Closing Costs in New York: Who Pays What
Transfer taxes, the mansion tax, mortgage recording tax, and title insurance can add tens of thousands of dollars to a New York closing. Here is who usually pays each.
The purchase price is not the whole cost of buying or selling a home in New York. Taxes and fees paid at closing can add tens of thousands of dollars, and they fall differently on buyers and sellers. These are the main ones.
What the seller usually pays
New York State transfer tax. The state taxes the transfer of real property at $2 for every $500 of the price, which is 0.4 percent (Tax Law § 1402). By custom the seller pays it. In New York City, a higher state rate applies to residential sales of $3 million or more.
New York City transfer tax. For property in the five boroughs, the City imposes its own Real Property Transfer Tax. On residential sales it is 1 percent when the price is $500,000 or less and 1.425 percent when it is more. It applies to co-op apartments as well as houses and condominiums.
The broker's commission, where a broker is involved, as agreed in the listing agreement.
Paying off the existing mortgage, plus the fees to record the satisfaction.
What the buyer usually pays
The "mansion tax." Despite the name, it applies to any residential purchase of $1 million or more. The buyer pays 1 percent of the price (Tax Law § 1402-a). In New York City, a further graduated tax applies starting at $2 million (Tax Law § 1402-b), so the combined rate is 1.25 percent at $2 million and rises in steps to 3.9 percent at $25 million or more.
Mortgage recording tax. If you borrow to buy a house or a condominium, New York taxes the recording of the mortgage. The rate depends on the county and the size of the loan. In New York City the borrower's share is generally 1.8 percent of the loan for mortgages under $500,000 and 1.925 percent for mortgages of $500,000 or more. In Nassau and Suffolk Counties the borrower's share is generally 0.8 percent. On a home loan, the lender pays a further 0.25 percent.
There is no mortgage recording tax on a co-op loan, because a co-op loan is secured by shares and a lease and not by a mortgage on real property. That is one of the real cost differences between buying a co-op and buying a condominium.
Title insurance. A one-time premium for a policy that protects you, and separately your lender, against defects in title. Rates are filed with the state and are based on the price and the loan amount.
Lender charges. Application, appraisal, and bank attorney fees.
Your own attorney's fee, plus recording fees and adjustments.
Adjustments
At closing, the buyer and seller settle up for items the seller has prepaid or left unpaid as of the closing date: property taxes, fuel oil in the tank, common charges, or maintenance. These can run in either direction.
A rough sense of scale
On a house purchased with a mortgage, a buyer's closing costs in the New York City area commonly run to several percent of the price, and more where the mansion tax applies. A seller's costs are driven mostly by transfer taxes and the broker's commission.
Who pays what is partly custom, and custom can be changed by contract. In new construction bought from a developer, for example, the buyer is often asked to pay the transfer taxes the seller would otherwise pay.
Get an estimate before you sign
Rates and thresholds change, and the exact figures depend on the property, the price, the loan, and the county. Ask your attorney for a written estimate of closing costs before you sign a contract, not the week of the closing.
If you are buying or selling property in New York City or on Long Island, call the office. For more, see Real Estate.
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