How Much Are Typical Closing Costs in NYC?

Closing costs are fees and expenses paid when a real estate transaction is completed, covering services and taxes for ownership transfer and financing. New York City real estate transactions are complex and have some of the highest closing costs in the U.S. This is due to a unique combination of local and state taxes, diverse property types, and specific regulations. Both buyers and sellers pay these fees at closing.

Typical Buyer Costs

The Mortgage Recording Tax is imposed by the state and city when a mortgage is obtained. Calculated on the loan amount, rates vary by property type and mortgage size. For mortgages under $500,000 on one-to-three-family dwellings, the rate is 1.80%. For mortgages over $500,000 or on other property types, it is 1.925%, with a portion potentially paid by the lender as a credit.

The New York State and City Mansion Tax impacts higher-value transactions. This tax applies to residential properties sold for $1 million or more. The rate starts at 1% for properties at exactly $1 million and increases incrementally for higher purchase prices, reaching 3.9% for properties valued at $25 million or more. For example, a $5 million purchase would incur a mansion tax of 2.25%, paid directly by the buyer at closing.

Title insurance is a mandatory expense for buyers obtaining a mortgage, protecting against title defects. It includes a Lender’s Policy, protecting the lender’s investment, and an Owner’s Policy, safeguarding the buyer’s equity. The cost is state-regulated, varying with purchase price, from 0.4% to 0.5% of the property value, plus additional search and endorsement fees.

Attorney fees for legal representation ensure accurate documents and protected interests. These fees range from $3,000 to $6,000, depending on deal complexity and attorney experience.

Lender fees are imposed by the mortgage provider. These include origination fees (0.5% to 1% of the loan amount) for loan processing, and underwriting fees ($500 to $1,000) for borrower creditworthiness and property value assessment.

Buyers may pay discount points to reduce the interest rate (one point equals 1% of the loan amount). An appraisal fee ($500 to $1,000) determines property market value, required by the lender. A credit report fee ($30 to $50) covers credit history. A flood certification fee ($15 to $25) is charged for flood-prone areas to determine if flood insurance is required.

Co-op or condo buyers face additional specific fees, including:
Application fees ($200 to $1,000) covering administrative costs for application review by the building’s board or management.
Move-in fees ($200-$500) charged by the building to cover potential damage or administrative costs during a move-in.
Recognition agreement fees ($200 to $500) paid to the co-op or condo board for acknowledging the lender’s lien.
Bank attorney fees ($500 to $1,000) for co-op purchases, for the co-op’s attorney to review lender documents.

Escrow deposits are funds held by the lender for future property taxes and homeowners insurance. Lenders require an initial deposit of several months’ worth of these expenses at closing for timely payments. Adjustments are made at closing for prorated property taxes and common charges, with the buyer reimbursing the seller for any prepaid amounts covering the period after closing.

Typical Seller Costs

Sellers in New York City face closing costs, primarily transfer taxes, real estate broker commissions, and legal fees.

Real Property Transfer Taxes are imposed by New York State and City on real property sales. The New York State Real Estate Transfer Tax is 0.4% of the purchase price for residential properties. The New York City Real Property Transfer Tax varies by purchase price and property type: 1.425% for residential properties under $500,000, and 1.825% for properties $500,000 and above. Commercial property rates are higher.

Real estate broker commissions are one of the largest costs for sellers, covering fees paid to both seller’s and buyer’s agents. The commission rate ranges from 5% to 6% of the purchase price, though negotiable. Paid by the seller from sale proceeds, it is split between listing and buyer’s brokers.

Sellers incur attorney fees for legal representation, similar to buyers, ensuring proper contract drafting, negotiation, and closing. These fees range from $3,000 to $6,000, depending on sale complexity and attorney experience.

Sellers with an outstanding mortgage must pay off the remaining balance at closing, including principal, accrued interest, and potential prepayment penalties. Payoff costs are calculated by the lender as of the closing date to satisfy the property lien.

Co-op and condo sellers encounter specific fees unique to their property type, including:
Flip tax: A fee imposed by a co-op or condo association on unit sales, a percentage of sale price/net profit, or a fixed amount per share. This tax ranges from 0.5% to 3% or more and funds the building’s reserve or operating budget.
Working capital contribution: A common fee in new construction condominiums, where the seller or first buyer contributes to the building’s operating fund at closing to establish initial reserves.
Move-out fees: Similar to move-in fees for buyers, charged by the building to cover administrative costs or potential damage during the seller’s move.
Waiver of option fee: Paid to the co-op board for waiving its right of first refusal to purchase the unit. This fee can be a flat amount or a percentage of the sale price.

These co-op and condo fees are determined by the building’s bylaws and vary widely. Sellers should understand their building’s specific requirements early.

Key Factors Affecting Costs

The purchase price of the property is a major determinant, as many taxes and fees are calculated as a percentage of this value. Higher purchase prices increase costs for the Mansion Tax (buyers) and Real Property Transfer Taxes (sellers), as these are tiered. Broker commissions, a percentage of the sale price, are also higher for more expensive properties.

The loan amount plays a direct role in buyer closing costs. The Mortgage Recording Tax, a significant buyer expense, is calculated as a percentage of the mortgage amount. Larger loans result in higher mortgage recording tax liability. Lender fees, like origination fees, also scale with the loan amount.

Property type—co-op, condo, or single-family home—introduces different cost structures. Co-ops and condos have unique board-imposed fees (e.g., flip taxes, working capital contributions, application/move-in/out fees) absent in single-family home sales. Building rules and financial health can also lead to fee variations.

New construction properties, particularly condominiums, often have additional costs not present in resales. Buyers of new development units may pay the developer’s transfer taxes, typically seller costs in resales. New construction also includes sponsor attorney fees and initial working capital contributions, increasing buyer expenses.

The choice of lenders and attorneys can lead to fee variations. While some fees are fixed or regulated, professional service fees, like those charged by attorneys or for specific lender services, differ based on the provider.

Calculating Your Closing Cost Estimate

Compiling fees and taxes into a closing cost estimate requires a systematic approach.

For buyers, the Loan Estimate (LE) from their lender is crucial. This standardized form details estimated mortgage closing costs, including lender fees, title insurance, and prepaid items. The LE helps buyers compare costs.

Engaging real estate attorneys and brokers early is advisable for personalized estimates. Professionals provide insights into costs for your transaction type and property in New York City, drawing on local market knowledge. They identify unique fees, such as co-op or condo charges.

Creating a spreadsheet can itemize and sum up potential closing costs, allowing you to track each expense and estimate the amount based on your purchase price and loan amount. Online calculators offer general estimates; combine them with professional advice for NYC nuances.

Budgeting for these closing costs, separate from the purchase price, is important. These expenses can increase the total cash needed to close a deal, ranging from 2% to 6% or more of the purchase price for buyers, and higher for sellers due to broker commissions. Planning upfront helps ensure a smooth transaction.