The journey to homeownership or selling your property in New York City, particularly with a condo, involves a complex tapestry of legal, financial, and procedural steps known as the closing process. This blog post aims to introduce you to this intricate process, focusing on the customary fees involved for both buyers and sellers, and offer an alternative path to homeownership using Lock It In, LLC’s proprietary lease-option product.

The Closing Process: An Overview

1. Offer and Acceptance:

• The journey begins when a buyer makes an offer on a condo, which, if accepted by the seller, leads to a signed contract. This contract outlines the terms of sale, including price, closing date, and any conditions.

2. Due Diligence:

• Buyers: Conduct inspections, review the building’s financials, bylaws, and any potential liens or assessments.
• Sellers: Prepare all disclosures and ensure all property-related issues are addressed.

3. Financing:

• If the buyer is financing the purchase, this step involves mortgage application, approval, and securing a commitment letter from the lender.

4. Legal Representation:

• Both parties hire real estate attorneys to review or draft the contract, manage the closing, and protect their interests.

5. Title Search and Insurance:

• A title company searches public records to ensure the property title is clear of any liens or claims. Title insurance is then purchased to protect against future claims.

6. Closing Preparation:

• Attorneys prepare closing documents, including the deed transfer for buyers and payoff statements for sellers.

7. Closing Day:

• Both parties, along with their attorneys, meet (often virtually) to sign all documents, exchange keys (if applicable), and finalize the transaction with payment.

8. Post-Closing:

• The deed is recorded with the city, and any remaining steps like changing utilities are completed.

Customary Closing Costs for Buyers:

Mortgage-Related Fees:

• Application Fee: Ranging from $300 to $500, this covers the cost of processing your loan application.
• Appraisal Fee: Typically $300 – $1,200, to assess the condo’s value for the lender.
• Loan Origination Fee: Often 1% of the loan amount, charged by the lender.
• Loan Underwriting Fee:  Often a flat fee ranging from $500 to $1,500.
• Points: Optional upfront fee to lower the interest rate, each point costing 1% of the loan.
• Credit Report Fee: Usually under $100, for pulling your credit report.
• Flood Certification: $20 – $50, to determine if the property is in a flood zone.
• Attorney Fee: For reviewing documents and representing at closing, expect $2,500 – $3,500.

Title and Recording Fees:

• Title Search and Insurance: Can range from 0.4% to 0.5% of the purchase price for condos, protecting against title issues.
• Recording Fees: For recording the deed and mortgage, around $200 – $300.

Taxes:

• Mansion Tax: Progressive from 1% to 3.9% for properties sold over $1 million.
• Mortgage Recording Tax: For condos, this is 1.8% for mortgages up to $500,000, and 1.925% above that, minus any lender contribution.

Condo-Specific Costs:

• Application Fee: To process your application by the condo board, typically $500 – $1,000.
• Credit Check: $100 – $200 per person.
• Move-in Fee: Non-refundable, often around $500 – $1,000.
• Move-in Deposit: Refundable, could be $1,000 – $2,000 or more.
• Building Fees: Various, like working capital contributions or assessments.

Customary Closing Costs for Sellers:

Real Estate Commissions:

• Agent Commission: Usually 5% to 6% of the sale price, split between buyer’s and seller’s agents.

Legal and Title Fees:

• Attorney Fee: Similar to buyers, expect $1,500 – $3,000 for legal services.
• Title Insurance: Sellers typically pay for the buyer’s policy, around 0.4% to 0.5% of the sale price.

Taxes:

• New York State Transfer Tax: 0.65% for properties over $3 million, 0.4% otherwise.
• New York City Transfer Tax: 1.425% for properties sold over $500,000.

Condo-Specific Costs:

• Flip Tax: If applicable, 1% to 3% of the seller’s gross profit, paid to the condo association.
• Move-out Fee: Often around $500 – $1,000.
• Move-out Deposit: Refundable, generally $1,000 or more.

Additional Fees:

Both parties might also encounter:

• Escrow Fees: For holding funds during the transaction.
• Courier Fees: For document delivery, usually minor.
• UCC-1 Filing Fee: If a cooperative, for filing against personal property, around $100.
• Prorations: Adjustments for property taxes, common charges, etc., shared based on the closing date.

Cost Illustration for a $2 Million Condo:  

Buyer:

Seller:

Managing Closing Costs

• Negotiation: Buyers can sometimes negotiate with sellers or developers to cover some fees.
• Comparison Shopping: For services like title insurance or attorney fees, shopping around can save money.
• Tax Abatements: Look into any available tax abatements or exemptions for homeowners.

Lock It In!, LLC can Mitigate These Costs

The NYC condo closing process can be costly, but there is a way to defer and reduce these costs by using the proprietary lease-option product offered by Lock It In!, LLC.  Visit LockItInFinance.com or email [email protected] to learn how our product lowers the cost of your NY State or NYC home, benefiting both buyers and sellers.