NYC Condo Closing Costs-How much will I pay?
NYC Condo Closing Costs
One of the top questions our office gets asked is to explain the way closing costs work when you buy a co-op or condominium in New York City. Co-Ops and Condo’s are different animals, so I’m going to explain them separately. What you need to know at least initially is the following (1) If you’re buying a co-op in New York City, it’s going to costs a hell of a lot less in closing costs than if you are buying a condo in New York. (2) In either situation, you need to know how much you’re likely going to pay, well in advance of even putting an offer in on a particular property, because it’s going to affect how much you left over at the end of the day.
For purposes of clarity, we’re going to use the purchase of a hypothetical $600,000 condo in New York City to illustrate the closing costs you’re likely going to pay. Of course, you can certainly try your hand at various closing costs calculators that are available to you online, but I want to go into more detail to explain specifically what it is that you’re going to be paying and why you’re paying it. So let’s take each one from the list of fees you’ll likely going to be paying at the closing table.
1. Title insurance: It’s important to point out that people go crazy over title insurance in New York. Some people like the comfort of knowing that if something goes wrong, be it a judgment, issue with a survey, or some sort of fraud, title insurance will kick in to protect you. Others believe it’s a completely useless device that’s meant to rip you off of thousands of dollars. Governor Cuomo has even addresses this issue and has vowed to cut premiums by up to 60% percent because of allegations of rampant abuses. In fact, while the vast, vast majority of people purchase title insurance, you are not legally obligated to do so in New York. If you chose not to purchase title insurance, Good luck finding an attorney who will handle all the work that a title company does at the closing, though.
Below are the numbers for a hypothetical purchase of a $600,000 condo in Brooklyn, New York. For purposes of this example, the buyers have received a mortgage of $480,000, or 80% of the purchase price. In the below example, if you’re buying this condo in Brooklyn, you’re going to be paying a little over $3,000 just for title insurance. Are you going to save more by going with one title company over another? No, not really. At least not in the title policy side. The title rates that are charged to you are regulated in New York and have to be approved by the Superintendent of Insurance (who, I’m sure, is a riot at cocktail parties).
Obviously, as your purchase price increases, so will your title insurance costs (and vice versa if your purchase price decreases. The title insurance fees aren’t the only fees you’ll be paying to title insurance companies. As you can see below, title insurance companies can charge you for all sorts of searches, including Bankruptcy searches, searches related to the Patriot Act, and many others. They’re also charging for actually recording these documents with the County Clerk. This can and does add hundreds of dollars onto your title bill.
2. New York City Mortgage Recording Taxes: Another large expense you’re going to pay at the closing table are New York City Mortgage Taxes. How much are you looking at paying? In New York, on this $600,000 purchase, with a mortgage of $480,00, you’re going to be paying $8,610 for mortgage taxes (combining New York City and New York State mortgages taxes.) You can find the specific percentage breakdown for each here, with an explanation here
As you can see from this example, when factoring just the mortgage recording taxes and the title insurance costs, you’re already almost $12,000 out of pocket. This is, of course, in addition to the $600,000 you’re paying for the property.
3. Additional Out of Pocket Fees at a NYC Real Estate Closing: A few other fees that are going to come out of your pocket at this hypothetical real estate closing in New York City
- Survey Fee- If you’re buying a house, and the seller can’t provide you with a survey, your bank may mandate that you order one (it’s a good idea even if they don’t mandate this.) The cost can vary, but you’re looking at anywhere from $600-$1000 for a new survey.
- Title Closer Tip– A discretionary tip to the title closer who actually appears at the closing to represent the title company. Again, I am emphasizing this is discretionary. If you’re looking at the title bill and you see this appear as a mandatory charge, speak to your attorney immediately and find out why it’s there. Typically closers can receive anywhere from $100-$300 depending on the complexity of the closing. In exchange they personally feel the deed and mortgage and ensure that all documents have been compiled appropriately.
- Condo Management fees– You didn’t think the building wouldn’t make a few hundred bucks, did you? Condo Management fees can range in the hundreds of dollars and sometimes more. They can charge for a move in deposit, move out deposit, working capital or reserve fund fee and a “closing fee” which is a completely arbitrary fee just to put together some documents for the closing.
- Attorneys Fee- Whatever they charge they are worth it! I’m totally kidding, but seriously make sure you get your invoice ahead of time so there are no surprises (like when an attorney charges you to travel outside of a County, which I think is the most ridiculous thing in the world.)
The above are most of the fees you’re likely going to pay if you’re purchasing a Condo in New York City. Perhaps the most important thing to remember is that you should be familiar with these fees wayyyy ahead of time. Don’t wait until the last minute to find out how much you’re going to have to shell out at the closing. There are realistically two ways to find out how much you’ll pay. (1) Your lender will give you something called a Good Faith Estimate, which will outline, generally, how much you’ll be paying. (2) A good attorney should be able to ask the title company they work with to send over a copy of an estimate title bill. That bill (which I referenced in screen shots above), should lay out all of the fees you’re likely to pay and should give you a good estimate as to how much you’ll be paying.
The last thing to remember is that things can fluctuate. Just because your title bill says one thing doesn’t mean the final bill won’t come out a bit differently. It’s critically important to be in communication with all sides to ensure you know exactly how much you’re paying during your NYC Condo purchase.