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Closing Costs
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  • 1. Closing Costs Jerry M. Feeney, Esq. Manhattan Office: Brooklyn Office: 303 Fifth Avenue, Ste. 405 374 Court Street New York, New York 10016 Brooklyn, New York 11231 (212) 842-0237 (718) 233 6560 DE Capital Mortgage
  • 2. Understanding Closing Costs
    • Seller’s closing costs
      • New York State Real Property Transfer Tax
        • Also known as the “deed tax”
          • But applies to coops also
    April 28, 2010
  • 3. Understanding Closing Costs
    • Seller’s closing costs
      • New York State Real Property Transfer Tax
        • Also known as the “deed tax”
          • But applies to coops also
        • $2 for every $500 of purchase price or portion thereof
    April 28, 2010
  • 4. Understanding Closing Costs
    • Seller’s closing costs
      • New York State Real Property Transfer Tax
        • Also known as the “deed tax”
          • But applies to coops also
        • $2 for every $500 of purchase price or portion thereof
        • Example
          • Purchase price of condo is $500,000
    April 28, 2010
  • 5. Understanding Closing Costs
    • Seller’s closing costs
      • New York State Real Property Transfer Tax
        • Also known as the “deed tax”
          • But applies to coops also
        • $2 for every $500 of purchase price or portion thereof
        • Example
          • Purchase price of condo is $500,000
          • $500,000 / 500 = 1,000
    April 28, 2010
  • 6. Understanding Closing Costs
    • Seller’s closing costs
      • New York State Real Property Transfer Tax
        • Also known as the “deed tax”
          • But applies to coops also
        • $2 for every $500 of purchase price or portion thereof
        • Example
          • Purchase price of condo is $500,000
          • $500,000 / 500 = 1,000
          • $2 x 1,000 = $2,000
    April 28, 2010
  • 7. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1% of sale price if $500,000 or less
    April 28, 2010
  • 8. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1% of sale price if $500,000 or less
        • Example
          • Sale price $500,000
    April 28, 2010
  • 9. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1% of sale price if $500,000 or less
        • Example
          • Sale price $500,000
          • $500,000 x .01 = $5,000 tax
    April 28, 2010
  • 10. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1.425% of sale price if greater than $500,000
    April 28, 2010
  • 11. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1.425% of sale price if greater than $500,000
        • Example
          • Sale price $502,000 ($2,000 higher)
    April 28, 2010
  • 12. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax
        • 1.425% of sale price if greater than $500,000
        • Example
          • Sale price $502,000 ($2,000 higher )
          • $502,000 x .01425 = $7,153.50 tax ($2,153.50 higher )
    April 28, 2010
  • 13. Understanding Closing Costs
    • Seller’s closing costs
      • New York City Real Property Transfer Tax (individual sales)
        • 1.425% of sale price if greater than $500,000
        • Example
          • Sale price $502,000 ($2,000 higher )
          • $502,000 x .01425 = $7,153.50 tax ($2,153.50 higher )
          • Seller nets $153.50 less by selling for $2,000 more
    April 28, 2010
  • 14. Understanding Closing Costs
    • Purchaser’s closing costs
    April 28, 2010
  • 15. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Applies to transactions of $1,000,000 and over
    April 28, 2010
  • 16. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Applies to transactions of $1,000,000 and over
        • Flat 1% of entire purchase price
    April 28, 2010
  • 17. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Mixed use buildings
        • If building is mixed use, and total purchase price is $1,000,000 or over, pay on the amount allocated to residential (even if allocated amount is less than $1,000,000)
    April 28, 2010
  • 18. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Mixed use buildings
        • Example
          • Purchase price is $1,200,000
    April 28, 2010
  • 19. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Example
          • Purchase price is $1,200,000
          • Building is mixed use, 1/3 commercial, 2/3 residential
            • Floor one is a grocery store
            • Floors two and three are residential apartments
    April 28, 2010
  • 20. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Example
          • Purchase price is $1,200,000
          • Building is mixed use, 1/3 commercial, 2/3 residential
          • Allocation is $400,000 commercial, $800,000 residential
    April 28, 2010
  • 21. Understanding Closing Costs
    • Purchaser’s closing costs
      • Mansion tax
        • Example
          • Purchase price is $1,200,000
          • Building is mixed use, 1/3 commercial, 2/3 residential
          • Allocation is $400,000 commercial, $800,000 residential
          • Pay mansion tax on $800,000 only ( e.g. $8,000)
    April 28, 2010
  • 22. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
    April 28, 2010
  • 23. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
    April 28, 2010
  • 24. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
    April 28, 2010
  • 25. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
    April 28, 2010
  • 26. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
            • Purchaser pays 1.8% or $8,999.98
    April 28, 2010
  • 27. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
            • Purchaser pays 1.8% or $8,999.98
          • 1.925% if $500,000 or more
    April 28, 2010
  • 28. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
            • Purchaser pays 1.8% or $8,999.98
          • 1.925% if $500,000 or more
          • Example
            • Mortgage is $500,000
    April 28, 2010
  • 29. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
            • Purchaser pays 1.8% or $8,999.98
          • 1.925% if $500,000 or more
          • Example
            • Mortgage is $500,000
            • Purchaser pays 1.925% or $9,625.00
    April 28, 2010
  • 30. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • 1.80% if less than $500,000
          • Example
            • Mortgage is $499,999
            • Purchaser pays 1.8% or $8,999.98
          • 1.925% if $500,000 or more
          • Example
            • Mortgage is $500,000
            • Purchaser pays 1.925% or $9,625.00
            • In other words , purchaser pays $625.02 more for the opportunity to borrow $1 extra of mortgage money
    April 28, 2010
  • 31. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • On commercial “bulk rate” scenario, NYS takes the position that the commercial rate applies . . .
            • 2.05% if loan is less than $500,000
            • 2.80% if loan is $500,000 or more
            • Lender pays 25 basis points it unit encumbered is 1-6 family residence
          • But it also takes the position that the mansion tax applies!
    April 28, 2010
  • 32. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • Some things to be aware of
            • Negative amortization loans, the MRT is based on the maximum amount the loan could grow to
            • If the maximum amount kicks over the $500,000 mark, then the MRT is based on 1.925%
    April 28, 2010 April 21, 2008 (c) 2008 Jerry M. Feeney, Esq.
  • 33. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Mortgage recording tax
          • Some things to be aware of
            • Adding an unused HELOC that brings total mortgage amount above threshold of $500,000 forces the MRT on both loans to be 1.925%
    April 28, 2010 April 21, 2008 (c) 2008 Jerry M. Feeney, Esq.
  • 34. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Title charges
          • Policy rates regulated by statute
          • Be careful:
            • Bulk rate only applies for new construction / conversion with 10 or more units
            • 8 unit conversion, $1,000,000, $750,000 mortgage
            • Bulk rate is $3,156 and $617 but that is wrong
            • Correct quote is $4,508 and $881
    April 28, 2010
  • 35. Understanding Closing Costs
    • Purchaser’s closing costs
      • Condos and houses only
        • Title charges
          • Policy rates regulated by statute
          • Be careful:
            • Some lawyers use leasehold insurance on a coop purchase
            • When buying from an estate, this is considered prudent
    April 28, 2010
  • 36. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
    April 28, 2010
  • 37. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
    April 28, 2010
  • 38. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
            • NYS deed tax would be $2,400 (600,000 / 500 x $2)
    April 28, 2010
  • 39. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
            • NYS transfer tax would be $2,400 (600,000 / 500 x 2)
            • NYC transfer tax would be $8,550 (1.425% of 600,000)
    April 28, 2010
  • 40. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
            • NYS transfer tax would be $2,400 (600,000 / 500 x 2)
            • NYC transfer tax would be $8,550 (1.425% of 600,000)
            • Adjusted purchase price is $610,950 (600,000 + 2,400 + 8,550)
    April 28, 2010
  • 41. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
            • NYS transfer tax would be $2,400 (600,000 / 500 x 2)
            • NYC transfer tax would be $8,550 (1.425% of 600,000)
            • Adjusted purchase price is $610,950 (600,000 + 2,400 + 8,550)
            • NYS transfer tax payable is $2,444 (610,950 / 500 x 2)
    April 28, 2010
  • 42. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000
            • NYS transfer tax would be $2,400 (600,000 / 500 x 2)
            • NYC transfer tax would be $8,550 (1.425% of 600,000)
            • Adjusted purchase price is $610,950 (600,000 + 2,400 + 8,550)
            • NYS transfer tax payable is $2,444 (610,950 / 500 x 2)
            • NYC transfer tax payable is $8,706.04 (1.425% of 610,950)
    April 28, 2010
  • 43. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $600,000, contract says buyer pays ½ of transfer taxes
            • NYS transfer tax would be $2,400 (600,000 / 500 x 2)
            • NYC transfer tax would be $8,550 (1.425% of 600,000)
            • Adjusted purchase price is $606,675 (600,000 + ½ x (2,400 + 8,550))
            • NYS transfer tax payable is $1,213.35 (1/2 x 606,675 / 500 x 2)
            • NYC transfer tax payable is $4,322.56 (1/2 x 1.425% of 606,675)
    April 28, 2010
  • 44. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Seller’s transfer taxes
        • Based on adjusted price
          • Example
            • Purchase price $495,000, contract says buyer pays all of seller’s transfer taxes
            • NYS transfer tax would be $1,980 (495,000 / 500 x 2)
            • NYC transfer tax would be $4,950 (1.0% of 495,000)
            • Adjusted purchase price is $501,930 (495,000 + 1,980 + 4,950)
            • Now the transaction is subject to 1.425% NYC tax
            • NYS transfer tax payable is $2,007.72 (495,000 / 500 x 2)
            • NYC transfer tax payable is $7,152.50 (1.425% of 501,930)
    April 28, 2010
  • 45. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Mansion tax based on adjusted price
        • Example
          • Purchase price $985,000
          • NYS transfer tax would be $3,940 (985,000/500*2)
          • NYC transfer tax would be $14,036.25 (985,000*0.01425)
          • Adjusted price is $1,002,976.25
          • Now the transaction is subject to the mansion tax of 1% or $10,029.76
    April 28, 2010
  • 46. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Working capital fund contributions
        • Can be as high as two months common charges
    April 28, 2010
  • 47. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Reserve fund contribution
        • Can be as high as three months common charges
    April 28, 2010
  • 48. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Security fund contribution
        • Can be as $25,000 in some of the Battery Park projects
    April 28, 2010
  • 49. Understanding Closing Costs
    • Purchaser’s closing costs – new construction
      • Share of resident manager’s unit
        • Two options:
          • Option one: condominium association buys the unit outright
            • Downside: higher payment at closing
          • Option two: condominium association gives a mortgage to buy it
            • Downside: higher common charges
          • Convert the decision into a sales positive
    April 28, 2010