When Buying or Selling a Home in New York, What Charges, Fees and/or Taxes Are Each Side of the Deal Responsible For?
A great question and, as a title insurance company solely focused on New York State real estate transactions, we spend much of our time educating the consumer on the costs within our purview and about how companies considered to be commodity in nature, are actually far from that (‘Are New York Title Insurance Providers All The Same?‘).
There are many other closing costs involved, and it’s important to know who is responsible for what.
Fortunately, an article on the subject has been written by Manhattan real estate attorneys Natalia A. Sishodia, Esq., LL.M., Managing Partner of Sishodia PLLC (firstname.lastname@example.org, (833) 616-4646) and Beatrice Raccanello, Esq., LL.M., Of Counsel (email@example.com, (833) 616-4646).
‘Who Pays Real Estate Closing Costs in New York?‘
Closing costs are any charges over and above the price of the real estate that is due at closing. No matter which side of the real estate transaction you are on in New York City, you will be subject to some type of closing costs.
Whether you are a buyer or a seller, closing costs can either take a chunk out of your sales proceeds or significantly affect your purchasing power. It’s important to be prepared, so it isn’t a surprise when you least expect it. In some cases, closing costs can be negotiated between a buyer and a seller and it may be to your advantage to explore those options if they are available to you. Speak with your Manhattan real estate lawyer to learn more.
Closing Costs Paid By the Seller in New York
If you are the seller, you will be paying closing costs that can run more than 8% of the sales price. This is because the seller is responsible for paying the real estate commission for the sale. The real estate commission makes up the largest percentage of your closing costs as the seller, with commissions typically ranging from 5 to 6 percent of the sales prices. This commission is then typically split between the two agents.
In addition, the seller is responsible for any city and state transfer fees. The NYC transfer fee is 1% of the sales price for properties $500,000 or less or 1.425% for properties over $500,000. State transfer fees are an additional .40% or .65% for any properties selling in excess of $3 million.
In those cases when the seller is a foreign national, there is an additional 15% tax withholding known as FIRPTA.
To add to the complexity, out-of-state residents also have to take into consideration a mandatory income tax payment at closing equal to 10.9% of the gain.
A knowledgeable real estate attorney experienced in handling sales involving both foreign sellers and out-of-state residents’ sales can guide you on the issues such as withholding (FIRPTA), exemptions, and your options when it comes to withholding certificates.
In addition to New York state-specific taxes, the seller is responsible for their pro-rata share of real estate taxes for the current year and any attorney fees.
Closing Costs Paid By the Buyer in New York
Buyers should expect to pay closing costs ranging from 2 to 5% of the purchase price of the property, depending on their mortgage terms and property type variables. These will include
- Lender’s fees, including any costs associated with the mortgage financing for the property, such as prepaid interest, appraisal fees, survey costs, and tax escrow
- Their pro-rata share of property taxes for the current year
- Transfer taxes if the purchase is a new build
- Mortgage recording tax
- Attorney’s fees
- Condo or co-op building application and attorney fees
- Title insurance premiums
- Mansion tax on any properties with a purchase price of $1 million or more
Depending on the type of mortgage and the market, closing costs can be negotiated between a buyer and seller, although in a very hot real estate market, the seller doesn’t usually have much incentive to do this.
Getting the Guidance of a New York City Real Estate Lawyer
When you are purchasing a piece of real estate in New York City, it is always advisable to have the advice of an NYC real estate attorney to ensure that everything is in order and you are not paying for anything that is not your responsibility. An experienced real estate attorney will work with you from contract to closing to protect your legal rights and prepare you for all your contractual and financial obligations and closing costs.
Read more about differences between title insurance providers here, https://www.hallmarkabstractllc.com/new-york-title-insurance/.
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