New York Real Estate: Understanding Closing Costs

New York’s real estate market is a tale of two cities or rather, a tale of two regions. While some parts of the state, like New York City and the Hamptons, boast some of the highest home prices in the nation, other areas like Buffalo, Rochester, and Syracuse offer more affordable housing options, with median home prices of around $200,000 or less. Regardless of whether you’re buying a home in Long Island or selling in Lake Placid, there’s one aspect of the real estate process you can’t escape: closing costs. In this blog post, we’ll break down what to expect when it comes to closing costs in the Empire State.

How Much Are Closing Costs in New York?

Closing costs vary from state to state, and New York tends to be on the higher end of the spectrum. On average, closing costs in New York amount to about 3.1% of a home’s sale price, according to CoreLogic’s ClosingCorp. To put this into perspective, Connecticut has a 2.1% rate, and New Jersey’s rate is 1.7%.

Let’s take July 2024’s median sale price for the state, which was $400,000, as an example. Applying the 3.1% rate, the estimated closing costs would be around $12,400. However, keep in mind that these costs can vary significantly depending on your local market. For instance, Westchester County, just north of New York City, had a median price of $770,000 in July, resulting in closing costs of approximately $23,870. On the other hand, in Potsdam, located not far from the Canadian border, where the median price is only $175,000, closing costs would be roughly $5,425.

Who Pays Closing Costs in New York: Buyers or Sellers?

Whether you’re the buyer or the seller in the New York housing market, you’ll have some responsibility for covering closing costs.

Closing Costs for Buyers:

Loan-Related Fees: These may include application and origination fees, as well as charges for a credit check. If you’re paying points on your mortgage to lower your interest rate, that fee will also be part of your closing costs.

Appraisal and Inspection Fees: Lenders often require a professional home appraisal to determine the property’s value. It’s also wise to get a home inspection, although not required. Expect each of these to cost a few hundred dollars.

Title-Related Fees: A title search confirms ownership and checks for any liens or claims on the property. Title insurance, which is typically paid for by the buyer in New York, protects both you and the lender.

Taxes: You may need to prepay a portion of the year’s property taxes at closing, depending on your local jurisdiction. Additionally, if you’re buying a home over $1,000,000, you’ll incur the state’s mansion tax.

Attorney Fees: New York mandates that both homebuyers and sellers have legal representation at closing, so attorney fees are an essential part of the process.

Closing Costs for Sellers:

Agent Commissions: Realtor fees are often the largest expense for sellers, typically ranging from 5% to 6% of the home’s sale price.

Transfer Taxes: Sellers are responsible for New York’s real estate transfer tax, with additional city taxes applicable in New York City.

Attorney Fees: Like buyers, sellers are also required to have an attorney present at closing.

Seller Concessions: Any concessions made to the buyer, such as covering repair costs, are settled at closing and deducted from the sale price.

Wire Transfer Fee: If there’s an outstanding mortgage balance, it will be paid off from your sale proceeds, and a fee may apply.

Lowering Your Closing Costs in New York

Many closing costs are negotiable, except for government-assessed fees like property and transfer taxes. Here are some tips for reducing your closing costs:

For Sellers:

Negotiate Realtor Commissions: Ask your agent if they are willing to lower their commission slightly, which can lead to significant savings.

For Buyers:

Explore Down Payment Assistance Programs: These can help cover closing costs for eligible buyers through low- or no-interest loans and grants.

Shop Around for Lenders: Different lenders may offer varying rates, terms, and fee structures. Compare offers to find the best deal.

Request Seller Concessions: Don’t hesitate to ask the seller for concessions, which could include covering certain closing costs.

FAQs on New York Real Estate: Understanding Closing Costs:

What are closing costs, and why are they important to consider when buying real estate in New York?

Closing costs are the fees and expenses associated with finalizing a real estate transaction. In New York, these costs typically include expenses such as attorney fees, title insurance, appraisal fees, property taxes, and various administrative fees. Understanding closing costs is crucial for buyers as they can significantly impact the total amount needed to purchase a property.

How do closing costs in New York compare to other states?

Closing costs in New York tend to be higher compared to many other states due to factors such as higher real estate prices, complex legal requirements, and additional taxes and fees specific to the state. Buyers should be prepared for potentially substantial closing costs when purchasing real estate in New York.

Can closing costs in New York be negotiated or reduced?

While some closing costs are fixed and non-negotiable, others may be subject to negotiation. Buyers can sometimes negotiate with sellers to cover certain closing costs or request concessions to offset expenses. Additionally, buyers can shop around for service providers such as lenders and title companies to potentially find lower-cost options for certain services.

Are there any government taxes or fees included in New York closing costs?

Yes, New York imposes various government taxes and fees as part of closing costs. These may include transfer taxes, mortgage recording taxes, and mansion taxes for high-value properties. Buyers should consult with their real estate agent or attorney to understand the specific taxes and fees applicable to their transaction.

How can buyers prepare financially for closing costs in New York?

To prepare for closing costs in New York, buyers should budget for expenses in addition to the down payment and mortgage payments. It’s essential to obtain a detailed estimate of closing costs early in the home buying process and ensure that sufficient funds are available to cover these expenses at closing. Working closely with a knowledgeable real estate agent and attorney can help buyers navigate the complexities of New York’s closing costs and make informed financial decisions.

Conclusion

In the complex and unique New York real estate market, having an experienced local real estate agent by your side is invaluable. They can provide guidance tailored to your specific area and help you navigate the intricacies of closing costs. So, whether you’re eyeing a penthouse.