Closing Costs In New York Real Estate Transactions

Cea Legal is a boutique transactional law firm that works with both sellers and purchasers in New York real estate transactions. Depending on the details of the transactions, the negotiations are specifically tailored to the goals pursued by the party represented. However, one item that is always requested by both purchasers and sellers is an estimate of the closing costs.

Broadly speaking, sellers are typically paying more in closing costs than purchasers.

Sellers are responsible for brokers’ fees and New York State (NYS) and New York City (NYC) transfer taxes, as well as for the flip tax when provided for in certain cooperative (co-op) buildings.

Brokers’ fees are usually 6% of the purchase price and are equally split between the purchaser's broker and seller’s broker, although these terms are contractually negotiable.

The New York State transfer tax is charged at the rate of $2 each $500 of consideration + $1.25 for each $500 of consideration only for those residential properties with a sales price of $3,000,000 or more and for those properties with a sales price of $2,000,000 or more.

The New York City transfer tax is 1% of the purchase price, when the latter is $500,000 or less, or 1.425% of the purchase price, when the latter is $500,000 or more. 

The flip tax is not technically a tax but a fee often imposed by co-op buildings on the seller to support building finances and it ranges from 2% to 5% of the purchase price.  

Overall, sellers should estimate closing costs 8% to 10% of the sale price. As a matter of fact, these costs are incorporated in the listing price with an intent to implicitly transfer them to purchasers.

Purchasers are responsible for a number of variable building fees in connection with the proposed transaction (moving fees, working capital fees, board application fees, managing agent fees, co-op or condo attorney fees). The total amount of the fees depends on the size of the transaction, the range is between $1,500 and $5,000.

Purchasers are also responsible for title insurance fees and the mortgage recording tax, although these fees are not required in co-op buildings transactions because these are shares transfers.

The title insurance fee is approximately 0.45% of the purchase price. The mortgage recording tax is 1.925% on loans over $500,000 or 1.8% on loans under $500,000. This tax can be partially or wholly offset when the purchaser is allowed to have the seller's mortgage assigned by the seller's lender to the purchaser's lender.

Finally, the purchaser is required to pay the mansion tax for those transactions in excess of $1 million. The Mansion Tax is 1% if the purchase price is between $1,000,000 and $1,999,999; 1,25% if the purchase price is between $2,000,000 and $2,999,999; 1,50% if the purchase price is between $3,000,000 and $4,999,999; 2,25% if the purchase price is between $5,000,000 and $9,999,999; 3,25% if the purchase price is between $10,000,000 and $14,999,999; 3,50% if the purchase price is between $15,000,000 and $19,999,999; 3,75% if the purchase price is between $20,000,000 and $24,999,999; 3,90% if the purchase price is between $25,000,000.

Last but not least, for both sellers and purchasers, attorneys range between $2,500 and $8,000 depending on a variety of factors.