How much will I need liquid to close on an apartment?
Closing Time
No more coop wars and your board package has been hurled
Closing time
No more paying rent again let your anger to your landlord unfurl
Closing Time
Closing costs will make you bawl so here’s some whiskey and beer
Closing time
You just bought a new home and your money disappearrreeedd
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I didn’t know those costs to buy a home (x10,000 while dry heaving)
Let’s talk about closing costs for a hommmmeeee
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True story: I just listened to “Closing time” 15 times in a row at 10am in a coffee shop in Brooklyn and that song should be solely reserved to the end of a wedding, when you’re sweaty, look like you got hit-with-a-leaf blower and are contemplating the life decisions that led you to this point.
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So I get these question a lot: What are they, how much should I factor in, is there any way to lower them? This answer changes with 1) the building structure 2) if you’re financing 3) the quality of services you use. While New York real estate can definitely keep buyers on their toes, one of the most surprising parts of the process are the additional costs due at the closing table. For buyers, it can affect the budget and what type of property you can buy; for sellers, it can effect your proceeds.
^Because no one wants this at the closing table.
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While there are smaller fees (like $250 lien search charge and $100 Ucc3 filing fee), the bigger considerations will be taxes, mortgage expenses, broker’s commission, attorney fees, and building fees. While some are uniform no matter what you’re purchasing, many vary based on sale price, if you’re financing or not, how intricate the sale is, and largely what type of property it is. Elliman has one of the most comprehensive and easy to sift through closing cost break downs out there, accessed online here. But for an in-depth explanation of everything, here’s what to expect, splurge on, and potentially mediate.
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Buyers
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First: Rule of thumb for buyers, set aside roughly 2-4% of the cost of the apartment to cover your closing costs. 2-3% percent should suffice normally but you’ll most likely be pushed to the 3-4% percent range if the apartment is over one million dollars. If you’re buying a condo, closing costs are always going to be higher; costs like title insurance, of which the rate is determined by the state, ends up being between $3,000-$4,000. You save those fees in coops, as there’s no title insurance since you’re buying shares in a corporation, so technically there’s no transfer of real property.
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Second: If you are financing, you will be picking up some additional fees as well. You should reserve about $2,000 to $3,000 for bank fees; this doesn’t include your bank attorney’s fees and an appraisal, the latter of which typically starts around $500 and can go up with purchase price. Also be aware that if you’re financing and buying a condo, you will also be responsible for a mortgage recording tax of 1.925% for loans over $500k and 1.8% for loans under $500k. When interviewing different banks and loan officers, they will compete to get your business by offering to cover various expenses, like credit checks and UCC filing fees. However at the end of the day, you do want to move forward with the best interest rate you can.
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Third: You will have to pay your attorney’s fees, which can range from $2,000 to $5,500. It is crucially important that you use a lawyer who specializes in Yew York CITY real estate, not just real estate and not a real estate attorney from far upstate. The entire real estate process from legal perspective is wildly different in the city and you need someone who can work incredibly fast and thorough, as time assuredly kills deal here. The cost of your legal services can go up if the deal is complex but the one place you should never cut costs is with your attorney. There are plenty of attorneys who will cut their rates but you will undoubtedly get what you pay for. I almost had one deal go completely to flames because of a discount attorney – if you have someone slowing down the deal, refusing to answer the phone, overlooking clauses, and ruffling feathers of the other players in the deal, they can easily bring the deal down with them. You want someone who is responsive, knowledge, quick, and often that comes with a higher price tag but will ensure the sale goes to completion. Thing to think about…if you’re getting a mortgage and the seller is still paying off their own home loan, you can ask your attorney if you can purchase a CEMA. This is a mortgage maneuver involving the buyer assuming the seller’s mortgage, saving both parties a good chunk of change in transaction taxes. This doesn’t always work but something to inquire about.
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Fourth: With regards to new development, what tends to surprise buyers is the fact that they’re responsible for the developer’s closing costs, including transfer taxes, attorney fees, and their unit’s share of the superintendent’s apartment.
This will also apply to sponsor units in coops. The golden thing about these properties that you don’t have to submit a board package or abide by any board regulations for purchasing restrictions, which is why some people pony up and stomach these fees.
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Fifth: Oh the lovely Mansion tax – for this inaccurately named tax, the buyer of any property over 1 million dollars is responsible for a 1% tax paid to the city. In apartments hovering around the 1 million dollar mark, people will try to knock the price under the threshold to avoid the tax. With new development, be careful because if the closing costs for paying out the sponsor bump the total price over 1 million, you will be served the mansion tax.
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Sixth: Each building will have it’s own required move-in, move-out, and application fees, ranging from a couple hundred dollars to a couple of thousand dollars each. The move-in and move-out fees are partially refundable and are used to both reserve the elevator and also to provide insurance of sorts for the hallways and lobbies. No matter if you’re purchasing a studio or the penthouse full floor unit, these costs will be uniform.
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Sellers
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First: Rule of thumb for sellers, set aside roughly 8-10% of the price for your closing costs. You will be the individual covering commission – traditionally in New York commission rings in at 6% of the purchase price, split equally between the listing and buyers brokers. In a market that favors sellers, sometimes you can wiggle this down to 5% but usually to get the most activity and attract the attention of the widest berth of brokers (which will lead to a higher sale price and more competition usually) a 6% commission will pay for itself.
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Second: Typically in New York, the seller pays the transfer tax. This comes out to 1.825% if the sale price is over $500k, and 1.4% if the deal is under $500k. In the instance of a coop purchase, there will be flip tax of about 2% of the purchase price. While the seller is typically responsible to cover both of these, sometimes this can be a factor for negotiation. The building is often specific in the bylaws as to who has to cover this fee but at the end of the day, they just want it paid and don’t care too much about who is doing the paying