How to Estimate Closing Costs in NYC [2021 Edition]

How much are closing costs in New York? Unfortunately, the average closing costs in New York for buyers will depend on many different factors, but this article seeks to shed some light on the process. New York City real estate closing costs are one of the substantial parts of the overall cost of the deal, homebuyers should keep this in mind when planning to buy a house, co-op or condo. Real estate attorney fees for closing are an additional cost to consider.

What Are Closing Costs in NY?

Closing is the period during the real estate sales process where the title of the property is transferred from the seller to the buyer. Closing involves costs. Closing costs can include many of the following items:

• Fees the lender charges you to process and finalize your loan;
• Appraisal fees;
• Inspection fees;
• Credit search fees;
• Title search fees;
• Real estate attorney fees for closing;
• Transfer taxes;
• Prepaid property taxes;
• Prepaid interest;
• Homeowner’s insurance.

The exact fees will vary by lender and the type of property you wish to purchase (house vs. co-op vs. condo). Prior to closing, lenders are required to detail all closing costs on an initial loan estimate when you apply for the loan. This is known as the Loan Estimate. Lenders must also update their closing costs estimate a few days before closing occurs and disclose them on the Closing Disclosure. This way, you will always have the opportunity to know what your closing costs will be before the closing actually occurs.

Real Estate Closing Costs in New York – What Are They?

Let us first examine the seller’s side of the transactions.  Among other things the seller generally pays for realtor’s commission and transfer taxes.  Realtors generally charge anywhere between four to six percent of the purchase price.  While a seller might be tempted to go with a lower end of the spectrum realtor, remember “you get what you pay for.” This past summer I assisted a client in selling her Bedford-Stuyvesant multifamily brownstone. The seller had hired one of the best realtors in the area. The brownstone sold for way above asking price and over $500,000 more than a similar brownstone which sold several months earlier on the same block.  While the seller might have paid one or two percent more to the realtor, the price increase alone was well worth it.

The other major fee that is incurred by a seller during a real estate transaction is New York City and New York State transfer taxes. New York City transfer taxes depend on the type of property you are selling but generally for residential properties are 1% if the sale price of the property is $500,000 or less and 1.425% if the sale price is $500,000 or more.  New York State charges the seller $4 for every $1,000 of the sale price. Additionally, a seller might incur a Capital Gain tax at the conclusion of the tax year but that discussion is better left to a C.P.A.

Generally, a purchaser will incur higher costs than a seller during a real estate transaction. If a purchase requires a mortgage, most counties in New York State will charge a mortgage recording tax. In New York City, the mortgage recording tax is based on the mortgage amount. If the mortgage amount is less than $500,000 on a residential property, the tax is 1.8% of the mortgage, if the mortgage is $500,000 or more than the mortgage recording tax is 1.925%.

Additionally, a purchase price of the property is $1,000,000 or more, the buyer will pay New York State’s mansion tax, which is 1% of the entire purchase price. The other big expense that is incurred by the purchase is title insurance fee and mortgage insurance title fee. Both fees are controlled by the purchase prices. There are other bank and title fees which may be influenced by an increase in the sale price, but generally, the ones previously listed have the biggest impact to be considered.

Understanding the Loan Estimate

As explained above, the Loan Estimate is a document that includes the breakdown of the approximate payments due upon the closing of a mortgage loan. As the outline is simply an estimate, the actual closing costs could be either lower or higher at closing, but the outline is always reasonably accurate. The most commonly incorrect estimates are those for third-party services such as home inspection fees and moving fees.

The Loan Estimate helps borrowers shop and compare the costs of loans with various lenders. The Loan Estimate contains several pieces of information including the loan amount, loan term, the interest rate, payment penalties, and other fees and charges. The Loan Estimate also outlines the closing fees, some of which will be paid by the buyer and some by the seller. These fees are normally broken down into several categories:

• The loan fees;
• Pre-closing fees;
• Reserves or escrow paid to third parties;
• Title charges;
• Government charges.

Understanding the Final Costs Listed in the Closing Disclosure

The Closing Disclosure is a real estate document required by the government to itemize all of the charges imposed upon the parties. Due to the amount of information it contains, it is one of the most important documents of the closing process. Once you receive the Closing Disclosure from the lender, it is highly recommended that you review the Closing Disclosure with an attorney because of its complexity.

Generally, a real estate lawyer NYC will walk you through the document and explain each item. You will need the trained eye of an attorney to spot any errors made by the lender. As explained above, the amount estimated by the Loan Estimate is generally pretty close to the amount contained in the final Closing Disclosure.

An Example of Average Closing Costs in NY

The average closing costs in New York can vary a bit depending on several factors. Closing costs in New York can range from as low as 1.5% to as high as 6% of the purchase price for buyers. As for sellers, the closing costs can vary from 8% to 10% of the price. As expected, New York can be expensive. But, mistakes in the closing process can cost large amounts of money. Without the proper guidance, unwary sellers and buyers can find themselves with a lot of unexpected costs. With an experienced NY real estate attorney helping you through the closing process, the likelihood of such mistakes is much lower.

How Much Are Closing Costs in NY

Purchasing real estate in New York comes with hefty amounts of fees and taxes. Buyers and sellers both pay certain fees at closing and the amount of fees will vary with the type of sale or purchase you are making. Some things that both buyers and sellers typically encounter at closing include: 

• Real Estate Commission
• New York Transfer Tax
• Attorney’s fees
• County recording fees
• Pickup Fee to Title Closer:

Average Closing Costs in NY for Buyer

Average closing costs in NY for the buyer are between 1.5% and 5% of the purchase price. How much are closing costs for the seller in NY? Unfortunately, they are slightly higher that the costs for buyers, ranging from 8% to 10% for sellers. Simple mistakes in the property sale negotiation or filling out paperwork could cost thousands of dollars. Having an experienced real estate attorney by your side is important at all stages of the real estate transaction, but having legal counsel at closing is crucial.

Other Services and Fees the Buyer Should Be Prepared to Pay for Prior to Closing

• Home inspection: sometimes this is required. The purpose of a home inspection is to identify any defects in the home that need to be corrected prior to closing. The job of a home inspection of to poke around the deepest and darkest corners of the home to search for mold, rot, and termites that the buyer probably did not discover during the purchasing period. Generally, home inspections will cost between $100 and $500. We strongly suggest that you order a home inspection before closing as it is the buyer’s final chance to discover any hidden problems with the property. If you discover a defect during inspection, it could allow you to further negotiate the final closing price.
• Homeowners’ insurance: in general, homeowners’ insurance will help ensure your property investment is protected. Many lenders will require you to place some amount of money into an escrow account to cover the cost of monthly homeowners insurance premiums just in case you ever run into financial trouble and cannot pay.
• Prepaid daily interest: if you are closing on your home in the middle of the month, you may need to pay interest covering the days until your first full month in the home begins.
• Property survey: this is intended to evaluate the property border line so that you know what the property’s legal boundaries are. This is important to insure that the location of fences and walls are proper and identify the locations of municipal gas and water lines. Generally, this costs between $100 and $400.
• Property tax escrow: generally, your lender will require you to place a sum of money into an escrow account prior to closing to cover property taxes for at least a month so that in the event of a mortgage default, the bank can continue to pay property taxes for you.

Co-op Closing Costs in NYC

For NYC buyers who are purchasing a co-op, the buyer can expect to pay somewhere around 1–2%  of the purchase price if the co-op is below $1 million. If the price is over $1 million, generally the condo closing costs nyc buyers between 2–3% of the price. There are also some special fees and expenses associated with co-op purchases, such as:

• Higher Moving Fees
• UCC-3 filing fee
• Flip tax/fee
• Co-op attorneys’ fees
• Transferring agent fee

 Condo Closing Costs in NYC

• Application fee: Some (but not all) lenders charge an application fee, which averages around $300, but can be as high as $500;
• Misc. condo closing fees: like co-op purchasing, there are a variety of small fees associated with condo purchases, which normally vary anywhere between $200 and $300.

Condo Closing Costs NYC For Buyer

Closing costs on condos in NYC tend to be higher than the cost of co-ops in NYC. For those buying a condo in NYC, they can expect to pay between 2–4% of the purchase price for condos under $1 million dollars. For the condos that have prices over $1 million, the price can be much higher and can even go over 5% of the purchase price. Condos are generally more expensive than co-ops because of the additional taxes and fees paid for the mortgage and for title insurance. Co-op apartment owners technically buy “shares” in the co-op, whereas a condo buyer pays for a mortgage on the home that gives the buyer the title to the condo. Some of the condo closing costs the buyer can expect in NY include: 

• Attorneys fees
• A 1% “Mansion Tax” for homes over $1,000,000 
• Title Insurance (which only applies to condo owners, compared to co-ops)
• A mortgage recording tax
• And some other fees that will undoubtedly arise.

Examples of Closing Cost Calculations in New York

Additional Closing Costs for Coop’s in New York

Additional Closing Costs for Condos in New York

Overwhelmed by the complexity of calculating these various charges? Several online services can roughly calculate real estate closing costs utilizing a closing cost calculator NYC, but be aware that any NYC closing cost calculator provides a mere estimate of your closing costs to properly manage closing, you will need to hire an NYC real estate lawyer to help you negotiate down fees and ensure that you are not getting a bad bargain.

Standard New York Seller Closing Costs Descriptions

Standard closing costs in NYC include a lot of various costs and depend on the type of property. For most sales, the costs  include: 

• Real Estate Commission: for sellers, the broker’s commission in NY is typically around 5 to 6%. This usually is the biggest chunk of the seller’s closing costs. 
• New York Transfer Tax: for the seller the transfer tax is roughly 1.825%, but can vary. 
• Attorney’s fees: this amount will vary depending on the amount of work your attorney has to do in relation to the sale, including the time spent preparing documents and providing advice. 
• County recording fee: these fees vary from $30 to $100 typically. 
• Pickup Fee to Title Closer: This fee is typically around $200 for each Mortgage. 

For co-ops, the closing costs include: 

• Flip Tax/Fee: the filing fee for co-ops is generally about 1 to 3% for co-ops.
• New York State Transfer Tax: the transfer tax fee can be about 1%, typically
• Attorney’s Fees: attorneys fees will vary a lot depending on how much the attorney needs to be involved in the proces
• Moving Out Fees: moving out fees can be fairly expensive for co-op because of the unique nature of co-ops
• Pay off the Bank/Pick-up Fee: paying off the mortgage is typically necessary on the sellers side before the property transfer is final 
• UCC-3 Filing Fee: generally, this fee is between $40 to $175 dollars

For condos

• Condominium Attorneys fee: often in NY, the attorney’s fee for condos, like other residences  in NYC, will vary depending on how much work the attorney must do during the purchase/sale process. 
• Moving out fees: moving fees are a given when moving in and out of condos in NYC. The more things you have to move, the more expensive it can be. 
• Waiver Application Fees: some fees associated with condo purchases can be waived if you have the right information ready when you apply, but you may still encounter some fees for waiving parts of the application. 
• Miscellaneous condo fees: other fees and taxes can always pop up. Experienced real estate attorneys in NYC can help you be prepared for things you may not expect to come up during the closing process. 

FAQ:

A Brief Note on Closing Procedure

Generally, the closing will occur between 60 and 90 days after the contract is signed (things tend to move a bit slower in NYC, so assume that closing will occur closer to 90 days after signing). After the signing, the buyer must send the seller’s attorney a down payment. If the buyer walks away from the contract before closing, the buyer could lose his or her down payment unless the buyer has a justified reason, such as a mortgage contingency clause. Typically, down payments in New York state average around 10% of the purchase price, which is placed in an escrow account.

Between signing and closing, your attorney will need to complete several tasks in preparation for closing. First, your attorney will order a title report to determine if there are any issues for the sellers to resolve before closing. The most common outstanding title issues are unsatisfied liens or property violations. Discovering and resolving title defects is critical to ensuring that your purchase is legally secure. Reliance on experienced real estate attorneys is crucial at this stage because the consequence of a mistake could be losing your home without warning in the future.

Next, your attorney will work with you to complete any paperwork requested by the lender and deliver any documentation required. After that, your attorney will help you calculate the amount that you will owe to the sellers at closing. Additionally, your attorney will help you determine how much you will owe to any applicable lenders, the title company, and any other third-party entities involved in the transaction (such as co-op boards).

Finally, on the date of the closing, your attorney will represent you and ensure that all of the documents you need to sign such as the deed, transfer tax returns, and mortgage documents, are all in order and state what you had agreed to previously. You will also need to tender payment at that time.

Real estate closings are very technical procedures, especially in NYC where there are a lot of additional requirements and local real estate transaction customs. Many different aspects of the real estate transaction process will be foreign to an attorney who does not practice real estate law, which is why it is so important to hire real estate law focused professionals. The experienced real estate lawyers at the Law Office of Yuriy Moshes, P.C. will walk you through the deal and ensure that everything is correct and no issues persist.

Are you considering buying or selling property? Have you already begun the real estate transaction process and need advice on how to proceed? At the Law Office of Yuriy Moshes, we assist clients who buy or sell property in the greater New York City area including all of its boroughs (Manhattan, Brooklyn, Queens, the Bronx, and Staten Island) as well as Northern New Jersey, Long Island, and Upstate New York.