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.
If 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 New York City real estate lawyer to learn more.
Understanding the intricate landscape of real estate closing costs in New York City can be a daunting task. At Sishodia PLLC, our skilled New York City real estate lawyers can help you determine who bears the financial responsibility for closing costs and how to avoid challenges at closing. Our experienced legal team can guide you through the complexities of real estate transactions in New York. Contact us at (833) 616-4646 for a smooth and well-informed closing process that safeguards your interests.
Closing Cost Statement
The process of buying an apartment in NYC does not end when you finally secure a closing date. There are still some matters that need to be addressed, such as conducting the last walk-through of your condo or co-op apartment, and the closing statement. You may not be familiar with a closing statement if this is your first home purchase.
The closing statement summarises the sale transaction and needs to be kept for your records. The closing statement is prepared by your real estate attorney in spreadsheet format and will include the closing costs for your home purchase. This is an important document because it will contain the precise figure for your closing costs. You won’t know the exact amount of your final costs until your attorney has completed the closing statement.
The closing statement should contain all necessary information to determine where the money is going as well as other details such as:
- The names of both the seller and buyer
- The closing date
- The address of the property
- The location for the closing
Closings can be delayed by up to a day or two. This is why it is important for the closing statement to specify a date.
The Closing Process
The closing of a real estate transaction usually takes between 60-90 days from the date the contract was signed. In NYC things move slower so expect closing to take place closer to 90 days. The buyer will need to send the attorney the down payment after the contract is signed. The buyer can lose their down payment if the buyer walks away from the contract prior to closing unless there is a valid reason such as a mortgage contingency. In New York, the average down payment is 10%. This money goes into an escrow account.
The buyer’s attorney must complete several tasks before closing. First, they must order a title check to see if the seller has any outstanding issues. Unsatisfied liens are the most frequent title problems. It is crucial to resolve title problems and ensure that your purchase is legal.
The buyer’s attorney will also then work closely with the client to fill out any documents required by the lender. The attorney can also help their client calculate how much they owe any lenders or title companies, as well as any third-party entities that are involved in the transaction, such as co-op boards.
On closing day, the real estate attorney will ensure all documents that you sign, such as deeds, tax returns, and mortgage documents are in order. At that point, the buyer will need to make a payment.
In NYC, there are additional regulations and customs involved in real estate transactions that can make closings very complex. An experienced real estate attorney can help you understand the many aspects of the process. At Sishodia PLLC, attorney Natalia Sishodia and our team of experienced real estate lawyers can guide you through every step of the process.
New York City Real Estate Lawyer
Natalia A. Sishodia, Esq., LL.M.
Natalia A. Sishodia is a seasoned New York City attorney dedicated to guiding clients through complex real estate matters. Fluent in English and Russian, she has assisted clients from around the world, including Russia, Japan, the UK, Canada, the UAE, and beyond, with legal needs involving New York real estate and cross-border transactions. Known for her strategic approach and precision, she represents high-net-worth individuals, celebrities, and major financial institutions with the utmost discretion and care.
Ms. Sishodia focuses her practice on high-end real estate transactions for both domestic and international clients. Her experience spans co-op and condo sales, single and multi-family home purchases, new developments, deed transfers, leasing, lending, and 1031 exchanges. She is known for her meticulous planning and ability to deliver smooth, “stress-free” closings. Beyond real estate, Natalia also counsels clients on estate planning and wealth management, helping them structure their legacies and protect their assets with thoughtful, tax-efficient strategies.
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.
Disadvantages Of Seller Paying Closing Costs
When a seller decides to shoulder the responsibility of covering closing costs, they are essentially taking on the financial responsibility associated with transferring property ownership. These costs encompass various expenses, including appraisals, title searches, and legal fees. Sellers choosing to pay closing costs frequently employ this strategy as a beneficial negotiation tactic, potentially speeding up the home sale process and even securing a more favorable offer. However, there are drawbacks associated with sellers covering these expenses.
- Increased Listing Price: When the seller agrees to cover the buyer’s closing expenses, they may choose to raise the home’s listing price to cover this additional financial obligation. As a result, this adjustment can lead to an increased overall cost for the buyer, even though the seller is taking care of the closing costs.
- Reduced Room for Negotiation: When the seller commits to shoulder the burden of covering the closing costs, it can restrict the scope of negotiations opportunities available to both the buyer and seller. This limitation arises because the seller has already made a concession by taking on the closing costs, which might reduce their willingness to negotiate on other aspects of the sale.
- Limited Scope for Upgrades or Repairs: If the seller takes on the responsibility of covering closing costs, they might have less flexibility to offer other concessions, like home upgrades or necessary repairs. This limitation can restrict the buyer’s capacity to negotiate for extra benefits or improvements.
- Complicated Documentation: The process of incorporating the seller’s payment of closing costs into the purchase agreement can be intricate, necessitating additional paperwork and documentation. This intricacy can prolong the time and effort needed to finalize the sale.
- Potential Appraisal Challenges: The involvement of the seller in covering the closing costs can pose potential appraisal difficulties. This is because the appraiser must take into account the higher listing price, potentially resulting in an adjustment to the assessed value of the home. Such adjustments could complicate matters if the appraised value ends up being less than the initially agreed-upon sale price.
When it comes to the disadvantages of a seller paying closing costs in real estate transactions, the landscape of New York City’s property market can be particularly challenging. However, in such circumstances, a skilled New York City real estate lawyer can be an invaluable guide, helping you make informed decisions and avoid potential pitfalls seamlessly. Contact Sishodia PLLC today to schedule a consultation
| Disadvantage | Real-World Impact | Example or Insight |
|---|---|---|
| Increased Listing Price | Sellers often raise listing prices by 2% to 3% to offset the closing costs they agree to pay. | For a $500,000 home, this can mean a $10,000 to $15,000 increase in listing price, which may affect buyer affordability. |
| Reduced Room for Negotiation | Covering closing costs can limit flexibility to negotiate on price or contingencies. | Buyers may have fewer opportunities to request price reductions or inspection credits. |
| Limited Scope for Upgrades or Repairs | Sellers who cover closing costs often have less budget for home improvements. | The money used for closing costs can reduce funds available for upgrades or repairs before listing. |
| Complicated Documentation | Adding seller-paid closing costs requires additional paperwork in the purchase agreement. | This can delay the closing process by several days if extra documentation is needed. |
| Potential Appraisal Challenges | Increasing the listing price to include closing costs may affect the appraisal value. | If the appraised value comes in lower than the sale price, the buyer’s loan approval could be impacted. |
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.
How Property Type Affects Closing Costs in New York
The type of property you buy in New York plays a big role in how much you’ll pay in closing costs. Different property types come with their own rules, fees, and timelines, which can change the total amount due at closing.
For instance, co-ops and condos often have different cost structures from single-family homes. In a co-op purchase, buyers typically face more administrative fees because they’re buying shares in a corporation rather than real estate itself. Common costs include application fees, attorney review fees, and in some cases, a “flip tax.”
Condos, on the other hand, usually involve title insurance, mortgage recording tax, and standard lender fees since buyers are purchasing actual real estate. However, condos tend to have fewer board fees and a simpler approval process compared to co-ops.
Single-family homes generally have the most straightforward closing process. You’ll still pay standard costs such as attorney fees, title insurance, and property taxes, but you’ll avoid many of the administrative or board-related charges that come with co-ops and condos.
Understanding these differences helps buyers anticipate costs more accurately and avoid surprises on closing day. Knowing what applies to your property type can make your home purchase in New York smoother and more predictable.
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.
At Sishodia PLLC, our skilled team of New York City real estate lawyers is with you each step of the way to ensure that your entire real estate transaction goes smoothly and that there are no surprises. Whether you are a buyer or seller, we can help. Call us at (833) 616-4646 or contact us through our online contact form to schedule a free consultation.
