When you close your real estate transaction, you will have to pay some money to signify the close. These costs include taxes, commissions, mortgage points, escrow, et cetera, and you will pay this money depending on the sale contract you have with the buyer.
In many cases, the buyer pays the closing cost; however, there are cases when you pay a substantial part of the money.
If you are selling your home, you must understand that you will also have to spend at least 10% of whatever amount your home costs. And this is why you need to weigh your options well and count the cost before you put up your house for sale. These costs can also depend on where you live and your mortgage. You may also pay them once or recurrently for a set period.
Now, if you are new to the real estate market, this might sound strange and confusing to you. However, there is no need to panic, as it is a straightforward process. With Leave The Key Homebuyers, one of the companies that buy houses in Brooklyn, you can ease in and out of the process with no trouble, especially if you stay in New York.
This guide will help you understand closing costs, how they work in New York, and the benefits and demerits of paying them. It will help you clear things up while encouraging you to plan for them. At the end of the article, you should understand closing costs and feel very confident about gliding through the process.
What Are Closing Costs?
Closing costs are the fees you have to pay when you finish the process of selling your home. They can include attorney fees, taxes, mortgage points, escrow, among other expenses. Closing costs can range from 1% to 10% of the total house cost, in addition to taxes for both buyers and sellers. While you and the buyer can be liable to pay the closing costs, it is almost always the buyer who pays it.
In New York, closing costs for sellers range from 8% to 10%, although this is if you have paid the 6% agent commission. Your closing costs are also typically higher than that of buyers. The presence of closing costs implies that you cannot get the total net value of your home. If you are selling a building because of the tax, you will have to pay a higher closing cost.
What Are The Closing Costs in New York?
The real estate commission, transfer taxes, and flip taxes form most of the closing costs you will pay as a seller. Others include the attorney fees, move-out deposit, agent fee, bank loan fee, common charge adjustment, NYS equalization fee, residential deed transfer fee, UCC-3 filing fee.
If the property is a co-op, then you will need to pay a flip tax, co-op attorney fee, and co-op stock transfer tax in addition to the above-stated fees. If the property price is $1 million, you will get about $800,000 since 10% of the net price has gone into paying the closing costs.
New York Closing Cost Inclusions
As stated above, you will pay a higher percentage of the closing costs than the person purchasing your home. From the beginning of this article, we have mentioned these costs and their rates. But, what are they? Let’s find out.
- Real Estate Commission
Real estate commission is the money that listing and broker agents use to advertise the sale of your home to intending buyers. This closing cost takes up the highest percentage of your entire expenses at the end of your home sale. It takes up a whopping 6% of the entire net value of your home.
However, since the advent of technology, no one can justify this high rate. And this is because advertising has become easier and cheaper than in the old days. As a New Yorker, you can save up on this 6% by refusing to hire a commission listing agent. Instead, you can list and advertise your home yourself.
How do you do this? First, submit the house details online on the listing site, select an NYC listing package, allow buyers to view the home and negotiate, and close your sale after accepting an offer. For example, you can put up a buy my house New York sign online if you stay in Texas and allow buyers to come to view it.
- Transfer Taxes
There are two transfer taxes for which you must pay: the real property transfer tax and the New York State transfer tax. The real property transfer tax is a tax on the grants, transfers, and sales of a property in New York City.
This tax ranges from about 1% to 1.5% of the net value of the home. You will also have to pay a filing fee of $100 alongside this tax. On the other hand, the New York State transfer tax costs about 0.4% to 0.7% of the net value of your home.
- Flip Taxes
You pay flip taxes on co-op buildings, and they are about 1.5% of the net value of your home. However, you can only pay flip taxes if the lease document of the co-op specifies it. In some cases, the buyer will bear the flip tax burden, cutting you free from it.
- Attorney’s Fees
Excellent and reliable real estate attorneys do not come cheap, and you will need an excellent one to ensure that your home sale process goes smoothly. An attorney will help you analyze the several legal modalities involved in the process and proffer practical advice to deal with any situation.
Before you pick an attorney, you should first vet their capabilities to check whether they can handle the job. Experience is one of the top qualities that you must look for. You should also check for credibility and reliability by reading the reviews of the attorney.
You can also ask for references to make the process more trustworthy. Negotiate well with your attorney concerning the fees. Doing this will help you save up more money on other costs you need to pay for.
- Move Out Deposit
These fees vary from building to building and are, in many cases, compulsory. You should budget about $2000 to handle this deposit. This deposit should take care of the move-out fees that your condo or co-op levies against you.
There is also the common charge adjustment fee that you will pay to your buyer to reimburse them for the coming charge fees you should pay during the transfer. Others include managing agent fees, New York State Equalization fees, among other things.
Who Pays Closing Costs in New York?
Both the buyer and the seller can pay the closing costs in New York. However, when both of them have to pay, the buyer pays more than the seller. It would help if you discussed the specifics of this arrangement in the purchase contract you make with your home’s buyer. Because of this contract, you will cover the commission fees, transfer tax, title insurance, attorney’s fees, escrow, et cetera.
In New York, your attorney needs to be present to draw up this contract of sale. Once they have finalized the draft to everyone’s satisfaction, you and the buyer can sign it. If you wish, You can accept a cash offer for your house sale. Your attorney will also help to smoothen the closing process and provide all information concerning the sale to you.
In drafting the contract, you should listen to the advice of your attorney on who should pay and how much of the costs you should bear, and without a good attorney, you might end up losing so much at the end of your home sale.
Pros and Cons of Paying Closing Costs in New York
There are benefits that you will enjoy if you pay these closing costs on your home. There are also some disadvantages to paying closing costs; it all depends on how you view it.
Pros of Paying Closing Costs
Some of the benefits include:
- You will sell your home faster. Buyers will be more likely to come over if they know that you will carry a significant burden of the closing costs. It is an efficient way to sell your house fast in Suffolk County.
- You will have a more significant buyer’s pool. And this implies that you will be able to negotiate a better price for your home.
Cons of Paying Closing Costs
The demerits include:
- You cannot have the total value for your home. In a case where you sell the house for $4 million, you will have to give up about 10% to closing costs.
- The process can be very technical, and if you do not have a good lawyer, you can lose money rather than gaining.
Selling your home in New York will only be easy if you have expert hands to guide you. It would be best always to carry along a good and reliable attorney to help you, especially with the closing costs.
Closing costs are an essential part of your sale, but they can be a hassle if you do not understand them. Therefore, if you are selling your home, try to understand the costs you will have to pay and negotiate with your buyer on a price that will favor you.
You can also find the best cash home buyers to help put your sale through.