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 New York City real estate lawyer to learn more.

Navigating the intricate landscape of real estate closing costs in New York City can be a daunting task, but you don’t have to do it alone. A skilled New York City real estate lawyer can help you understand who bears the financial responsibility for closing costs and how to avoid challenges at closing. Whether you’re a buyer or a seller, our experienced legal team at Sishodia PLLC 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.

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, navigating the complex 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 your invaluable guide, helping you make informed decisions and avoid potential pitfalls seamlessly. Contact Sishodia PLLC today to schedule a consultation.

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.

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.