Congratulations! You’ve made it to the finish line.
Closing on a home can be one of the most exciting moments as a seller, but it can also be stressful if you aren’t prepared. This blog will answer all your questions about seller closing costs in New York and how to calculate and negotiate them.
What are Closing Costs in New York?
- Closing costs, also known as “settlement costs,” are the final expenses to complete the real estate transaction.
- Closing costs are separate from the price of the property.
- The seller and the buyer have to pay specific closing costs.
- Typically, in New York, the closing process is managed by a real estate attorney.
- Due to different fees and statute requirements, closing costs vary in municipalities and states.
Who Pays Closing Costs in New York?
Both, the buyer and seller, pay the closing costs. The estimated seller closing costs for New York could reach up to 8% to 10% of the final sale price of the home. This includes the commission of the listing and buyer’s agent.
As a seller, you can negotiate some closing costs with the homebuyer. However, you must pay closing costs like taxes charged by your state or local jurisdiction. They are non-negotiable.
Most of the closing costs for seller in New York will be deducted from the proceeds you get from the property. As such, you need enough equity to cover some of the expenses.
Most real estate agents know who typically pays what for the closing costs in your local area. So, it’s important to seek professional advice. Hiring an experienced real estate agent can help reduce your closing costs.
How Much are Closing Costs in New York?
The closing cost in New York for sellers is approximately 8%–10% of the home’s agreement value.
Let’s put this in perspective! The typical home value in New York is $783,175. So, if you are selling a house in New York, you may have to pay $62,000 to $78,000 as closing costs.
What are the Typical Closing Costs for Seller in New York?
1. Attorney’s Fee
The state of New York mandates the presence of an attorney at closing. Sellers usually hire real estate attorneys to review the sales contract, especially when no real estate brokers are involved or there are any legal issues with the property.
In most cases, the seller and buyer hire different attorneys to represent their best interests. However, if you and the buyer decide to hire the same attorney, the attorney fee will be split.
Typically, the average attorney fee for house closing in New York is $200-$300 per hour.
2. Credits Towards Closing Costs
You can offer to help buyers with closing costs to make the property more attractive, especially if you live in an area where market competition is low. These costs are called closing credits or seller concessions and are paid at closing.
You can also negotiate concessions with homebuyers if a requirement for repairs arises after the inspection. This may help you save some money on the costs of repair.
3. Documentary Stamp
The documentary stamps refer to the excise tax levied on the documentation that transfers the property from you to the buyer. It is like paying tax on a property deed or some other official documentation.
4. Escrow Fee
An escrow is a neutral third party that holds certain funds or the property until the contract conditions have been met. It protects the interests of both parties by ensuring that either does not wrongfully back out of the deal and lose money. Typically, the escrow charges in New York will be split between the buyer and you as both parties benefit from it.
You should budget between $200 to $500 or more for escrow fee, depending upon the circumstances of their sale.
5. Home Inspection Fee
You can opt for a home inspection to identify any major defects and issues in the house that you must resolve before selling it. These may include plumbing issues, water damage, mold, appliance malfunction, etc. This can be done before the property is listed on the market (pre-inspection) or just before the closing.
New York seller disclosure requires sellers to declare any known issues and defects with the property. Some of these are:
- Structural defects: The buyer must be informed about leaking roofs, loose masonry, foundational cracks, etc.
- Factors that pose health risks: You must disclose the presence of asbestos, lead paint, etc., to the buyer.
- Soil problems: You must identify any issues related to the foundation of the home that could potentially render the house inhabitable. This includes underground pits, mines, or other instability.
- Flood risk: You must provide a list of flooding instances and water damage caused by pipe leaks, broken sewer lines, leaking roof, etc.
- Pest infestation: You must also offer a list of any previous or current infestations of termites or other wood-boring insects.
- Utility defects: You must list defects such as malfunctioning heating and air conditioning systems, damaged lighting fixtures, faulty wiring, leaky ventilation systems, etc.
The buyer can also undertake a home inspection. However, if they find undisclosed defects, it might give them the upper hand during negotiations, or they may back out of the deal.
6. Home Warranty Fee
A home warranty covers the maintenance cost of the devices and appliances in the house for a limited time period, like, days, months, or years. You may offer a home warranty to make the property more desirable for buyers.
7. Homeowner Association (HOA) Fee/ Document Fee
If you are a part of the Homeowners Association (HOA), you will have to pay the fee due until the closing date and clear the remaining dues, if any. In most cases, you will not be able to close on the house until the dues are paid.
However, if the issue persists and is not resolved before closing, the HOA can place a lien on your house and even initiate foreclosure.
8. HOA Estoppel Fee
The HOA Estoppel letter is a legally binding document containing details about the financial obligations like the monthly or annual fee, that the buyer will have to pay after closing. It also offers information about any unresolved dues you may owe.
The HOA Estoppel fee in New York needs to be paid by you as part of the process. It ranges from $200-$500.
9. HOA Transfer Fee
If you are a part of the Homeowners Association, at the time of closing, the ownership of your house needs to be transferred to the buyer in HOA records. HOA transfer fee is a one-time non-negotiable charge that you pay the HOA to update their records.
10. Mortgage Payoff
Mortgage payoff will most likely be one of the biggest items on your list of fees. You’ll have to pay off any remaining balance of the mortgage on your property with the proceeds of your home sale at closing. This includes interest accrued from the last payment to the day of closing and any penalty the lender might charge you for prepayment of the mortgage.
Contact your lender and discuss the requirements to pay off the mortgage to get the overall details of your closing costs. Also, check for the loan documents if there’s any prepayment penalty with your mortgage.
11. Municipal Lien Search
A Municipal Lien Search can help you uncover any unrecorded liens, code violations, permits, taxes, and utility bills, associated with the property. While many sellers forego a municipal lien search, it can complement a title search, especially since it offers additional information about open or expired permits.
An open or expired permit can be a thorn in the side for both you and the buyer as it can lead to further expenses and delays in the sale. On average, a municipal lien search costs $200.
12. Owner’s Title Insurance
In New York , the home buyer usually pay for the owner’s title insurance to protect themselves against discrepancies relating to the ownership of the property or false documentation. Additionally, title insurance takes care of any back taxes, liens, ownership clauses, etc.
However, both parties can negotiate who purchases the owner’s title insurance.
13. Property Tax
While there is no set rate, with a statewide average of 1.69%, the property tax in New York is more than the national average.
You must pay prorated property tax according to the date of purchase at closing.
14. Real Estate Broker Commission
The agent’s commission is the biggest chunk of the closing cost you need to pay. However, it’s negotiable and typically paid from the proceeds of your house sale. Likewise, don’t forget to contact your agent to negotiate the fees. In total, you are expected to pay the real estate agent commission that ranges from 4% to 6% (listing agent commission + buyer’s agent commission which costs 2% to 3% of the total sales price).
To put this in perspective, as per the typical home value in New York , you may have to spend $30,000-$47,000 in commission.
If you want to avoid paying hefty commissions, you can list your property for a flat fee or with no commission at all! Choosing FSBO (For Sale by Owner) and listing your home with a Flat Fee MLS Service in New York can help you save more. What’s more, you pay zero realtor commission if your buyer has no agent.
15. Recording Fee
A recording fee is paid to the local government to register the change in ownership of a house or sale of a property in the public record. It also records mortgages and other liens against the house. Recording fee is usually charged by the county.
16. Transfer Tax
Transfer tax is levied to transfer ownership of the house from the seller to the owner. The tax amount is based on the value of the property. It may be imposed by the municipality, county, or state.
Depending on the negotiations, the transfer tax can be paid by either seller or buyer. In some cases, the tax is split between the parties.
17. Utility Bills
You must pay all utility bills till the date of purchase of the house. The title company usually checks for unpaid bills and utility liens. If there are any dues, you must clear them at closing.
How to Reduce Closing Costs in New York?
1. Opt for a discount broker or a flat fee realtor
Compared to traditional brokers who charge 6% of the sales price as commission, discount real estate brokers only charge 3-4% of the sales price for their services. Some low commission realtors offer higher concessions if you let them represent you as buyer’s agents for your next real estate purchase.
2. Choose “For Sale By Owner”(FSBO)
Sellers can save up to 3% commission and cut several costs by opting for “For Sale By Owner” services. Houzeo offers Flat Fee MLS packages for FSBO sellers that list properties on the MLS and make the selling process easier and smoother. What’s more, if the buyer is unrepresented, with Houzeo, sellers can sell their homes for zero realtor commission charge!
» Flat Fee MLS: Everything You Need to Know
3. Research and compare
You can save more cash on closing costs for seller, such as the pest inspector or homeowner’s insurance agent, title and escrow companies that are more economical. Browse and ask friends who have already experience hiring one.
4. Ask to roll pay your closing costs into your loan
Your lender may offer to pay the seller closing costs at closing and add it to your mortgage. However, it comes with a price. The lender may charge you a higher interest on the loan, which now also includes the closing cost.
5. Negotiate realtor fees
While traditional real estate agents usually charge 6% of the sale price as commission, this number is not set in stone. You can negotiate the fee with your realtor.
6. Ask the buyer to cover seller closing costs
Buyers may agree to cover closing costs for sellers if the market is competitive and fewer houses are in the market. Alternatively, you can raise the listing price to cover full or partial closing costs.
Seller Closing Costs Calculator New York
Closing costs vary heavily according to location and mortgage rates. Houzeo’s Closing Costs Estimator is a free tool that factors in these elements to help sellers and buyers estimate their closing costs. It shows the user a detailed list of itemized costs and highlights junk costs that can be avoided.
All the sellers have to do is enter their property location, home sale price, mortgage payoff, seller agent commission, and buyer agent commission in the Home Sale Calculator and find out how much closing costs they will have to bear.
The Seller Closing Cost Calculator even gives sellers the estimate of their home inspection fee and home warranty fee. With the help of this home sale proceeds calculator, sellers can find out their home equity and be prepared for closing.
» Seller Closing Cost Calculator New York: Check out the seller closing costs calculator for calculating the closing costs for seller.
How Should I Prepare for My New York Home Closing?
Your closing agent will schedule a date for your closing. Here’s how to prepare for your closing day.
1. Review Your Closing Documents in Advance
Closing documents should generally be available to you in advance of the scheduled date of closing. Review these documents at length and understand their provisions. Here are some key documents you’ll likely sign at closing:
The HUD-1 or Closing Disclosure
If the buyer is taking out a mortgage to purchase a house in New York, they will get the closing disclosure summarizing the costs in detail. These documents detail the fee being charged, your loan payoffs if any, and the net proceeds you will get from the bank.
Remember, depending on how much equity you have in the property, you might be asked to bring a check (or send a wire) on the closing date. Ensure there are no typos in your name, address, property address, bank info, and other details. After that, review every amount and the totals to ensure there are no mathematical errors or inadvertent costs. You’ll be surprised how many times these documents have errors.
This document enables the legal transfer of the title from the seller to the buyer. Read this document carefully, verifying all details, including the legal description of the property, the deed book, the deed book page, and the Property Identification Number (PIN), if any.
In fact, we know of a case where a home seller sold a $94,000 property, but the deed also legally transferred the 5 other homes they owned worth $680,000 to the buyer. There was a huge scramble post-closing to correct this mistake. It could have been a nightmare for the seller if the buyer didn’t honestly transfer the rest of the properties back to them.
Statement of Closing Costs
This statement summarizes all the expenses involved in the transaction. This document is easier to understand vs. the HUD-1/Closing Disclosure, but they should tie.
Certificate of Title
This document allows you to state that you have the right to sell the property.
2. Ask Questions
If this is your first time selling a house in New York, schedule an appointment with the closing agent before the date of the closing. Prior to that appointment, do your research and ask clarifying questions on anything you have doubts about.
3. Bring TWO Forms of Official ID
There will likely be a licensed notary involved to verify your identity. Take a valid driver’s license or passport for ID. Carry a secondary ID as well, just in case.
Conclusion: Seller Closing Costs in New York
Developing an understanding of closing costs is important for you as a seller, as it can greatly impact your profits. Additionally, it is an important factor in calculating the listing price of a house in New York.
Now you’re ready! You might’ve heard horror stories of people being blindsided by high closing costs in New York- but that’s often the result of not preparing and educating themselves ahead of time. If you are a Houzeo For Sale By Owner Seller in New York, we want you to be one of the most well-informed home sellers out there. Next step, log on to Houzeo.com and list your home for sale by owner. You’ll be in full control of your listing and save thousands in the process!
Frequently Asked Questions
1. Who pays title insurance in NY?
Usually, they buyer pays for owner's title insurance and lender's title insurance in NY.
2. Can you claim closing costs on taxes in New York?
Yes. You can claim tax deductions on some closing costs that are considered taxes or insurance.
3. How are closing cost calculated in New York?
Closing costs are a sum of specific settlement expenses. These vary according to the location, mortgage rates, and market conditions. Houzeo's closing cost estimator is a free tool you can use to get a close estimate of their settlement costs.
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