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.
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 which can make closings very complex. An attorney that specializes in real estate law may be able to help you understand the many aspects of the process. This is why it is so crucial to find attorneys who specialize in real estate transactions. At Sishodia PLLC, attorney Natalia Sishodia and our team of experienced real estate lawyers will guide you through every step of the process.
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.
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.