While there are similarities in closing costs between condos in NYC and condos elsewhere in the country, it’s important to note that New York State and City impose their own set of taxes and fees unique to the city. We understand that navigating through these complexities can be challenging, which is why we’ve compiled this informative guide to ensure you are well-prepared every step of the way.
Typical NYC Condo Closing Costs
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Table of Contents
Condo Seller Closing Costs
Attorney Fees
Varies by Attorney
The seller’s attorney fee is a fee charged by the attorney who represents the seller in the transaction. This fee is usually a flat fee and typically falls within the range of $2,000 to $4,000, but can vary widely depending on the specific attorney the seller chooses.
The seller’s attorney is responsible for several tasks in the sale process including drafting, reviewing, and negotiating the contract of sale, preparing the deed and other necessary documents, and representing the seller’s interests throughout the transaction. Additionally, the seller’s attorney may also be responsible for coordinating with the building’s management company or condo board to obtain any necessary approvals or documentation required for the sale.
NYC Real Property Transfer Tax
1% of sale price if $500K or less; 1.425% of sale price if more than $500K
When selling a condo in New York City, the seller will be subject to the NYC Real Property Transfer Tax, which is a tax imposed by the city on the sale or transfer of property. The exact language according to the NYC Department of Finance is:
“You must pay the Real Property Transfer Tax (RPTT) on sales, grants, assignments, transfers or surrenders of real property in New York City. You must also pay RPTT for the sale or transfer of at least 50% of ownership in a corporation, partnership, trust, or other entity that owns/leases property and transfers of cooperative housing stock shares.”
The amount of tax owed is calculated based on the purchase price of the property and in the case of a resale condo is typically paid by the seller. The tax rate is calculated as a percentage of the purchase price, and the rate varies depending on the purchase price.
For example, if a condo is sold for $500,000 or less, the tax rate is 1%. If the condo is sold for more than $500,000, the tax rate increases to 1.425%.
NYS Transfer Tax
0.4% of sale price for transactions less than $3M. 0.65% of sale price for transactions greater than or equal to $3M
When selling a condo in New York City, sellers will be subject to the New York State Transfer Tax, which is a tax imposed by the state of New York on the transfer of property. It is different from the NYC Real Property Transfer Tax – one is a local NYC tax, and the other is a NY state tax. NYS Transfer Tax is typically paid by the seller at the time of closing and is based on the final sale price of the property, though it can be negotiated that a buyer may pay it, or split the tax between both parties.
The transfer tax rate for residential properties in New York State is 0.4% of the sale price on transactions up to $3,000,000, and 0.65% above $3M. For example, if a seller sells a residential property for $1,000,000, they would need to pay a transfer tax of $4,000 (0.4% of $1,000,000) to the state of New York.
Reserve Fund Contribution (if applicable)
Determined by condo board; Payable by buyer unless otherwise stated
Reserve Fund Contributions are similar to a co-operative’s flip tax, and while this type of fee is standard in new construction buildings (where it is referred to as a working capital fund), it is less common for resale condos to require it.
A reserve fund is an account maintained by the condo’s board and is used to cover unexpected expenses or future capital improvements to the building or common areas.
The purpose of the contribution is to ensure that the reserve fund has sufficient resources to cover future expenses or capital improvements. The reserve fund contribution is typically a percentage of the purchase price of the unit and while it is traditionally paid for by the seller, it is often negotiable between the buyer and the seller.
Payoff Bank Fees (if applicable)
$250 and up
Payoff Bank Fees are the fees associated with paying off the seller’s existing mortgage on the property and can vary depending on the terms of the mortgage and the specific bank involved. If the seller doesn’t have a mortgage on the property, these fees do not apply.
Typically, a seller will work with their bank to obtain a payoff letter, which outlines the exact amount needed to satisfy the mortgage in full. This payoff amount will include any remaining principal balance, interest, and other fees that have accrued on the mortgage.
This fee is similar to the Payoff Bank Attorney Fee seen in co-ops, with the main difference being how the mortgages are held. In a condo, each unit owner has an individual mortgage, but since co-ops tenants technically own shares of a corporation (who has a mortgage for the whole building), they would pay an attorney fee rather than a fee to their bank.
Managing Agent Fees
$650 and up
When a condo owner decides to sell their unit, the managing agent will be involved in several ways. First, they may provide necessary information to the seller or their real estate agent, such as the building’s rules and regulations, financial statements, and any outstanding assessments or fees owed by the seller.
The managing agent may also play a role in the buyer’s due diligence process, providing documentation and information about the building to the buyer or their agent. This can include information about the building’s financial stability, maintenance history, and any pending or completed repairs or renovations.
Additionally, the managing agent may be responsible for coordinating and scheduling inspections, repairs, and other necessary tasks related to the sale of the condo. They may work with the buyer’s agent, the seller, and any necessary vendors or contractors to ensure that these tasks are completed in a timely and efficient manner.
Managing agent fees cover the work they do during the sale process, and they start at about $650.
Move-Out Fee & Deposit
$500 and up for each
The move-out fee and deposit is typically required for any seller, but is most commonly paid with a board package rather than at the closing table. The fee is for the use of the service elevator and building staff for the coordination of the move, while the deposit is designed to cover any potential damage or cleaning costs that may occur when the buyer moves into the property. The amount of the move-out fee and deposit can vary depending on the building and the terms of the sale, but each are typically a minimum of $500.
Broker Commission
6% of sale price
In both co-ops and condos, it’s customary for real estate agents or brokers to be involved in the sales process. The seller is generally responsible for paying a commission to both their own broker and the buyer’s broker. This commission is usually a percentage of the sale price, which is typically 6%, and is equally divided between the two brokers, meaning the buyer’s broker would earn 3% and the seller’s broker would earn 3%.
For example, if a property is sold for $1,000,000 with a 6% commission rate, the seller would pay a total of $60,000 in commission, which would be divided equally between the seller’s broker and the buyer’s broker, with each receiving $30,000.
It’s essential to note that the commission structure can be different depending on the specific agreement between the seller and their broker. In some cases, the commission may be negotiable, and the seller may choose to work with a broker who charges a lower commission rate. Also, the buyer may agree to pay their own broker’s commission instead of having it split with the seller.
Working with a reputable and experienced broker can help ensure that the process is transparent, and that the seller gets the best value for their property.
E-Tax Filing (ACRIS)
$100
The e-tax filing fee for ACRIS (also known as the Automated City Register Information System) is a charge imposed to register the transaction with the city and produce/file all the necessary documentation.
In condos, the transfer tax is based on the sale price of the individual unit being sold but is typically around $100.
Property Condition Disclosure Statement Waiver Fee
$500-$1,000
A Property Condition Disclosure Statement Waiver Fee is a fee charged to waive the requirement for the seller to provide a Property Condition Disclosure Statement to the buyer during the sale of a condominium.
The Property Condition Disclosure Statement is a document that discloses any known defects or issues with the property, and it is required by law in some states. However, in New York State, this document is not required for the sale of a condominium.
Some brokers or attorneys may offer to waive the requirement for the seller to provide this document to the buyer in exchange for a fee. This fee is known as the Property Condition Disclosure Statement Waiver Fee and is typically paid by the seller at closing as part of their closing costs.
NYS Capital Gains Tax Withholding
8.97% of taxable gain on sale (Only applicable to non-NY residents)
The New York State Capital Gains withholding tax is a tax that is withheld from the seller’s proceeds at the closing of an NYC residential real estate transaction. It is required by the New York State Department of Taxation and Finance to ensure that the seller pays their income taxes on the gain from the sale of their property.
This withholding tax applies to nonresident sellers who are not citizens or residents of New York State. These sellers are subject to a withholding tax of 8.97% on the gain from the sale of their property.
Federal Withholding Tax (FIRPTA)
10%-15% of the sale price if the seller is a non-US resident
Federal withholding tax is a tax that is withheld by the buyer of real estate from the seller’s proceeds at closing. This tax is required by the Internal Revenue Service (IRS) to ensure that the seller pays their income taxes on the gain from the sale of their property.
In the context of NYC residential real estate transactions, the federal withholding tax applies to nonresident foreign sellers who are not citizens or permanent residents of the United States. These sellers are subject to a withholding tax of up to 15% on the gross proceeds from the sale of their property.
Condo Buyer Closing Costs
Attorney Fees
Varies by Attorney
When purchasing a condo in New York City, having a buyer’s attorney is essential to protecting your interests throughout the transaction. While fees can range from $2,000 to $4,000, the specific costs may vary depending on the attorney you choose. Here are some of the key roles and responsibilities of a buyer’s attorney in a condo purchase:
- Reviewing and negotiating the contract: The buyer’s attorney will review the contract of sale to ensure that the terms and conditions of the purchase are favorable to the buyer and negotiate any unfavorable provisions.
- Conducting due diligence: The attorney will conduct due diligence on the condo’s association, including reviewing the building’s financial statements, board meeting minutes, and any potential or pending litigation.
- Reviewing the condo documents: The attorney will review the condo’s governing documents, including the bylaws, declaration, and rules and regulations, to ensure that the buyer is aware of any restrictions or limitations on their ownership.
- Coordinating with the lender: If the buyer is obtaining a mortgage to finance the purchase, the attorney will work closely with the lender to ensure that all necessary documents are in order.
- Attending the closing: The attorney will attend the closing, where the buyer will sign the necessary documents and transfer the purchase funds to the seller.
In summary, a buyer’s attorney in a resale condo real estate transaction is responsible for protecting the buyer’s interests, conducting due diligence, and ensuring a smooth transaction throughout the process.
Building Application
$500 and up
Condominium buildings in NYC have an application process that potential buyers must go through before they can purchase. The purpose of the application process is to ensure that the building’s rules and regulations are followed and that new residents are a good fit for the community. The application process may include a background check, financial review, and an interview with the board.
The building application fee is a fee that is charged by the building or the managing agent to cover the cost of processing the application, and typically starts at around $500.
Title Insurance, Title Search, & Recording Fees
0.6% of sale price and up
Title insurance protects the buyer (and their lender) against any defects in the title of the property they are purchasing. This can include things like liens, judgments, or other legal issues that could arise after the sale. The cost of title insurance can vary depending on the value of the property and the specific policy purchased.
A title search is a process where the buyer’s attorney reviews all of the public records related to the property to ensure that the seller has a clear title and that there are no outstanding liens or other issues that could affect the buyer’s ownership of the property. The cost of a title search can vary depending on the complexity of the search and the hourly rate of the person performing the search. This fee is passed on from the attorney (who pays for it initially) to the buyer.
A judgment and lien search in a co-op is similar to a title search in a condo, but they differ slightly in scope and purpose. A lien search in a co-op is focused on identifying any outstanding debts or encumbrances on the co-op corporation or shares being sold, while a title search in a condo is focused on identifying the legal ownership of the property and any outstanding liens or encumbrances on the property itself.
Recording fees are paid to record the sale of the property in public records. This ensures that the transfer of ownership is legally recognized and that the buyer’s ownership is protected. The cost of recording fees can vary depending on the jurisdiction and the value of the property.
Move-in Fee & Deposit
$500 and up for each
The move-in fee and deposit is typically required for any buyer, but is most commonly paid with a board package rather than at the closing table. The fee is for the use of the service elevator and building staff for the coordination of the move, while the deposit is designed to cover any potential damage or cleaning costs that may occur when the buyer moves into the property. The amount of the move-out fee and deposit can vary depending on the building and the terms of the sale, but each are typically a minimum of $500.
Common Charges, Property Taxes, and Insurance Premium
Adjustments prorated as of closing
Common charges: These are fees that condo owners pay to cover the building’s operating expenses, such as maintenance, utilities, staff salaries, and other services. Common charges are paid on a monthly basis and can vary depending on the size and amenities of the building. As part of the closing costs, buyers may need to pay an upfront amount of common charges, usually prorated from the day of the closing until the end of the month.
Property taxes: Property taxes are annual taxes assessed by the local government on the value of the property. In NYC, property taxes are calculated based on the assessed value of the property and the tax rate set by the city. As part of the closing costs, buyers typically need to pay a prorated share of the property taxes for the remaining part of the year.
Insurance premiums: Condo buyers are required to have insurance coverage for their unit, which typically includes hazard insurance to protect against damage from fire, flood, or other perils. Depending on the building’s insurance policy, buyers may also need to purchase additional coverage, such as liability insurance or loss assessment coverage. As part of the closing costs, buyers will need to pay an upfront amount for insurance premiums.
Mansion Tax
Varies by Price of Apartment (see below)
The mansion tax (see the dropdown at the link under tax rate for more info) is a New York State tax on residential properties that are sold for $1 million or more. It is a state tax, not a city tax, so it applies to residential transactions throughout New York State, not just in the city. However, since property values in New York City are generally higher than in other parts of the state, the mansion tax tends to have a greater impact on those real estate transactions.
The mansion tax was first introduced in 1989, and it has been amended several times since then. In 2019, the state legislature increased the tax rates based on the purchase price.
Mansion Tax Rates:
- Over $1M but less than $2M = 1%
- $2M to less than $3M = 1.25%
- $3M to less than $5M = 1.5%
- $5M to less than $10M = 2.25%
- $10M to less than $15M = 3.25%
- $15M to less than $20M = 3.5%
- $20M to less than $25M = 3.75%
- $25M and up = 3.9%
Condo Mortgage Associated Fees
Origination Costs & Points
0-3% of the Loan
Origination costs and points are the same in co-ops and condos – they are fees associated with financing a purchase of NYC real estate.
Origination costs are fees that a lender charges to process and underwrite a mortgage application, including application fees, document preparation fees, and credit report fees. These costs are usually calculated as a percentage of the loan amount and are paid at closing.
Points are fees that borrowers can pay to reduce their interest rate and therefore monthly payments. Each point is equivalent to 1% of the loan amount. While paying points requires a larger upfront payment, it can result in long-term savings. It is essential for buyers to calculate how long it would take to recover the cost of buying down the rate and determine if it is worthwhile. It is often helpful to calculate how long it would take to recuperate the cost of buying down the rate, and if the buyer plans to hold the property for longer than that time, it is usually worth it to purchase a lower rate. Points are paid at closing and are generally non-refundable.
Mortgage Application, Credit Check, etc
Cost Varies
A condo buyer’s lender charges a mortgage application fee to cover the cost of processing and verifying the borrower’s financial information, as well as any administrative expenses related to the application process. The fee can be either a percentage of the loan amount or a flat fee, and the exact amount varies depending on the lender and loan program.
While not all lenders will be familiar with co-op purchases, most can work with condo buyers since condos are considered real property and don’t have the complications of housing shares.
The credit check fee is the same for condos and co-ops. It is charged by the lender for pulling a potential borrower’s credit and helps the lender assess how likely a buyer will be able to repay the loan. The cost of the credit check fee can vary depending on the lender, but it is typically a flat fee.
It is important to note that both the mortgage application fee and the credit check fee are typically non-refundable, even if the loan is not approved or the transaction does not close. However, some lenders may allow the borrower to roll these fees into the loan amount, which can help to reduce the upfront cost of the transaction.
Appraisal
Cost Varies
The appraisal fee covers the cost of having a professional real estate appraiser assess the value of a condo unit. It is an important step in financing a condo purchase since the lender will need to ensure the value of the condo is sufficient to serve as collateral for the loan. A condo appraisal will take into account the square footage on a property’s legal description, as well as the condition of the unit. They will also take into account the building’s location, features, and condition, as well as it’s financial history and amenities.
Co-op and condo appraisals are very similar, but do differ in a few areas – most notably size. In a co-op the physical measurement of the interior space determines the square footage, while in a condo, square footage is determined by what’s listed on a property’s legal description. Condo’s square footage includes a percentage share of the building’s common areas, so it’s not accurate to simply measure the interior space.
The appraisal fee typically covers the cost of the appraiser’s time and expertise, as well as any expenses incurred during the appraisal process, such as travel costs or fees for accessing building amenities. The exact cost of the appraisal fee can vary depending on the size and location of the condo unit being appraised, as well as the specific appraiser and lender involved.
It is important to note that the appraisal fee is typically paid by the borrower as part of the closing costs for the transaction, and it is not refundable even if the loan is not approved or the transaction does not close.
Bank Attorney
$800-$1,250
Bank attorney fees are typically charged by the lender that provides the mortgage for the property, and are meant to cover the cost of legal work related to the loan. Bank attorney fees can vary depending on the lender and the type of loan that you are obtaining, but are typically between $800-$1,250.
Mortgage Recording Tax
1.8% for all mortgages less than $500,000; 1.925% for all mortgages of $500K or more minus $30 for townhomes
The mortgage recording tax is a tax that is typically paid by the buyer of a condo in NYC at closing as part of their closing costs. The tax is calculated as a percentage of the loan amount and is based on the property’s purchase price.
It is a one-time fee that is due at the time of closing, and it cannot be rolled into the loan amount. The exact percentage charged can vary depending the size of the loan. In New York City, the mortgage recording tax rate is 1.8% for loans under $500,000 and 1.925% for loans over $500,000, minus $30 for townhomes.
It is worth noting that while this is typically paid for by the buyer, in some cases, the mortgage recording tax may be split between the buyer and seller as part of the negotiation of the sales contract.
Real Estate Tax Escrow
0-6 Months
When a buyer takes out a mortgage to purchase a condo, the lender typically requires them to establish an escrow account to ensure that these expenses are paid on time. This helps protect the lender’s investment in the property by ensuring that any required payments are made.
At closing, the buyer will typically pay an initial deposit into the escrow account, which will be based on estimates of the upcoming expenses for the property. The lender will then use the funds in the account to pay the expenses as they become due. The exact amount required for the escrow deposit will vary, but is typically between 0-6 month’s worth of real estate taxes.
As a buyer, it is important to understand that the funds in the escrow account are your funds, and you have the right to receive any excess funds in the account if the balance becomes too high. However, if there is a shortage in the account, you will be responsible for making up the difference to ensure that all required expenses are paid on time.
Condo Closing Costs That Are Exclusive To New Developments
If you are considering a new development, it’s important to know that while most new developments are condos, there are some newer buildings that are legally structured as cooperatives but are run by condo bylaws called condops.
NYC Real Property Transfer Tax
1%-1.425% of sale price
NYC Real Property Transfer Taxes are typically paid by the seller (in co-ops and resale condos), but in the case of a new development, the tax is customarily passed along from the sponsor to the buyer.
The tax is calculated as a percentage of the purchase price of the property, and the rate varies depending on the purchase price. For example, for properties that sell for $500,000 or less, the tax rate is 1%. For properties that sell for more than $500,000, the tax rate increases to 1.425%.
NYS Transfer Tax
0.4% of the sale price for transactions less than $3M. 0.65% of the sale price for transactions greater than or equal to $3M
The New York State Transfer Tax is imposed by the state of New York on the transfer of property. It is different from the NYC Real Property Transfer Tax – one is a local NYC tax, and the other is a NY state tax. The NYS Transfer Tax is typically paid by the seller of a property at the time of closing, but in a new development, the cost is customarily passed along from the sponsor to the buyer.
The transfer tax rate for residential properties in New York State is 0.4% of the sale price on transactions up to $3,000,000, and 0.65% above $3M. For example, if the purchase price of a new development is $1,000,000, the buyer would need to pay a transfer tax of $4,000 (0.4% of $1,000,000) to the state of New York.
Sponsor Attorney Fee
Cost Varies
Sponsor Attorney Fees are charged by the sponsor/developer’s attorney and are meant to cover the cost of legal work related to the transfer of ownership from the sponsor to the buyer. These fees can vary widely depending on the building and can depend on the specific details of the transaction, but typically range from $2,500-$5,000.
Working Capital Fund Contribution
Typically 1-2 month’s common charges
A working capital fund contribution is a fee intended to help build up a reserve fund for the building’s future maintenance and repairs and is very similar to Reserve Fund Contributions seen in resale condos and Flip Taxes seen in co-ops.
The working capital fund contribution is usually calculated as a percentage of the purchase price, typically ranging from 1-2%. For example, if the purchase price of a unit is $1,000,000 and the working capital fund contribution is 1%, the buyer would be required to contribute $10,000 to the fund at closing.
The working capital fund contribution is separate from other closing costs, such as taxes, title insurance, and legal fees. The money is held in reserve by the building’s management company or board and is used to cover unforeseen expenses that may arise in the future, such as repairs to the building’s common areas or major systems.
It’s important to note that the working capital fund contribution is generally non-refundable and cannot be rolled into a mortgage. Buyers should budget accordingly when considering a purchase in a new development and factor in this additional expense in addition to other closing costs and upfront fees.
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Need More Information?
Should you have any additional questions about closing costs, and how they can impact you as a NYC buyer or seller, feel free to reach out. We’d welcome the opportunity to discuss your specific circumstances and have the knowledge and experience to help you understand how the closing costs we outlined above would impact your transaction.
