Real estate in NYC is expensive and closing costs for sellers can be substantial. The average price of a condominium apartment in Manhattan in 2018 was $2,880,000 and closing costs paid by sellers can reach 8% of the sale price. This post will discuss typical condominium closing costs for sellers in New York City. For condo purchaser’s closing costs, click here.
NYC Condo Closing Costs
Closing costs for sellers of a condominium apartment in New York typically range from 8% to 10% of the purchase price. At the closing, sellers typically have to pay for real estate broker commissions, NYC and NY State Transfer Taxes, building fees, and real estate attorney fees.
Real Estate Commission
The Real Estate Brokers’ Commission is usually the largest expense for the sellers of apartments in New York. It is typically 6% of the purchase price, paid by the seller and split between the seller’s broker and purchaser’s broker. The brokers’ commission percentage is always fully negotiable and should be negotiated with the brokers prior to hiring them. We also suggest our clients negotiate things like the duration of the agreement, termination rights, how the commission would be paid in case the seller themselves procure a purchaser, etc.
The New York State Transfer Tax is 0.4% of the purchase price up to $3,000,000. For transactions over $3,000,000 The New York State Transfer Tax is 0.65%.
The New York City Transfer Tax is 1% of the purchase price for transactions of $500,000 or less and 1.425% for transactions above half a million.
Most management companies and condo boards charge sellers closing fees, move-out fees, etc. In rare cases, condominiums may impose a “flip tax” on the sellers. It is not a real tax but a fee charged by the condominium itself. Usually, this fee is a percentage of the purchase price and can be as high as a few percent. You should obtain a list of all condo closing fees prior to listing your apartment for sale.
Foreign sellers are subject to FIRPTA. Under the Federal Withholding Tax (FIRPTA) 10% of the purchase price for properties between $300,000 and $1,000,000 and 15% of the purchase price for properties over $1,000,000 is withheld if the seller is a non-exempt foreigner. FIRPTA is not a tax but a withholding. Seller’s actual tax liability will be determined once the seller files his or her tax returns. In a lot of cases, we can help our foreign clients lower the amount due at the time of sale under FIRPTA by obtaining Withholding Certificates from IRS prior to the closing.
Real Estate Attorney Fees
Rates for real estate lawyers in New York vary and are based on the attorney’s experience, location, services included, etc. Most real estate attorneys in NYC charge a flat fee for residential condominium closings. If your attorney is charging you an hourly rate for a residential condo closing make sure to obtain an estimate from him or her in advance. A lot of lawyers focus on specific areas of law. Before retaining an attorney always ask them about their experience and whether they have closed similar deals in the past. It is also recommended to discuss all of the fees prior to retaining a lawyer.
The Process of Closing a Real Estate Transaction in NYC
The Closing of a property transaction takes 60 to 90 days after the date of the contract signing. Things move slower in NYC, so closing may take longer than usual – closer to 90 days for complex transactions. After the contract has been signed, the buyer must send their attorney a portion of the down payment. If the buyer withdraws from the contract before closing, the down payment can be forfeited. The average down payment in New York is 20% and the money is deposited into an escrow account.
Before closing, the buyer’s lawyer must perform several tasks. One of these tasks is to order a title search to check if there are any outstanding problems with the property. The most common title problem is unpaid liens. It is important that these issues must be resolved to ensure that the title transfer is valid.
Real estate transactions in NYC are subject to additional rules that can complicate closings. A real estate lawyer should be able to help you to understand all aspects of this process. It is important to look for attorneys that specialize in real estate transactions. At Avenue Law Firm, our experienced team of real estate attorneys will help you navigate every stage of the process. Call us today to schedule a consultation.
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Disclosure: This is a law blog by an NYC real estate attorney. This blog is for general informational purposes only and does not express or provide a legal opinion.