documents. Scrutinizing these forms for accuracy and unexpected fees allows for timely questions and corrections before the closing date.