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How Much Are Closing Costs?

What Are Closing Costs?

Closing costs are what buyers and sellers have to pay when they complete a real estate transaction, and the property changes hands between the buyer and the seller. These costs can be 2-4% of the purchase price for the buyer and are paid out of their own pocket.

Closing costs are typically higher for sellers, 8-10% of the sale price, but they are taken out of the funds the seller receives for their property. Additionally, these costs may differ for different property types.

Closing Costs For Buyers In NYC

Closing costs impact buyers more than sellers because these costs come out of their own pockets. So if you are buying a property, it’s a good idea to save more than 20% and keep the closing costs in mind. And this doesn’t include the cost of moving into the new property (cost of movers, new purchases, improvements, etc.).

The closing costs below are for three property types: Condos, Townhouses/Houses, and Co-ops. Paying several closing costs is compulsory, regardless of the property type you choose. Others are specific to a certain property type.

The following costs are calculated for a property that costs $1,000,000; the buyer has paid a 20% down payment and got financing for the rest.

Tax/Fee

Property Type(s)

Closing Cost

Mansion Tax

All

$10,000 (1% of the price)

Buyer’s attorney fee

All

$3,000 (can be higher for complex deals)

Title insurance

Condos, Townhouses

$4,500 (Proportional to the price of the property)

Application/Building/Move-In Fee

Condos, Co-ops

$1,500 – $2,000 (varies from property to property)

Mortgage Recording Tax

Condos, Townhouses

$15,400 (1.925% of the mortgage amount, which is $800,000 in this case)

Bank Fees

All

Around $4,000 (It’s a lump-sum of several different costs)

Transfer Tax

All (New Properties)

$18,250 (1.425% for NYC transfer + 0.4% for NY State transfer)

Mansion tax is based on the price of a property. It starts at 1% of the price for properties that cost $1 million and grows to a maximum of 3.9% of the price for properties that cost $25 million or more.

Different mansion tax rates according to the property price are:

Property Price

Mansion Tax Rate

(% of the property price)

$1 million to $1.99 million

1%

$2 million to $2.99 million

1.25%

$3 million to $4.99 million

1.5%

$5 million to $9.99 million

2.25%

$10 million to $14.99 million

3.25%

$15 million to $20.99 million

3.5%

$20 million to $24.99 million

3.75%

$25 million or more

3.9%

Buyer’s attorney fee is for services like due diligence and contracts.

Title insurance is crucial because you will not be able to close a condo or a townhouse in NYC without buying title insurance, even though it’s not an official requirement of the city or the state. Attorneys require it and it offers you protection against someone else claiming ownership of your property.

Application/Building/Move-In Fees are specific to the condominium or co-op you are moving in. They are usually split between move-in deposit, move-in fee and can also include co-op attorney and or board application fees.

Mortgage Recording Tax is collected by NYC Register’s office for all boroughs except Staten Island.

Bank Fees are a combination of loan application fees, appraisal fees, mortgage recording fees (not tax), bank’s attorney fee, etc.

Buyers usually only pay transfer Tax for new properties where there isn’t a previous seller. For previously owned properties, transfer tax is the responsibility of the seller. It’s calculated at a rate of 1% for properties that cost $500,000 or less. For properties beyond this price point, the NYC transfer tax rate is 1.425%, and the state transfer tax rate is 0.4%.

Closing Costs For Sellers In NYC

The most significant segment of closing costs for sellers in NYC is the broker’s fee. The seller is responsible for both buyer’s and seller’s commissions, which usually adds up to 6% of the property price.

For seller closing costs in NYC, there is relatively little difference for different property types, except for a flip tax that is only applied to co-ops. So the seller’s closing costs are relatively straightforward. The following closing costs are calculated for a $1,000,000 property.

Tax/Fee

Closing Cost

Broker’s Commission/Fee (Buyer’s + Seller’s)

$60,000 ($30,000 + $30,000) – 6% of the property price

NYC Transfer Tax (NYC + State)

$18,250 ($14,250 + $4,000)

Attorney Fee

$3,000 (typically)

Move-Out Fee (For co-ops and Condominiums)

$1,500

Flip Tax/Fee (For co-ops only)

$10,000 – $30,000 (1% to 3% of the property)

The broker’s commission is the responsibility of the seller.

Transfer Tax (also called RPTT – Real Property Transfer Tax) applies to sellers for all real estate transactions. For properties that cost $500,000 or less, the rate is 1% of the property price. Transfer taxes are paid out to both the city and the state, and both have their own tax rates.

For co-ops, condos, and townhouses, the NYC transfer tax rates are:

Property Price

Transfer Tax Rate

(% of the property price)

$500,000 or less

1%

More than $500,000

1.425%

For residential properties, the state transfer tax rates are:

Property Price

Transfer Tax Rate

(% of the property price)

Less than $3 million

0.4%

$3 million or more

0.625% (Original 0.4% + additional base tax 0.25%)

Move-Out fees are similar to move-in fees and usually, go towards maintaining and improving the property.

Flip Taxes usually range from 1% to 3% of the property, but in some cases, they can go as high as 5% or more. These taxes are usually invested in improving the co-op.