While finding a new apartment can be a thrilling adventure; buying an apartment in New York City can add stress and a chunk of expenses above and beyond the purchase price.
The Big Apple is known for being both expensive and tricky when it comes to real estate and real property. New York City also has the most expensive closing costs in the United States. You expect to invest a serious amount of money on your new apartment; and in New York City, you’ll also be paying hefty buyer closing costs.
By educating yourself in advance, and by working with an agent from Interactive Realty Solutions who specializes in selling apartments in New York City, you can prepare yourself for the complicated process and discover how to save a bit of money on your buyer closing costs along the way.
- What is an Apartment in New York City?
- What’s the Difference Between Real Property and Real Estate in New York?
- What Does the Term “Closing Costs” Mean when Buying a New York City Apartment?
- What do Closing Costs pay for when Buying a Cooperative or Condominium Apartment in New York City?
- Have Questions? Ask Interactive Realty Solutions
What is an Apartment in New York City?
Since apartments make up 95% of real estate in a highly competitive market, the word apartment deserves defining.
The word apartment is a general term that encompasses condominium apartments and cooperative apartments.
Condominiums and cooperatives, different from single-family homes, occupy multiple units in a building.
When you purchase a condominium apartment in New York City, you own your unit — complete with the title to the apartment. Monthly you’ll be paying proportionate maintenance costs for the building. Semi annually you will be billed directly for your property taxes
When purchasing a cooperative apartment, you’re buying shares in the building, plus a Proprietary Lease granting you use and occupancy of the apartment. Monthly, you’ll be paying proportionate maintenance costs and taxes for the building.
Condominiums in New York tend to be newer with more modern amenities whereas cooperatives, which account for approximately 70% of the apartments in New York City, were constructed before the 1980s and are generally less expensive but dated unless having been renovated.
New construction condominiums come with additional closing costs, notably the sponsor or seller of new developments often require the buyer to pay transfer taxes normally paid by the buyer.
Apartments in New York City also come with a Board of Directors, which is similar to a homeowners’ association with a set of rules and bylaws. It’s worth investigating the Board of Directors and the bylaws when considering an apartment
What’s the Difference Between Real Property and Real Estate in New York?
Real estate in New York encompasses ownership of the land, the natural resources, and the buildings and structures on the land.
Real property, on the other hand, includes real estate, and also a set of legal rights to the use of common features and amenities.
What Does the Term “Closing Costs” Mean when Buying a New York City Apartment?
Once a set sales price has been agreed upon by you and the seller, and along with paying for your apartment, you’ll be responsible for buyer closing costs, which you generally cannot roll into your mortgage.
Buyer closing costs on a property in New York generally range between 2% and 4% of the property’s value. Since the median price of a New York apartment is now around $1,000,000, or five times the U.S. average of $200,000, your closing costs will be higher than in other locales.
The “closing costs” on real estate in New York City encompass all the fees associated with closing your transaction.
What do Closing Costs pay for when Buying a Cooperative or Condominium Apartment in New York City?
Closing costs are a collection of expenses charged for services required to complete the sales transaction on your New York City apartment. These taxes and fees include but are not limited to:
- Attorney Fees – Attorney fees are estimated to range between $2,000 and $4,000. Fortunately, most real estate lawyers usually charged a flat rate vs. hourly and are willing to collect at closing. You may also be required to pay lender attorney fees, racking up another $1,000.
- Mortgage Recording Tax – The mortgage recording tax applies to what the state considers the privilege to record your mortgage. This added tax will tack on an added 1.8% if your loan is under $500,000 and 1.925% on amounts greater than $500,000. This tax is applied to the loan amount, not to the purchase price of your new apartment.
- Mansion Tax – The mansion tax, also referred to as a transfer tax, is the most well-known and least favorite tax associated with purchasing real estate in New York City. Although New York apartments may not fit the common perception of what a mansion is, the state considers any property over $1,000,000 to fit that description. The tax amount varies, graduating from 1% to 3.9%.
- Title Insurance – Title insurance protects you and your lender from claims such as outstanding property taxes or liens or any issues arising from former owners or open permits, etc. against the title of the property before you took ownership. You can anticipate an additional 0.45% of the apartment’s purchase price added to your closing costs. Be advised; your lender will likely require title insurance as a stipulation to the mortgage.
- Flip Taxes – Flip taxes, technically a fee and not a tax, are a transfer fee collected by the co-op corporation at the time of purchase of your apartment. Although the seller typically pays the flip taxes, you may find yourself responsible after negotiations. These fees vary from property to property, the details of which are generally located in the cooperative’s Proprietary Lease and Bylaws.
New Construction Apartments Only:
- New York City and New York State Transfer Taxes – The New York City and New York State transfer taxes, also known as the Real Property Transfer Tax, apply to the transfer of title for any real property. You may be able, with the help of your agent, to negotiate these fees with the sponsor, but you can otherwise expect to shell out another 1% of the price if the property is $500,000 or less, or a whopping 1.435% for more expensive apartments.
- Other Closing Cost Fees on Apartments in New York
- Application Fees
- Lender Fees
- Mortgage Fees
- Move-in Deposits
- Recording Expenses
Your Interactive Realty Solutions agent can help you can save on closing costs when buying a condominium or cooperative apartment in NYC.
Navigating the waters of real estate, although exciting, can be treacherous. But in New York City, the stakes are even higher. The cost of real estate and real property in The Big Apple is expensive, made steeper by a stack of closing costs.
There’s a lot to finding the perfect apartment in New York City. You’ve got to prepare your credit, save for a down payment, and then consider tens of thousands of dollars worth of closing costs.
Don’t embark on your property hunting journey by yourself. Using an experienced real estate agent from Interactive Realty Solutions will save you money and heartache.
Have Questions? Ask Interactive Realty Solutions
Interactive Realty Solutions is the best source of information about the local community and real estate topics. Give them a call today at (917) 341-2797 to learn more about local areas, discuss selling a house, or tour available homes for sale.