Your search results

Condo vs. Co-op Closing Cost Comparison in NYC

Posted by Hauseit Research on May 17, 2018
| 0

Closing costs for buyers and sellers in NYC are different for condos and co-op apartments. As a buyer, closing costs are the highest for condos. As a seller, closing costs are highest for coop apartments.

For buyers, closing costs are highest for condos because of title insurance and the mortgage recording tax.

For sellers, closing costs are highest for co-ops because most co-op buildings charge sellers a flip tax.

Save 2% on Your Home Purchase

Save money without disrupting your deal by working with one of our traditional, experienced partner buyer's brokers who never openly discount. Discreet buyer closing credit check given at close.

What is title insurance?

Title insurance protects a buyer from any defects or future claims against the title which were unknown at the time of purchase. This means that you’ll be protected against financial loss if a former owner claims that he or she never sold the property to the seller of your property, which means the seller of the property didn’t have a right to sell it to you.

Co-ops Don’t Require Title Insurance

Title insurance is generally not applicable to co-ops because co-op apartments are not considered to be ‘real property.’ Buying a co-op means that you are buying shares in a corporation that owns the apartment building.

Each co-op apartment owner receives a proprietary lease which associates the shares purchased with your specific apartment.

Title insurance is a bank requirement if you are financing your condo purchase. The title insurance policy comes in two parts: a lender’s policy and an owner’s policy. The lender’s policy covers the principal loan amount and decreases as you pay down the mortgage. The owner’s policy protects you against the full purchase price and does not decrease over time. If you are purchasing a co-op apartment, your real estate attorney may conduct a lien search as part of his or her apartment due diligence.

If you are buying a condo in NYC, you will also have the option to purchase a ‘market value rider’ for your title insurance policy. The market value rider pegs the amount of your insurance coverage to the value of your apartment as it increases over time.

Hauseit® Best Deal Guarantee

Real Brokers. Discreet Savings. You’ll always get the best deal through Hauseit, we guarantee it. If you find a better deal elsewhere, we’ll beat it. Plus, you’ll always be paired with a trustworthy, experienced, brand name real estate broker who never openly discounts so other agents won’t treat you or your agent any differently.

How much is title insurance?

Title insurance is around 0.4% to 0.5% of the purchase price. It is the third largest closing cost for condo buyers in NYC behind the mortgage recording tax and the mansion tax.

Title insurance is comprised of a fixed fee component and variable fee element that adjusts based on the purchase price. Prior to closing you will receive a ‘good faith estimate’ from the title company which breaks down all elements of the title insurance bill.

Fixed components of title insurance include:

  • Endorsements – Condominium Owners ($50), Condominium Loan ($50), Environmental Protection Lien NYC ($50), Residential Mortgage ($50), Waiver of Arbitration Loan ($50)

  • Other Charges – Certificate of Occupancy Search ($60), Street Report ($60), Housing & Building ($60), Fire Department Search ($60), Emergency Repairs ($60), Bankruptcy Search ($60), Patriot Search ($60), Post-Closing Document Return ($30), Service Charge to Record Documents ($75)

Variable components of title insurance include:

  • Owner’s Policy Premium

  • Loan Policy Premium

  • Market Value Rider (Optional)

Buying a home in NYC? Closing costs are highest for condos because of title insurance and the mortgage recording tax. Selling a property in New York City? Closing Costs are highest for co-ops because most NYC co-op buildings charge sellers a flip tax.

Hauseit® Buyer Closing Credit

Save thousands on your purchase with a discreet buyer closing credit without disrupting your deal or upsetting the other party. After all, what’s the point of a sweet closing gift if you don’t close?

What is the mortgage recording tax?

The NYC & NYS Mortgage Recording Tax of 2.05% to 2.175% is the largest closing cost for condo buyers in NYC. Buyers of co-ops in NYC do not have to pay the mortgage recording tax because the tax is imposed on “real property” and co-ops are not ‘real property.’

How much is the mortgage recording tax?

All mortgages with initial loan balances less than $500,000:

  • 2.05% of the initial mortgage principal (includes a 1% New York City tax)

Mortgages of one to three family houses and individual residential condo units with initial loan balances of $500,000 or more

  • 2.175% of the initial mortgage principal (includes a 1.125% New York City tax)

All other mortgages with initial loan balances of $500,000 or more

  • 2.8% of the initial mortgage principal (includes a 1.75% New York City tax)

Pro Tip: For residential transactions, the mortgage lender will typically pay 0.25% of the total Mortgage Recording Tax. For commercial transactions and “hard money” loans, the lender will typically not pay for any of the Mortgage Recording Tax.

The mortgage recording tax generated $1.889 billion in revenue in 2016 according to the NYC Department of Finance. The New York City component of the mortgage recording tax was originally imposed in 1971 and subsequently increased in 1990 to its current levels.

Save 6% Percent When You Sell with an Agent Assisted FSBO

Have time to show your home yourself? Consider our self managed, For Sale By Owner listing option that gives your home the same marketing exposure as if you’d paid 6% commission to a traditional listing broker.

What is the flip tax?

A flip tax is an additional seller closing cost charged directly by the co-op or condo building on every resale transaction. Flip taxes are most commonly seen with co-ops in NYC, however you may find an occasional condo which charges a seller flip tax (or a buyer capital contribution closing cost). Therefore, seller closing costs are typically higher for co-ops compared to condos because there’s a high likelihood that the co-op will charge a flip tax.

1-2% is a Typical Flip Tax in NYC

The most common co-op flip tax in NYC is between 1-2% of the sale price. The amount of the flip tax varies by building, and each building’s flip tax is documented in its proprietary lease and/or building bylaws.

Flip taxes can be a percentage of the sale price or profits, a per share amount, a flat fee or a hybrid formula. Although rare, some condos also charge a flip tax on sales.

Don't have time to sell your home For Sale By Owner?

Sell your home for only 1% seller’s broker commission! We’ve negotiated private label discounts for full service with New York’s finest listing agents so you don’t have to. Work with the best for less!

Buyer Closing Costs in NYC

Buyer closing costs in New York City are between 1.5% to 5%. You can reduce your closing costs by $20k or more by requesting a Hauseit Buyer Rebate. Closing costs are higher for condos than co-ops, and closing costs are always greater for ‘new construction’ (sponsor sales). In most cases, you will also pay higher closing costs if you are financing vs. making an all-cash transaction.

Buyer Closing Costs in NYC Include:

  • 2.05% to 2.175% – Mortgage Recording Tax (Condo only)

  • 1% – NYC Mansion Tax (on purchases at/above $1m)

  • 0.4% to 0.5% – Title Insurance (Condo only)

  • $3k – Buyer Attorney Fees

  • $3k – Miscellaneous Fees

Pro Tip: Buying a sponsor unit (new construction)? If so, you should be aware that buyer closing costs are typically higher for sponsor sales compared to traditional private resales. You can learn more about buyer closing costs for sponsor units by reading our comprehensive closing cost guide.

Save 2% on Your Home Purchase

Save money without disrupting your deal by working with one of our traditional, experienced partner buyer's brokers who never openly discount. Discreet buyer closing credit check given at close.

Seller Closing Costs in NYC

Seller closing costs in New York City are between 8% to 10%. Fortunately, the largest closing cost (6% broker commission) is the one which you can most easily reduce or fully eliminate. You can save up to 6% by listing Agent-Assisted FSBO through Hauseit. Don’t have time to list For Sale by Owner? Consider a Traditional Full Service Listing for Just 1% Commission.

Seller Closing Costs in NYC Include:

  • 6% – Average NYC Real Estate Commission

  • 1% to 2% – Building Flip Tax (If Applicable)

  • 1% to 1.425% – NYC Transfer Tax (RPTT)

  • 0.4% – NY State Transfer Tax

  • $3k – Seller Attorney Fees

  • $3k – Miscellaneous Fees

Hauseit® Best Deal Guarantee

Real Brokers. Discreet Savings. You’ll always get the best deal through Hauseit, we guarantee it. If you find a better deal elsewhere, we’ll beat it. Plus, you’ll always be paired with a trustworthy, experienced, brand name real estate broker who never openly discounts so other agents won’t treat you or your agent any differently.

More Questions? Ask us anything in Hauseit’s Forum, where New York real estate professionals come together to discuss real estate.

Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

Leave a Reply

Your email address will not be published.

  • You can save $20,000 or more on the average New York City co-op apartment by requesting a legal and tax-free Hauseit Buyer Closing Credit. Here’s how it works: we pair you with an experienced, brand name, local partner broker who will not only provide you with great advice but who has already agreed to discreetly offer you the highest NYC buyer agent commission rebate available in the city. Most importantly, our partner brokers never openly discount their services. This means you’ll never have to worry about being treated differently by sellers or listing agents just because you’re receiving a large discount at closing.