Buying a home in New York is a long and expensive process, whether it’s a co-op apartment, a condo, a townhouse or a detached single-family home. Co-op board interviews, home inspections, and an array of other time-consuming activities that culminate at “the closing.” This is where the mountain of paperwork and legal documents get signed, and deeds or shares are transferred from seller to buyer.
However, there is one particularly painful part of closing on a property, and that’s paying the closing costs. It always hurts to write checks, of course. But closing cost checks are particularly distasteful because they are both numerous and for high amounts. And they cannot be easily avoided. Closing costs for buyers in New York City typically run between 2% – 4% of the purchase price. One of the few ways to mitigate your closing costs is to work with a real estate broker who offers a NYC buyer commission rebate of up to 2% of the home’s purchase price.
Here’s what you need to know about saving money with a commission rebate, as well as an overview of some of the closing costs that buyers will encounter in NYC.
How to Save Money With a Buyer Broker Commission Rebate
While most NYC buyer closing costs are hard to avoid, the 2% commission rebate you can get back at closing will help cover a good chunk of them. And getting a commission rebate is as simple as working with a company that offers one. A rebate broker will help you buy a home from beginning to end and negotiate the best deal for you, all while offering a major discount. And best of all, the typical real estate agent that offers a rebate has more experience than a traditional agent.
While this might sound too good to be true, the simple fact is that broker commission rebates are a newly emerging trend that is spreading like wildfire amongst savvy NYC buyers.
Typical Buyer Closing Costs in New York
Title Insurance
Title Insurance is about 0.4% of the purchase price and is paid by the buyer.
Mortgage Tax
Yes, the city even applies a tax to a mortgage. For mortgages less than $500,000, the tax is 1.8% of that mortgage. For those above, it is 2.8% unless the unit is in a building with one to three apartments in it. Then, the tax is 1.925%.
This tax only applies to purchases of real property, however, so if you’re buying shares in a cooperative building, you’re in luck and won’t have to pay the mortgage recording tax.
Bank Loan Origination and Attorney Fees
This is paid for by a buyer who is financing the purchase through a bank or other financial institution. This fee, for example, would be $750 on a $1.8 million sale.
Mortgage Application and Processing Fee
This too, is paid for by a buyer financing the purchase of their apartment or townhouse.
Credit Report and Employment Verification
It’s cost about $100 and buyers pay for it.
Mansion Tax
This little beauty is paid for by the buyer. It is perhaps the most misleading tax in America as it has nothing to do with mansions and, in fact, can apply to tiny New York City studio apartments. Calling this a Mansion Tax is kind of like having something called a Limousine Tax and applying it to wind up toy cars.
The Mansion Tax is a progressive tax that starts at 1% tax on the value of a home and applies to properties that sold for over $1 million in New York City. Given that the median price of a condo or co-op in NYC is a tad under $1 million, it applies to half of all residential properties sold, even 500 square foot studios in the West Village.
Attorney’s Fee
This typically runs between $1,000 and $3,000 for buyers in NYC.
Bank Loan Satisfaction Fee
This usually costs around $500 and, yet again, the buyer pays for this.
Residential Deed Transfer Fee
This applies only to condos and townhomes and is paid for by the buyer.
Move-in/out Deposit
This deposit applies to co-op and condo sales but not houses or townhomes. The deposit could run approximately $2,000, which the buyers will get back if haven’t banged up the hallway walls or broken a mirror.
Transfer Taxes- (for new developments)
While the seller typically pays for both the NYC and NY State transfer tax, if you’re purchasing a sponsor unit in a new development, the developer might ask you to cover the transfer taxes. If that’s the case, you can expect to pay a 0.4% or 0.65% NY State transfer tax (depending on if the home sells below or above the $3 million mark) as well as the more expensive NYC transfer tax.
If a property is sold for less than $500,000, the tax is 1% of the final sales price. If the unit sold for more than $500,000, the tax is 1.4%.
There is one additional way a buyer can get stuck paying the state Transfer Tax. If the seller skips out and can’t be located for some reason, the buyer is on the hook for this tax. That doesn’t happen very often, fortunately.
Conclusion
As you can see, both NYC and NY State will try and take their pound of flesh from you when you buy a home in the big apple, and there’s not much chance of avoiding buyer closing costs. Nonetheless, smart buyers will save big bucks by working with a forward-thinking real estate broker and getting themselves a commission rebate. If you’re purchasing a million-dollar home, that means you’ll save $20,000.
