Closing Costs

Closing Costs For Sellers In New York

After placing your house on the market, an interested buyer has made an offer on your home in Rye, New York, or the surrounding area and you’ve accepted it. Now, it’s time to get ready for closing, or the transfer of the property from you to the buyer.

For sellers and buyers alike, closing costs can be among the more shocking parts of the Real Estate process. You might recall having to pay a variety of closing costs when you first purchased your home. While those charges will usually be taken care of by the buyer, as the seller, you’re likely to encounter a variety of fees as well.

That’s why it’s essential to understand the closing costs for selling your home before you put it on the market.

What Are Closing Costs?

Closing costs are any fees associated with the sale of a home that is over and beyond the price agreed upon by the buyer and seller. Both buyer and seller are responsible for closing costs, but when it comes to the specific amount each is responsible for, it varies.

The amount and type of closing costs also vary by location. For example, New York closing costs include a “mansion tax,” or an additional one percent of the purchase price if it’s more than $1 million. The buyer usually pays the mansion tax, not the seller.

Often, the list of specific closing costs appears longer for buyers than for sellers, but it’s usually sellers who end up spending more on these charges. A few of the closing costs buyers in New York are often responsible for paying include.

• Bank fees.
• Application fee.
• Processing fee.
• Appraisal fee.
• Credit report fee.
• Bank attorney.
• Tax escrows.
• Recording fee.
• Mortgage title insurance.
• Fee title insurance.
• Municipal search.
• Mortgage tax in select counties in New York, such as Nassau and Suffolk.
• Condo or co-op fees, if applicable.

The closing costs a seller in New York is often responsible for include.

• Broker’s commission.
• Attorney fees.
• New York City transfer tax.
• State transfer tax.
• Equalization fee.
• Miscellaneous title fees.
• Mortgage satisfaction fee.
• Property taxes.

If you are selling a property in a condominium or co-op building, you might have to pay additional fees, including.

• Stock transfer fee.
• “Flip” tax.
• Uniform Commercial Code (UCC) 3 filing fee.

With so many different fees to consider, it’s essential to incorporate these into your budget.

How Much Should You Budget For Closing Costs?

While buyers usually need to budget for closing costs when purchasing a home, for sellers these expenses are deducted from the proceeds of the sale. That means the amount you receive when the transaction is over might be less than you anticipated.

To avoid disappointment, it’s a good idea to run the numbers ahead of time and make sure you have an understanding of the amount you’ll need to put towards closing costs in New York. A general recommendation is to expect to pay as much as 10 percent of the price of the home in closing costs.

Closing Costs For Selling A Home

Below is a guide to the costs you may incur in the southeast area of Westchester County. Please use this as a very rough introductory guide only and not as a replacement for getting specific estimates from the various parties involved.

Types of closing costs for selling a home in this area include.

Transfer Tax

Transfer tax happens on the transfer of a property from one party to another. The transfer tax amount differs considerably based on the state and city where the transaction takes place.

In New York, a transfer tax is due on all property sales over $500. The transfer tax for selling a home is $2 for every $500 or $4 for every $1,000 in price. The seller is responsible for this fee. You can calculate the transfer tax fee by multiplying the purchase price by .004. On a $1.5M purchase price, this will add up to $6,000.

Although the general transfer tax in New York is the responsibility of the seller, the additional one percent tax on sales of more than $1 million is the responsibility of the buyer.

Satisfaction Of Mortgage Fee

Satisfaction of mortgage is a document that your lender prepares to verify and confirm that the full payment of your mortgage. When selling your home, you need the satisfaction of the mortgage for the title to clear.

The satisfaction of the mortgage fee is paid to the government so that it can prepare and record the appropriate materials and so the document can become part of the public record.

In Westchester County, the general fee for mortgage satisfaction is $50.50. The county clerk’s office charges an additional $5 for each document page beyond the first one. Along with paying the county clerk, a seller might also need to pay the title company a fee to remove any liens from the property.

In addition to any fees involved, satisfying the mortgage means paying the lender any principal and accrued interest remaining on the home loan. If you are selling your property for $2 million, for example, but still owe $1 million including interest on your mortgage, you’ll need to direct $1 million of the proceeds from the sale to your lender.

Broker Commission

The broker commissions are due at closing and are usually taken out of the proceeds of the sale. Although the exact amount varies, the average is six percent of a home’s purchase price. The commission fee is negotiable, though, and some brokers might expect more or less than the usual six percent.

If a buyer and seller agent are both involved, the pair usually split the fee even. When selling a home, you should be aware of the percentage charged by the broker before agreeing to work with that agent. That way, you can avoid surprises or dismay at closing time.

While the seller is usually the one responsible for the commission, there might be some circumstances when a buyer is willing to contribute to the cost of the broker’s fee or pay it in full to make their bid more competitive.

If a lot of people are fighting for your property, don’t be surprised if you get an offer with the buyer paying the commission at closing. Since the agent’s fee is often one of the highest expenses at closing, it can be worth your while to consider offers that include paying it seriously.

Attorney’s Fee

Not every state requires buyers and sellers to hire an attorney to help them at closing. But in New York, the custom is to have legal representation. In New York, the attorney is responsible for preparing the sale contract and for reviewing the title on the mortgage. The attorney also creates the documents needed for closing and will give you a good-faith estimate of how much you’ll owe.

The cost for the attorney varies by the attorney selected. Some offer a fixed rate and others charge by the amount of work done. In both cases, the price of the home influences the price charged. Your agent can supply a list of qualified attorneys that have Real Estate closings as a regular part of their practice. You should plan on somewhere in the range of $1500 to $3000.

Adjustments

The seller will receive from the buyer any taxes the seller has pre-paid beyond the closing date. If not pre-paid, the seller will pay any taxes due up to the closing. The seller will also receive payment for any service contracts that the buyer will assume that you have pre-paid. And, the buyer will pay the seller for any oil left in the oil tank. If it is natural gas supplied by pipeline, then reading is taken the morning of the closing, and the past amount is settled by the seller with the suppliers. The same is true of electricity and water.

The seller will generally give the buyer a $500 credit for legally absolving the seller of any future liability on the home. Credit is a custom in this area.

Equalization Fee

In New York, municipalities assess the values of properties using different methods, which can create some inequality when it comes to taxation for school districts and other public resources. Equalization attempts to assess homes across the state at full market value, allowing for the collection of an appropriate amount of tax.

The state also collects a flat rate equalization fee from sellers at closing.

New York City Transfer Tax

If you are selling property in New York City, you can expect to pay a city transfer tax, on top of the state transfer tax. The amount of the tax varies based on the type of property and its price. Residential properties that sell for less than $500,000 receive a one percent tax rate, while homes that sell for more than $500,000 pay a rate of 1.425 percent to the city.

How Can You Reduce Closing Costs In New York?

When you sell your home, the goal is to get as much of a return on investment as possible. Closing costs do eat into your profit and can leave you feeling as if you didn’t receive the full value of your home in the sale.

Some types of closing costs such as the transfer taxes aren’t negotiable. New York charges a percentage of the home’s sale price and the only way to pay a lower transfer tax is to reduce the sale price of your home, but doing so would mean you are pocketless from the sale.

The closing cost with the most room for negotiation is the broker’s commission. While asking an agent to accept a fee of five percent instead of six percent might not seem like it will save you a considerable amount of money, on a sale worth $1 million, it translates to $10,000.

Another option for lowering closing costs is to have the buyer take responsibility for all or some of the broker’s commission. Depending on how competitive the market is and how desirable your property is, a buyer might be more than willing to pay part of it, especially if it means getting the home of their dreams.

While it can help your bottom line to find ways to work with your buyer or broker to reduce specific closing costs, one area where you don’t want to skimp is your Real Estate attorney.

Attorneys in New York might seem like they are a dime a dozen, but some are better than the rest. An attorney who charges less might seem like a good deal but will prove to be otherwise when they’re not available as much as you’d like or if they’re unable to produce a contract that keeps your best interests in mind.

Should Sellers Pay A Buyer’s Closing Costs?

While you can save money by having a buyer pick up some of your closing costs, in some circumstances, a seller might offer to cover all or some of a buyer’s closing costs. Though it can affect your bottom line as a seller, there are some situations when paying a buyer’s closing costs means a more significant return on investment for you.

If the current market in your area favors sellers, it’s often not in your best interest to offer to pay the closing costs. When inventory is low, meaning there are fewer homes available than people who want to buy them, it’s not uncommon for buyers to get into bidding wars over a property.

But in the reverse scenario when everyone seems to be selling, but no one is buying offering to cover the closing costs for potential buyers can be the difference between making a sale and having your property sit on the market.

What Should You Know Before Listing Your Home?

With an understanding of what to expect post-sale, what should you know before listing your home?

Here are five tips to get you started.

What Your Market Looks Like

Knowing what other, similar homes in your neighborhood or area have sold for will give you an idea of what you can expect to receive when you sell your home. If you have your home appraised, you’ll often receive a report that compares your property to not only others in the area but also to ones with similar features.

What Your Profit Might Be

Having an understanding of the closing costs and other fees associated with selling your houses, such as staging, renovations, or minor interior or exterior updates, will help you determine whether now is the right time for your family to sell.

Who the Real Estate Agents Are in Your Area

Hiring the right agent can be the difference between selling your home quickly and having it languish on the market. Interview a few agents before hiring one, so that you find someone who’s a good fit for you and knows your house’s market. It’s also a good idea to research and interview several attorneys before you hire one you can consult your Real Estate Broker for recommendations.

What You Can Expect From Selling Your Home

Depending on how much you earn from the sale of your home, you might be responsible for paying capital gains taxes. If you make less than $250,000 from the sale, or $500,000 if married, you are exempt from paying capital gains. But you’ll need to pay tax on any profit above $250,000 or $500,000.

What Selling Points to Emphasize

Remember, how your home looks inside and outside can be what makes or breaks a sale. Even if a house has a lot to offer buyers in its size, location and amenities, if it looks dirty or cluttered, people are going to consider other options.

Comparing your property to others on the market can help you see what’s attractive to buyers and what the typical selling price is for homes like yours which can provide you with a starting point for estimating your closing costs.