New Development Closing Costs in NYC
Sep 29, 2022 brooklyn,Brooklyn Buyers,Brooklyn Buyers Agent,brooklyn real estate,brooklyn realty,buyers,buyers agent,Buying in Brooklyn,new construction
If you are buying in a new development or a conversion, watch out – the new development closing costs NYC buyers pay can be significantly higher than buying other existing apartments in the city. Most buyers don’t know that there are additional points to be negotiated. It’s like Vegas, if you fail to ask for something, you rarely get it, and you may be shocked after you sign a contract.
What are the extra closing costs with a new development?
Most of the extra closing costs are in the form of transfer taxes. These taxes are typically paid by the seller, but new developments and conversions are the exceptions. In these cases, the default is for the buyer to pay the transfer taxes. If you don’t negotiate in your offer that the sponsor (seller) pays them, then guess what you are going to pay them twice – once when you buy, and again when you sell. They quickly add up! You will also be expected to pay the seller’s attorney fees unless separately negotiated.
How much should I expect to pay?
If the sponsor isn’t willing to negotiate and you are getting a mortgage, you could pay more than 5% in new development closing costs in addition to the purchase price. Most of this is made up of transfer taxes plus seller attorney fees of an additional $3,000 or more. For example, when buying a $2,000,000 apartment in a new development you should put aside roughly $110,000 for closing costs (you can estimate your costs with a NYC buyer closing cost calculator). These are only the closing costs to buy, you will have to pay hefty costs when you sell as well.
New York Real Property Transfer Taxes
- $500,000 or less: 1% of purchase price to NYC
- Over $500,000: 1.425% of purchase price to NYC
- All properties: Additional 0.40% of purchase price to New York State
To learn more about transfer taxes, you can reference: New York City Real Property Transfer Tax.
Can these closing costs be negotiated?
Absolutely! Depending on the strength of the market and demand for the unit, these transfer taxes can be negotiated with the sponsor. Strong real estate agents will help you navigate the relative pricing and strength in the market. If it’s a hot market, you’ll likely have to bite the bullet and pay all of them. In a neutral to buyer’s market, most developers are more reasonable.
If you are early to a building, many times you may get special incentives for a period of time because a developer is trying to get the building a certain percentage sold, after which they can raise prices and bargain less on other things.
Besides money, what else should I negotiate?
The possibilities are endless but we have had clients ask for storage units, parking spaces, custom closets, or bespoke improvements over stock finishes. Again, if you don’t ask for it, you will not get it! We have had customers get custom California closets throughout the apartment and others have received free storage units that are worth six figures.
Between you and your broker, gauge the level of interest in the building and negotiate accordingly.
Below is an example of what you can expect to pay if you are unable to negotiate concessions from the sponsor.
NYC New Development Closing Costs ($1.95M price, 20% down)
- Attorney Fees — $3,000
- NYC Mansion Tax — $19,500
- Title Insurance — $8,775
- Bank Attorney — $1,500
- Mortgage Recording Tax — $30,030
- Other Closing Costs — $4,000
- NY State Transfer Tax — $7,800
- NYC Transfer Tax — $27,788
- Seller’s Attorney Fee — $3,000
- Total — $105,393
We know that all this seems tricky – and it is. But that’s why it’s important to work with an experienced buyer’s agent whose been through this hundreds of times. We can help you with all those questions and then some, so get in touch!
If you’re interested in learning more about the buying process, download our free Buying Into Brooklyn Ebook. We share a ton of valuable resources to demystify the buying process and help you become a Brooklyn home-owner.