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Closing costs: A guide for NYC buyers and sellers

Both sellers and buyers need to anticipate closing costs—and many are negotiable now that the market favors buyers.

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2020
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Whether you're buying or selling real estate in NYC, you can expect to pay a hefty amount of taxes and fees at the closing table—some that you’d expect and others that are unique to New York. For sellers, closing costs take a bite out of the proceeds. For buyers, they may have a real impact on your buying power and may affect your decision to buy one apartment over another, so it's crucial to understand the big picture before your search.

Read on for an overview of what you’ll pay in closing costs—the actual sum, of course, will vary widely—and some ways that you can save. 


[Editor’s note: An earlier version of this article was published in December 2019. We are presenting it again here with updated information for February 2020.] 


Buyers: Plan to pay 2 to 4 percent of the purchase price of a co-op, condo, or townhouse

A good rule of thumb for buyers is to set aside roughly 2 to 3 percent of the purchase price. Bump that to 3 to 4 percent if the apartment is over $1 million or if you're buying a condo. If you're buying a brand new condo, prepare to pay up to 5 percent of the purchase price in closing costs.

Bank fees: If you're taking out a mortgage, expect to pay $2,000 to $3,000 in bank fees, including your bank attorney’s fees and an appraisal. 

Attorneys fees: These typically run about $2,500 to $3,000 for a standard deal and can increase for a more complex transaction, such as purchases involving two units that you plan to combine. This is not an area to skimp on, so steer clear of attorneys who say they can do this for $1,500 or who don't specialize in New York City real estate closings.

Mansion tax:  The mansion tax kicks in at 1 percent on co-ops, condos and townhouses sales of $1 million to $1.999 million—and rises incrementally to 3.9 percent on sales prices of $25 million or above. This is typically paid by the buyer, not the seller, and applies even if your so-called mansion is a 600-square-foot one bedroom. 

Building fees: Most condo and co-op buildings charge move-in and move-out fees, which can range from a few hundred to a couple of thousand dollars each, a managing agent and co-op attorney fee of around $1,500, and board application fees of $500 to $700.

"When you apply, the board should send the prospective purchaser or the broker a list of what is needed, as well as fees," says Robbie Gendels, a senior loan officer in the New York City office of mortgage lender National Cooperative Bank (a Brick Underground sponsor). 

Title Insurance (condos & townhouses only):  Title insurance for a $1 million property can be as much as $4,500. (For more information read: ”What is title insurance, and why do I need it?” ) Co-op buyers do not have to buy title insurance, or pay a mortgage recording tax, below, because rather than a transfer of real property, co-op purchases are technically the transfer of shares in a cooperative corporation.

Mortgage recording tax (condos & townhouses only): Condo and townhouse buyers who take out a mortgage must pay a state and city mortgage tax of 1.925 percent on loans over $500,000 or 1.8 percent for loans under $500,000. On a $1 million condo with an $800,000 mortgage, that's $15,400.

Transfer taxes (sponsor co-op and new condo buyers only): If you buy a brand new condo or  a co-op directly from the sponsor, you may also wind up paying a New York City transfer tax of 1 percent of the purchase price on purchases over $500,000 (or 1.425 percent on purchases of $500,000 or less), plus a .4 percent transfer tax to New York State. That's $14,000 on a $1 million condo. On a new condo purchase, you might also be expected to pay for part of the super's apartment (which can amount to thousands of dollars) as well as part of the building's insurance costs for the first year.

That said, an oversupply of apartments in high-end buildings in NYC means many developers ("sponsors") are willing to pay your transfer tax, attorneys fees and other miscellaneous fees. You’re even more likely to get a break where the developer has just a few units left to sell and they are willing to make a deal. For more details, check out "How New Yorkers can take advantage of the city's oversupply of luxury condos.”

Sellers: Budget for closing costs of 8 to 10 percent of your sales price

Sellers can expect to pay a lot more in closing costs than buyers--in large part because of their responsibility for paying the broker fee.

Broker fees: Seller are expected to cover the broker fee, which is traditionally 6 percent, split equally between the listing and buyer’s brokers. On a $1 million apartment, a 6 percent broker fee comes to $60,000.

Transfer taxes: Sellers pay a state and city combined transfer tax of 1.825 percent if the sale price is over $500,000 or 1.4 percent for deals under $500,000.  (That works out to $18,250 on a $1 million sale, and $9,125 on a $500,000 sale.) If your apartment or townhouse sells for $3 million or more, the tax increases by 0.25 percent. 

Flip taxes: Some co-op and condo buildings have flip taxes (also known as transfer fees) ranging anywhere from 1 to 2 percent of the purchase price up to 3 to 5 percent. Some buildings charge 10 percent of the seller's profit. Flip taxes are not really taxes, but a fee paid to support building reserves and capital improvements.  

In some buildings, the buyer pays, and in others the seller. In the current market, more buyers are having success getting the seller to pay the flip tax even if it's technically the buyer's responsiblity. 

“A knowledgeable buyer is going to try to get a transfer fee covered,” says Adam Stone, a real estate attorney with The Stone Law Firm. He points out that in buildings where the buyer typically pays the flip tax, the current market means this is increasingly open to negotiation. 

Attorney fees: Expect to pay $2,500 - $3,000 in attorneys fees on a standard transaction.

Building fees: Most condo and co-op buildings charge move-in and move-out fees, which can range from a few hundred to a couple of thousand dollars each, and a managing agent and co-op attorney fee of around $1,500.

How to lower your closing costs

Save on the broker's fee

At 5 to 6 percent of the sale price, a broker’s commission is by far the largest closing cost for sellers. Aside from trying to negotiate the fee down, consider working with a brokerage that rebates part of its commission to you.

NYC sellers who list their apartment with Prevu (a Brick Underground partner) pay a 1.5 percent listing agent commission upon closing, a savings of up to 3 percent of the sale price. Participants in the brokerage’s “Smart Seller” program receive a detailed home valuation and listing strategy from one of Prevu’s salaried agents. As a tech-enabled, full-service brokerage, Prevu handles showings, manages negotiations, and everything else you would expect from a traditional real estate broker. Sellers offer a commission to buyers’ brokers to entice them to bring buyers to the apartment, and if a buyer comes without a broker, sellers see additional savings, a unique feature of Prevu versus traditional brokers.

To partially or totally offset your closing costs as a buyer, you can work with a brokerage that offers a buyer’s rebate on its commission. For example, if you do some legwork yourself by viewing properties without an agent, an agent at Prevu will handle pretty much everything else, including advising you on the right price to offer, preparing your offer, negotiating with the seller, and assembling the board package you’ll need to prove your worth to a co-op or condo board. As a participant in Prevu’s “Smart Buyer” program, you’ll pocket a rebate of two-thirds of the commission paid to the buyer’s broker at closing. On a $1 million condo with a 6 percent commission (split 50-50 between the seller’s broker and buyer’s broker—so in this example, 3 percent each), the rebate equals 2 percent of the purchase price, a cool $20,000.

Structure the deal to your advantage

If you’re buying a $2 million condo, there’s not much you can do about paying the mansion tax. But if your purchase is close to the $1 million mark, there may be a way to structure the deal to avoid the extra assessment. 

Consult an attorney or tax expert on whether you can work out an agreement with the seller to and keep the purchase itself under $1 million. Keep in mind there are risks associated with this and if you end up being audited. For further details, read: ”Mansion or not, you may not escape that so-called Mansion Tax.”

Buy new—in a building with a hefty tax abatement

Assuming the apartment fits within your set budget range—and the savings aren't canceled out by the expense of covering the developer's closing costs, as discussed above—buying into a building with a heavy tax abatement can significantly lower the cost of your monthlies for years to come. You can read: "What is a property tax abatement on a New York City condo, and why does it matter?”

Buy almost new

A newly built condo is already going to be pricier than your average co-op; you need to factor in the expense of paying the developer’s closing costs (unless you're able to convince the developer to pay them), and it can be quite a bit more than a similar apartment that’s only slightly lived in. 

“A lot of people come in wanting new construction, but if they can wait for the first resale in new construction, that’s a great way to save,” says Tyler Whitman, an agent at Triplemint.

Shop around for a mortgage banker

Some loan officers will compete to get your business by offering to cover various expenses, like the credit check or UCC filing fee, which can save $50 or $100 here and there, Whitman says. (Of course, it’s still probably the smartest move to choose a mortgage based on the best interest rate.) Check out: "What's the difference between getting a mortgage for a co-op and a condo?”

Save on your mortgage recording tax

If you’re getting a mortgage and your seller is still paying off their own mortgage, you can ask your attorney if a Purchase Consolidation Extension and Modification Agreement, or "purchase CEMA" makes sense. This little-known mortgage maneuver involves combining the seller’s mortgage with the buyer’s mortgage and then legally modifying the terms to current rates. 

The result in New York City is a saving on your mortgage tax of as much as 1.925 percent of the seller’s or buyer’s mortgage amount, whichever is lower. 

For example, if the seller has an $800,000 balance on their mortgage, and the buyer is getting a $1,000,000 mortgage, then the mortgage tax to be saved by doing a purchase CEMA is approximately $15,400. There are usually $1,000-$2,000 in extra fees to achieve those savings. For more details, read: "What is a CEMA loan, and when does it make sense to get one?”

Ask for a closing credit

Developers selling new condos are “negotiating like crazy,” Stone says. Although they will probably be unwilling to budge on price (because of the impact on other units), they may offer what’s called a closing credit, a sum that is given back to the buyer at closing. 

It might seem like an odd thing to do, but it allows a seller to keep the purchase price technically the same in order to maintain pricing on other units.

Stone says a typical amount could be a $600,000 closing credit on a $4 million apartment. "This way, the sponsor is still able to say, 'We are getting X per square foot.'" he says. Check out: "Closing credits: Here's how much NYC sellers are paying now—and how to negotiate your own deal sweetener.”

Calculating your closing costs: Additional resources

For a detailed list of what you'll pay, Abrams Garfinkel and Douglas Elliman both have helpful breakdowns. This handy NYC Closing costs calculator from Prevu enables buyers to quickly estimate and compare closing costs for different property types, along with how much you can save with a commission rebate.