How to Calculate Closing Costs in NYC: A Guide For Sellers
Investing in the real estate market of New York City can provide stability and profitability for those who can afford it. However, before selling a home in the city, it's essential to understand the multiple costs that come along with it. While some fees are standard across the country, such as title insurance and transfer tax, several others are unique to NYC, including higher commission fees for selling agents and attorney fees.
This article aims to dissect each cost sellers can expect when preparing to sell their home in the Big Apple. By knowing what to anticipate, you can make informed decisions and ensure a profitable transaction.
Closing Costs for Sellers in New York City
- Sellers will pay, on average, 8%-10% of the selling price in closing costs.
- The closing costs generally include brokers' commissions, attorney fees, NY State and City transfer taxes, bank loan satisfaction fees, and a number of fees and taxes imposed by the condo or co-op your unit is in.
- Transfer taxes will depend on the selling price of your property.
- Brokers' commissions are paid not only to your selling agent but are usually split with the buyer's agent. A normal fee in New York City is anywhere from 4%-5% of the sale price.
- Ways to offset your costs would be to negotiate with the buyer, or sell the property without an agent.
What Closing Costs Does the Seller Pay For?
Both buyers and sellers have closing costs associated with buying or selling a home.
While buyers have to finance those costs into an already expensive home loan or pay them out of pocket, sellers can pay for the closing costs directly from the net profit they receive from the sale of their home.
Most fees are calculated as a percentage of the home's purchase price, so the higher your home sells for the higher the fees will be. Some of the fees are negotiable, while some are written in stone.
A typical seller in NYC pays between 8% to 10% of the purchase price in closing costs. When we factor in how expensive real estate in NYC is, the closing costs add up fast.
The average seller will see closing costs including all or most of the following:
- Brokers' Commissions
- Title Insurance (sometimes)
- NYC Real Property Transfer Tax
- NY State Transfer Tax
- NY State Equalization Fee
- Seller’s Attorney
- Move Out Deposit and Fees
- Managing Agent Fee
- Bank Loan Satisfaction Fee
- Mortgage Prepayment Fee (sometimes)
- Real Estate Tax/Common Charge Adjustment
- UCC-3 Filing Fee
- Residential Deed Transfer Fee
- Flip Tax (co-ops only)
- Utilities and Property Tax (sometimes)
- Any liens or loans
NYC Broker Commission
By far the heftiest fee a seller has to pay, the real estate broker commission is often about 6%.
The seller is typically responsible for their own broker and the buyer’s broker, though that is negotiable.
Even if a buyer approaches you with no broker, the fee will often stay around 6%.
It is possible to negotiate the fee lower, especially if your broker no longer has to split it with a buyer’s broker, but chances are it will not go lower than 4%.
This fee is a part of real estate history.
Before the internet made it easy for agents to show listings on hundreds of websites with a few clicks, agents had to spend a lot of time and money to purchase advertising for their listings.
Despite technological advancements, the commission fee for brokers has remained around 6% for sellers, and it’s not likely to change anytime soon.
It is possible to bypass this fee entirely by listing the property yourself.
This is commonly called a “for sale by owner” (FSBO) transaction.
While it can save you money, it has its own difficulties and will require you to be more heavily involved in the process, as we discuss further down in the article.
NYC Transfer Tax
For all real estate transactions in NYC, the City levies a tax that varies based on the sale price and property type.
For typical residential properties, the tax is 1% for sales under $500k and 1.425% for sales above $500k.
NY State Transfer Tax
In addition to the City’s tax, NY state levies a tax on each real estate transaction. It is less than the City’s, however.
For sales under $3M, the State charges 0.4% and charges 0.65% for those above.
NYC and NYS Property Transfer taxes as of Fiscal Year 2022
|Property Sale Price||NY State Transfer Tax||NYC Transfer Tax||Total Transfer Tax|
|$499,999 and less||0.40%||1.00%||1.40%|
|$500,000 - $1,999,999||0.40%||1.425%||1.825%|
|$2,000,000 - $2,999,999||0.40%||1.425%||1.825%|
|$3,000,000 - $4,999,999||0.65%||1.425%||2.075%|
|$5,000,000 - $9,999,999||0.65%||1.425%||2.075%|
|$10,000,000 - $14,999,999||0.65%||1.425%||2.075%|
|$15,000,000 - $19,999,999||0.65%||1.425%||2.075%|
|$20,000,000 - $24,999,999||0.65%||1.425%||2.075%|
|$25,000,000 or more||0.65%||1.425%||2.075%|
Not as common outside of NYC, the seller’s attorney fee is typically a flat fee paid at closing.
Selling in NYC is highly recommended to hire an attorney to help navigate the often dense and confusing NYC real estate transaction rules.
A standard attorney fee can range from anywhere between $1,500 and $4,000, depending on the attorney's quality and the home's selling price.
When you purchase a property with a mortgage, a lien is placed on the title until the mortgage is paid off.
The bank loan satisfaction fee is charged at closing to record the release of the lien on the title.
Some mortgages charge penalty fees for an early payoff--meaning a penalty if you pay off the whole loan before it matures at 20 or 30 years (or whenever you agreed upon).
It's important to check with your lender before you commit to a loan on any penalty fees for early payment.
At the same time, if you have taken out a home equity loan or a home equity line of credit (HELOC), you will need:
Co-op Flip Tax
The flip tax is essentially a transfer fee charged by your co-op upon selling or transfer. Some condos charge this tax as well, but it is much more common in co-ops.
This fee is in addition to the transfer taxes the seller pays to the City and to the State.
The average flip tax is 1% to 3% of the sale price.
This tax is most usually paid for by the seller, but who pays the tax is negotiable. The tax itself is non-negotiable if your building chooses to levy it.
This tax was originally used as a deterrent to investors purchasing apartments with the sole intention of flipping it for profit.
This original use has somewhat fallen by the wayside.
The tax now is mostly used as a revenue stream for co-ops that help to offset other potential fees for current residents.
The seller customarily pays for the title insurance, which ensures that you are providing your buyer with a clear title.
However, if the buyer is purchasing the property with a mortgage loan, the lender will require that the buyer pays for title insurance.
The seller generally covers various other costs upon selling or transferring their property.
These are usually much smaller fees than those listed above. They will, on average, total to a cost of around $2,250.
- NY State Equalization Fee $75
- Move Out Deposit & Fees $1,000
- This fee varies based on the building, but sellers can typically expect to pay around $1,000 for a non-refundable move out deposit. For co-ops or condos, an additional fee may be applicable.
- Bank Loan Satisfaction Fee - $500
- Real Estate Tax / Common Charge Adjustment - $500
- UCC-3 Filing Fee - $100
- Residential Deed Transfer Fee - $75
Utilities and Property Taxes
Utilities and property taxes are normally divided between seller and buyer according to when the property was sold/purchased during the calendar year.
Some homeowners pay for certain utilities and property tax in one payment for the year. If this is the case, the buyer should provide the difference from when they receive ownership of the property.
For example, if a seller paid his water bill for the whole year, and the buyer takes ownership in October, the buyer is then responsible for remitting the amount equal to October to December of that year.
The same goes for property/school taxes and any other utilities.
Now, if the seller hasn't paid those utilities or property taxes, then the seller will remit the appropriate amount he or she owes to the buyer at the closing table.
If a seller is behind on their property taxes, they'll need to make sure all is paid off and cleared before reaching the closing table to ensure that that buyer is getting a clear title without any liens.
How To Offset Closing Costs in NYC
The bad news for sellers is that many of the largest fees you will be faced with are non-negotiable.
The State and City will not revoke their transfer taxes.
Your condo or co-op won’t rescind their flip tax just because you have a cocktail with them every now and then.
At the same time, your attorney is not likely to give up his or her fee, and reductions will only save you so much.
Thankfully, unlike a buyer, you will not have to cover these charges out of pocket.
They will instead be deducted from the net profit made from the sale.
And with the healthy NYC real estate market, chances are you will net a much higher profit than the total in closing fees.
There are ways to save some money on the seller’s closing fees if you’re willing to take the time.
Negotiate the broker commission
While the broker commission is the most costly fee a seller faces, it is negotiable.
Most likely, your broker will quote you a 6% fee at the beginning of the listing process.
If you are willing to take the time, it is possible to negotiate a slightly lower fee, around 5%.
Still not cheap, but on a $1M purchase price, that will save you $1,000.
Trying For Sale By Owner (FSBO) to cut costs
As mentioned earlier, it is possible to list your home yourself and avoid the cost of paying a selling broker commission.
While possible, it is a time-consuming process that restricts the number of offers you will likely receive and does not totally bypass the commission fee in the first place.
In the large majority of real estate transactions in NYC, the buyers are represented by a buyer’s agent.
These agents will still require a commission fee, paid for by the seller.
If you try to avoid this fee and list your home as FSBO and indicate you don’t want to deal with any brokers on the buyer’s side, you will miss out on the large share of buyers in the market.
With fewer people viewing and bidding on your home, you will likely receive lower quality offers if you receive an offer at all.
Additionally, buyer’s agents often ignore FSBO sellers in general, even if they indicate they are willing to pay for a buyer’s agent commission.
This is due to the reputation that FSBO sellers are often difficult to deal with and will haggle for more than their home is worth.
Whether or not this is a fair reputation, it is something FSBO sellers will encounter on the market without a listing agent.
So while this is a possible course of action, you will likely experience a much lower pool of willing buyers, along with a drop in quality of potential offers.
Research your listing agent
Real estate is a competitive market in NYC, and listing agents will compete to list your home. Make sure you research the listing agents who know your area best.
Visit different open houses before you put your home on the market. Meet with a variety of listing agents and let them know you are looking to sell.
Chances are, you will be able to set terms that help you net the highest profit.
Summary of Seller’s Closing Costs
- Broker Commission - 6%
- NYC Transfer Tax - 1% for sales under $500k and 1.425% for sales above $500k.
- NY State Transfer Tax - 0.4% for sales under $3M and 0.65% for those above.
- Attorney Fee - $2,500 (average)
- Miscellaneous Fees - $2,250 (average)
- Flip Tax - varies per building (co-op/condo)
Before you list your house on the market, be sure you do your research.
Find an experienced broker who will work for you, and hire a knowledgeable attorney who will actively look to save you money.
Getting the right help on when and how to sell your home can make selling your home an even more profitable transaction than it already was.
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