Closing costs on a New York City real estate purchase depend on the property and the terms of the deal. Buyers of co-ops, condos, and townhouses may face different taxes, financing costs, and building charges. A new-development contract may also require the buyer to pay costs that would otherwise fall to the seller. This guide explains the principal expenses to budget for, the charges to check before signing, and where a buyer rebate may help offset costs.
The New York State Mansion Tax
New York State’s mansion tax applies to residential purchases of $1 million or more, including co-ops, condos, and one- to three-family houses. In New York City, an additional tax applies at $2 million or more, so the buyer’s total rate rises by price tier, as shown below.
$1 million to less than $2 million: 1%
$2 million to less than $3 million: 1.25%
$3 million to less than $5 million: 1.5%
$5 million to less than $10 million: 2.25%
$10 million to less than $15 million: 3.25%
$15 million to less than $20 million: 3.5%
$20 million to less than $25 million: 3.75%
$25 million or more: 3.9%
Because the tax applies to the entire purchase price—not merely the amount above a threshold—crossing into a higher bracket can produce a meaningful increase in the purchaser’s closing costs. The contract price and any additional consideration treated as part of the purchase price should therefore be reviewed carefully.
Transfer Taxes: Resales and Sponsor Sales
New York City and New York State impose transfer taxes on sales of co-ops, condos, and houses. In a typical resale, the seller pays these taxes. A sponsor or developer contract, however, may require the buyer to pay some or all of them in addition to the mansion tax.
Before signing, check the contract and, for a new development, the offering plan to see exactly which transfer taxes the buyer must pay. That allocation is part of the deal and may be negotiable.
The City transfer-tax rate is:
1% when the consideration is $500,000 or less
1.425% when the consideration is more than $500,000
The basic New York State transfer-tax rate is 0.4%. For New York City residential sales of $3 million or more, an additional State transfer tax of 0.25% applies, increasing the seller-side State transfer tax to 0.65%. In a new-development sale, the sponsor’s contract may shift both amounts to the purchaser.
These are legally seller-side taxes, but the contract may shift the economic burden to the purchaser. Whether the sponsor will absorb some or all of them is a negotiated business term and can depend upon the development’s sales pace, the particular apartment and the strength of the purchaser’s offer.
Title, Recording, and Financing Costs
A condo or townhouse purchase typically involves a title search, title insurance, and recording charges. If the buyer obtains a mortgage, mortgage recording tax can add a substantial cost. A co-op purchase works differently: the buyer acquires shares and a proprietary lease rather than a deed to the apartment, and a loan secured by those shares generally does not incur mortgage recording tax. Co-op buyers may still pay for lien searches, filings, legal work, and lender fees.
For any financed purchase, review the lender’s Loan Estimate for appraisal charges, lender fees, prepaid interest, and other amounts due at closing.
Sponsor and Building Charges
Co-op and condo buyers may have application fees, managing-agent charges, move-in deposits, or contributions to a building fund. Some co-ops also charge a transfer fee, often called a flip tax. Check the building documents and contract to see which charges apply, who pays them, and whether a deposit is refundable.
In a new development, the sponsor may require additional payments, such as a contribution to the building’s working capital or reserve fund or a sponsor attorney fee. These should be listed in the offering plan and purchase agreement. A standalone townhouse generally has no co-op or condo board charges, although a townhouse within an association may have its own fees.
How a Buyer Rebate Can Offset Closing Costs
When a new-development sponsor pays the buyer-broker commission, Eschewal may rebate a substantial portion of its earned commission to the buyer—sometimes as much as 50%. On a higher-priced purchase, that can materially reduce the buyer’s net cost without reducing the scope of representation.
The rebate depends on the commission available and the terms agreed for the transaction. It does not reduce the taxes legally due. For a financed purchase, the rebate should be coordinated with the lender and closing team so it is properly disclosed and applied.
Closing Costs Versus Ongoing Ownership Costs
Closing costs are the amounts needed to complete the purchase. Budget separately for expenses that continue afterward: mortgage payments, insurance, utilities, property taxes, and any co-op maintenance or condo common charges. Assessments can add to those costs.
Co-op maintenance generally covers the building’s property taxes, while condo and townhouse owners generally pay property taxes separately. For a new development, review whether the initial charges are projections and whether any tax benefit may expire. A low first-year estimate may not reflect the cost of ownership in later years.
Before Making an Offer
Ask for a closing-cost estimate based on the property, purchase price, financing, and proposed contract terms. It should account for applicable taxes, lender and title costs, co-op or condo charges, and any costs a sponsor asks the buyer to pay. Include any negotiated seller concession or buyer rebate so you can see the likely net amount needed at closing.
The estimate will become more precise as the deal progresses. Before signing the contract, have your attorney review the charges assigned to you and ask your lender to confirm the financing costs. A straightforward purchase usually does not require an elaborate planning team; bring in a tax adviser when your circumstances call for one.
If you are buying a condo from abroad, read What Foreign Buyers Should Know Before Buying a New York City Condo. Explore additional articles in our NYC Buyer Guides.