Closing costs in New York City can be a significant expense, even for the seller. You’ll likely be walking away with a nice check, but you are still responsible for paying certain fees that can add up quickly if you don’t anticipate them.
New York City has all kinds of unique taxes and fees that must be paid at closing. So, it’s essential to be aware of what they are when you’re looking to sell a home so that they don’t come as a shock. Here is a look at the NYC seller closing costs and how much you can expect to pay.
NYC Seller Closing Costs Breakdown
Real Estate Broker Commissions: 3% – 6%
Transfer Taxes: 1.4% – 2.075%
Attorney Fees: $2,000 – $4,000
Flip Tax: 0 – 3%
Real Estate Broker Commissions
The largest fee is the real estate broker’s commission. The seller is on the hook to pay both the buyer and the seller’s agent (if there are two). The standard broker commission is 3% – 6% to the buyer’s agent and 3% to the seller. If either party represented themselves, the seller is only responsible for paying 3% to the single agent (unless they negotiate a higher commission). If both parties represent themselves, then broker commissions would not be applicable. However, this rarely happens unless the buyer and seller know each other personally.
Another expense to be aware of is transfer taxes. Both New York City and New York State impose a tax on the transfer of a property from one party to another. In the city, it applies to any property worth over $25,000, and the state imposes this tax on any property worth over $500. For residential sales in New York City, the transfer tax is equal to 1% of the sale price if it’s less than $500,000 and 1.425% if it’s more than $500,000. The New York State transfer tax is 0.4% for properties worth less than $3 million and 0.65% for properties worth more than $3million. So, be sure to factor both of these taxes into the closing costs.
Another cost that must be paid at closing is your attorney fees. A good real estate attorney is an essential part of your team. They will ensure that all the necessary paperwork is properly handled and that the title is successfully transferred to the buyer. Real estate attorney fees in New York City are typically anywhere from $2000 to $4000. While low-cost options are available, it’s often better to pay a bit more for a reputable attorney than to hire a discounted firm that doesn’t handle the transaction properly. Otherwise, it may end up costing you in the long run. While attorneys aren’t cheap, they provide a valuable service that will help ensure the transaction goes smoothly.
A flip tax is a fee that the seller pays to the operators of the building, not the government. This tax is most common in co-op buildings, but certain condo buildings also charge this fee. Not all co-op buildings charge a flip tax, but the vast majority do. The flip tax started in the 1980s when developers converted standard rental buildings into co-ops. The tenants who lived there had the option to sell their unit for a significant profit but were forced to pay this tax to help make improvements in the building. Today this flip tax still applies in most structures throughout the city. Flip taxes generally range from 1-3% of the sales prices, with the majority landing at 2%. So, if you own a co-op, make sure to factor this additional fee into your closing costs.
How to Estimate NYC Closing Costs
You can estimate seller closing costs by adding all the applicable fees and multiplying the percentage by the final sales price. If you haven’t gotten an offer yet, you can use the listing price to get a rough estimate. Seller closing costs are anywhere from 5-11% of the final sales price.
If two brokers are involved in the transaction, you will pay the standard 6% commission (3% if there is only one). Add in the city and state transfer tax, which are anywhere from 1.4 – 2.075% of the sales price. Then add attorney fees and other miscellaneous fees (such as title transfer, escrow fees, etc.) Don’t forget the flip tax (if applicable). That will give you a rough percentage that is likely somewhere around 8-10%. Then multiply it by the rough sales price to estimate your final closing costs.
NYC Seller Closing Costs Example
Let’s use an example to break it down further. Say you sell your home for $1,000,000. If you and the buyer have a broker, the real estate commission would be $60,000 ($30,000 if there is only one broker).
The city transfer tax would be 1.425% because the sales price is over $500,000. The state transfer tax would be 0.4% because the price is under $3,000,000. So, your total transfer tax would be 1.825%, which comes out to $18,250.
If you live in a co-op building and have to pay a flip tax, then that will be an additional 2%, which comes out to $20,000. Plus, don’t forget attorney fees and other miscellaneous expenses, which will add roughly another $2,500 – $5,000. If all of these expenses apply, you would own an additional $103,250 in closing costs or 10.325% of the sales price. That leaves you with $896,750. So, you can see how quickly these costs add up, especially as the sales price increases.
How to Offset NYC Seller Closing Costs
Some of these costs are fairly set in stone, while others are more negotiable. The easiest way to lower your closing costs is to negotiate with your broker or not use one. While 3% is the standard, you can always negotiate and try to get a better deal.
If you have a high-end property or agree to take on some of the agent’s responsibilities yourself, you may be able to negotiate the commission down a bit. There usually isn’t much you can do about the buyer’s commission, but you have more leverage to deal with your own broker.
You can always choose to list the property for sale by the owner and avoid paying a broker fee entirely. But this means you’re on the hook to market the property and find a buyer on your own, which can get stressful.
Another way to offset the closing costs is to increase the listing price to account for the closing costs. So, if you’d like to walk away with a cool million, list the property for $1.1 million, and hopefully, you’ll land in the ballpark. You’ll still have to make sure that the price is reasonable to find a buyer who is willing to pay. But this can work if it’s in a desirable area and with enough interest from potential buyers.