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New York Closing Cost Responsibility

Who pays closing costs when closing on a New York condo or co-op apartment can be a question with multiple answers. Closing on a property can be an exciting time, however, it’s not the end of the process. There are several fees and taxes that must be paid at the closing table, including some that you might not expect. These fees and taxes, like transfer taxes and attorney fees, can take a bite out of the proceeds of the sale. In many cases, the seller will be expected to cover these charges, but in some situations, buyers might be willing to do so as a way of sweetening the deal and bringing the sale to completion.

In the case of a condo or co-op apartment in NYC, who pays closing costs can become a crucial negotiation point. These expenses can include the brokerage fee, which is traditionally 6 percent, split between the listing and buyer’s brokers. Attorney fees, often starting at $3,000 for a standard transaction and potentially going much higher, are another consideration. Additionally, there are transfer taxes, mortgage recording taxes, and a New York City mansion tax of 1.225 percent on sales above $1 million, which increases as the sales price goes up.

As the real estate market has continued to strengthen, property values have gone up as well, influencing who pays closing costs. The average sales price for a single-family home in New York increased by 14.4 percent in 2021. For condominiums, the average sales price in the city rose by 16.2 percent during the same period. This increase in property values has impacted the amount of money that a buyer needs to bring to closing. It has also affected how much a seller might be able to negotiate on their asking price, potentially influencing who pays closing costs.

Fortunately, there are ways to minimize the burden of closing costs, benefiting both buyers and sellers. An experienced local realtor familiar with these fees and taxes can provide valuable guidance.

The negotiation over who pays closing costs is a critical aspect of New York real estate transactions. While some closing costs can be negotiated between the buyer and seller, there are unavoidable expenses. However, both parties can often save by selecting a lender without loan origination fees or the need for private mortgage insurance, which could lead to substantial cost reductions.

While the specific closing costs vary based on property and location, it's generally advised to set aside around 3-4% of the final sales price. This estimation doesn't include the realtor’s fee, an important factor to consider when budgeting for New York closing costs. Relying on a knowledgeable local realtor can provide insights into these fees and assist in planning appropriately without the distraction of who pays closing costs.  

Buyer's Closing Costs in New York

Many people are not aware that in addition to the standard real estate commission fees and transfer taxes, there are many other costs associated with closing that buyers need to pay at the closing table. These extra charges related to who pays closing costs can add up and often surprise new homebuyers. This article will help you understand Buyer's Closing Costs in New York and give you some tips on how to minimize these charges.

There are two categories of buyer closing costs: lender fees and third-party fees that influence who pays closing costs. The former include charges that are paid to the lender for services such as title searches and mortgage recording taxes, all affecting who pays closing costs. The latter are fees paid to other companies that provide services such as inspections or appraisals, which can contribute to who pays closing costs.

The amount of Buyer's Closing Costs can vary greatly depending on factors like the purchase price, down payment, and location, which determine who pays closing costs. Additionally, with a conventional loan and making a down payment of less than 10%, the seller can only contribute a maximum of 3% of the closing costs, playing a role in who pays closing costs.

For first-time homebuyers, it's crucial to explore available down payment and closing cost assistance programs. The State of New York Mortgage Agency offers a program for eligible borrowers, providing up to $2,000 to be applied toward down payment and closing costs, affecting who pays closing costs. Furthermore, cities like New York City run their own down payment and closing cost assistance programs, influencing who pays closing costs.

Another effective way to reduce your closing costs is selecting an attorney with a flat fee instead of hourly billing. While not a significant monetary difference, it can help ease the stress of a complicated transaction related to who pays closing costs. Moreover, opting for an attorney specializing in NYC real estate closings can likely result in lower costs, impacting who pays closing costs.

Closing costs can be perplexing and overwhelming for homebuyers. Being prepared for additional expenses associated with property purchase and having sufficient funds set aside for covering these charges is vital. This preparedness ensures a smooth homebuying experience and prevents potential financial distress, important for understanding who pays closing costs.

If you plan to buy a condominium, townhouse, or single-family home, there are strategies to avoid specific closing costs. One approach is avoiding properties with a transfer tax exceeding $1 million. Also, you can lower closing costs by choosing an attorney with a flat rate and collaborating with a mortgage professional to secure an appraisal waiver. Lastly, when purchasing a condo from a new development, you can negotiate with the developer to absorb the transfer tax instead of passing it on to you, a tactic adopted by many new development companies in recent years related to who pays closing costs. 

Seller's Closing Cost Obligations in New York

Closing costs are monies that must be paid to various entities to complete the sale of real estate, and they encompass a wide variety of payments such as attorney fees, prepayments to county and local taxes, mortgage recording taxes, and title insurance, among others, impacting who pays closing costs. Both buyers and sellers encounter closing costs during the home sale process. However, the division of responsibilities for who pays what is usually outlined in a contract between the buyer and seller, influencing who pays closing costs. While negotiations over who pays closing costs can occur, the general consensus is that the person buying the property bears the brunt of the closing costs, including who pays closing costs. In New York City, this dynamic is especially pronounced due to the presence of numerous unique and expensive charges that must be settled with the city and state, shaping who pays closing costs.

As a standard guideline, sellers in New York City and Manhattan are obliged to cover 2-5% of the purchase price in closing costs, impacting who pays closing costs. This percentage tends to be higher for condos, townhouses, homes exceeding $1 million, and new developments, all of which influence who pays closing costs. Notably, NYC closing costs encompass the Mansion Tax, a one-time tax ranging from 1% to 3.9%, the Mortgage Recording Tax which is a fixed 2% of the loan amount, and title insurance whose cost is linked to the property's price, contributing to who pays closing costs.

While it's a customary practice for buyers to request sellers to assume these closing costs, such appeals aren't always granted. In particular circumstances, it is wise for buyers to engage in negotiations concerning these expenses, especially in cases of new development or high-end home purchases, influencing who pays closing costs. Similarly, sellers are advised to carefully assess the closing costs alongside their attorney before committing to cover any of these expenses, central to determining who pays closing costs.

For buyers who find it challenging to evade closing costs, collaborating with a mortgage professional to secure an appraisal waiver can lead to substantial savings. This waiver eliminates the need for a comprehensive property appraisal, and consequently, the associated fee, affecting who pays closing costs. Employing such a strategy can prove highly beneficial in reducing the overall cost of purchasing a home in the vibrant landscape of NYC.

Seller's Closing Cost Obligations

In the context of New York, seller's closing costs primarily encompass listing and broker fees, the residential deed transfer fee, the NYS equalization fee, the UCC-3 filing fee, and the managing agent fee. These closing costs are the primary financial obligations that fall on the seller, though there may also be opportunities for negotiation, such as reaching a reduced broker's fee with the buyer's agent, influencing who pays closing costs.

Furthermore, apart from these fees, the seller's attorney will levy a charge for reviewing and crafting the contract of sale, and may be tasked with negotiating specific terms with the buyer's attorney, all considerations that impact who pays closing costs. Opting for an attorney charging a flat rate can sometimes eliminate the need for such negotiations. Generally, attorney fees hover around 3 percent of the final sales price, a crucial factor in the determination of who pays closing costs. Additional potential fees encompass transfer taxes and flip taxes, imposed by both NYC and the state, calculated as a percentage of the sales price, further shaping who pays closing costs.

Sishodia PLLC

Sishodia PLLC | Real Estate Attorney and Estate Planning Lawyer | Asset Protection Law Firm | 1031 Exchange - NYC

600 Third Avenue 2nd Floor, New York, NY 10016, United States

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