2022 NestApple Guide to NYC Buyer Closing Costs

February 13, 2025 by Georges Benoliel

When you thought buying an apartment in NYC couldn’t get any more complicated or costly, you started to think about closing costs. The sheer number and size of a buyer’s closing costs in NYC can be overwhelming and, at worst, a deal-breaker, so it’s essential to have a rough sense of how much closing costs will be before looking at apartments. Many people do not think about closing costs when purchasing a home. Learn how to estimate your potential closing costs in New York and explore ways to reduce some of these expenses. Although the high costs of purchasing a condo or co-op in NYC make it challenging to afford, there are additional fees during closing that you might not have anticipated or included in your budget.

Since these extra fees can significantly impact your purchase in NYC, it’s important to understand their purpose to be better prepared when buying your dream home.

Could you clarify what you mean by buyer closing costs?

Buyer closing costs are expenses paid after the purchase price is negotiated with the seller.

This includes taxes, fees, and services imposed by the government, bank, management company, insurers, and your attorney.

Different fees apply to other types of transactions, and these fees can be significant.

1. An all-cash co-op priced under $1,000,000 may have fees as low as a few thousand dollars.
2. When financing new construction, buyer closing costs usually amount to around 5% of the purchase price and can go over 6%.

Most buyer closing costs are paid upfront in cash and cannot be included in the mortgage.

This feature can substantially raise the total cash you need to bring to closing. For instance, even a 2% buyer closing cost of the purchase price would still mean a typical financed buyer needs to bring 10% more cash to the closing table.

Although we suggest all buyers read this post initially, you can also estimate your closing costs using NestApple’s closing cost calculator.

What closing costs does the buyer need to pay?

The buyer’s closing costs include taxes and other fees due at closing when buying a home. While some of these expenses are similar to the seller’s closing costs, others differ entirely. Usually, these costs are higher for financed home purchases due to mortgage-related closing expenses.

When it comes to setting aside extra money for your closing costs, we recommend setting aside:

1. Approximately 2-4% of the purchase price of your co-op, condo, or townhouse.
2. For co-ops, townhouses, or condos priced over $1 million, aim to save approximately 3-4% of the purchase price.
3. If you bought a brand-new condo, raise that figure to 5% of your purchase price.

Many of the buyer’s closing costs may encompass some or all of the following expenses:

• Lender fees for processing and finalizing your loan
• Appraisal
• Inspection
• Credit search
• Title search
• Legal fees
• Transfer taxes
• Property taxes
• Taxes
• Prepaid interest
• Homeowner’s insurance

The NYC Mansion Tax

An extra real estate transfer tax is charged on property purchases of $1,000,000 or more. The mansion tax is likely the most well-known buyer closing cost in NYC.

Until 2019, the mansion tax was a simple 1% of the purchase price for real estate deals of $1,000,000 or more. In March 2019, the rates increased for transactions over $2,000,000.

The mansion tax is binary. It’s $0 if you buy an apartment for $999,999 and $10,000 if you buy one for $1,000,000. This is why seeing an apartment close to $1,000,000 is infrequent.

It includes all types of real estate—co-ops, condos, and houses.

If you’re considering apartments slightly above $1,000,000, negotiating a commission rebate could help bring the price below that threshold by effectively lowering the purchase cost.

The Mortgage Recording Tax

The mortgage tax requires purchasers in NYC to pay it

1. 1.8% fee applies to mortgage amounts less than $500,000.
2. A 1.925% rate applies to mortgage amounts exceeding $500,000.

This tax is based on the mortgage amount instead of the purchase price and applies to mortgages on real estate, like condos and houses.

It does not include co-ops, since they are a different form of ownership.

No deed, no real property, no mortgage recording tax. According to New York State, it is “a tax on the privilege of recording a mortgage on real property located within the state.” In New York City, the mortgage recording tax is

1. 2.05% of the mortgage amount if it’s less than $500,000
2. and 2.175% if it’s $ 500,000 or more.

The good news is that your lender usually chips in 0.25%, so your net responsibility is 1.8% or 1.925%, respectively.

If you finance 80% of your purchase, the mortgage recording tax will be approximately 1.45% of the purchase price, which is much higher than the mansion tax!

Reduce the Mortgage Recording Tax with a CEMA.

Even when buying a condo, you may lower the mortgage recording tax by using a CEMA. This process involves assuming the seller’s existing mortgage, a process that requires negotiation and extensive paperwork. I recommend considering this option early in your planning.

The mortgage recording tax is applicable in NYC and is notably higher than in other New York counties; for instance, Westchester County’s total mortgage recording tax is only 1.3%.

In various counties across New York, the mortgage recording tax usually ranges from 1% to 1.25%. However, certain counties like Ulster and Madison impose a lower rate of 0.75%. You can consult the tax tables provided in Form MT-15, also called the mortgage tax return.

The Title Insurance

While not as significant as the mortgage recording tax, title insurance is another NYC closing cost that sneaks up on buyers because it’s not well-known. Title insurance safeguards the buyer and their lender against claims on the property. What does this entail? The seller renovated their kitchen but did not pay the contractor, who now has a claim on the property. The contractor might file a construction lien with New York State. Ideally, this should be caught during due diligence, but it may not have been properly filed, could have been lost by the state, or been overlooked by your attorney.

A title insurance policy protects buyers from this type of claim after closing.

Remember, in the example above, the lien was on the property—not with the seller—so the lien would be your problem once you close. A simple way of summarizing title insurance is that it ensures you’re buying the apartment and only the apartment. If there are any unwelcome surprises down the road, you’re covered. A title insurance policy remains valid for as long as you own the property and typically costs around 0.4% of the purchase price.

When buying a condo, you are always required to purchase title insurance for several reasons. However, buying title insurance for co-ops is rare because you are not buying real property.

The Legal Fees

Given the size of the items listed above, buyers can rest assured that their attorney’s closing costs will be relatively low. Unlike many lawyers, real estate attorneys usually charge a flat fee per transaction rather than an hourly rate. Whether your purchase proceeds smoothly or a contract negotiation becomes lengthy and complex, the cost remains the same. Typical real estate attorney fees range from $2,500 to $4,000 per deal.

Some lawyers may charge only a few hundred dollars, while others might bill over $5,000. When selecting an attorney, it’s crucial to conduct thorough research and prioritize your best interests, regardless of the fee.

While it is technically all attorneys’ responsibility to do this, NestApple has negotiated transactions in which attorneys have cut corners.

The Application Fees

Although not significant, purchase application fees are among the most burdensome closing costs for buyers.

When submitting your condo or co-op application, you’ll encounter certain fees, typically including a processing charge, credit check, financing costs, and a move-in fee. You can request a copy of the purchase application before submitting your offer to review the costs, but expect to pay an extra $2,000 to $3,000 in expenses. Financing fees are also included here, alongside application fees.

Your bank applies various financing fees for your mortgage, such as application, appraisal, and attorney fees. Expect to pay approximately $2,000 in total for these fees. Home buyers in NYC who will be financing their purchase will likely also cover most, if not all, of the additional costs listed below.

• $900 – Bank Attorney Fee
• $900 – Bank Loan Origination Fee
• $750 – Property Appraisal Fee
• $500 – Mortgage Application & Processing Fee
• $100 – Credit Report & Employment Verification Fee
• $1500 – Title Search & Recording Fees
• $500– Financing / Recognition Agreement Fee (Co-op only)
• Are there any other closing costs?

Sometimes, sellers attempt to pass their closing costs onto you.

When dealing with new developments, it’s common to pay transfer taxes and other fees. Transfer taxes are typically 1.825% of the purchase price. Moreover, closing costs for new developments are usually about 2% higher than those for resale properties.

Flip Tax

Be cautious if a seller requests extra payments, such as a flip tax, that should have been disclosed upfront. Dishonest sellers or agents may secretly add these costs after accepting an offer, effectively acting as hidden price increases, which is unacceptable. If you encounter this situation, consult your broker and attorney. They can help determine if the seller is attempting to deceive you. A flip tax is a closing cost paid by the seller.

Are closing costs paid by buyers tax-deductible?

The quick answer is no—most closing costs for buyers are not tax-deductible.

However, taxes such as mansion and mortgage recording taxes can be included in your cost basis, potentially lowering your capital gains upon sale. Talk to your accountant to determine which closing costs are relevant to you. Most buyers will see that real estate primarily influences their tax return through mortgage interest and property taxes, although this effect will decrease after the 2017 tax reform.

What are effective methods to reduce buyers’ closing costs in NYC?

While avoiding most closing costs is challenging, focusing on co-ops can reduce expenses. Opting for co-ops allows you to bypass the mortgage recording tax and title insurance, saving approximately 2% of the purchase price. Although government negotiations are unlikely, negotiating with others might be possible. Can your bank waive the application fee? Could your attorney lower their fee by $250? You won’t know unless you ask. These small savings might not resolve everything, but they still count as meaningful progress.

Requesting a commission rebate from your real estate agent is the most effective way to lower your closing costs. Since buyer-broker commissions typically amount to 2.5% or 3% of the purchase price, even a small rebate can significantly reduce your costs in NYC. Many buyers are unaware that this option exists, so if you choose not to work with NestApple (though we hope you do!), please ask about a rebate.

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