So, it’s time to sell your New York City home. Hopefully, you’ll be expecting to get a pretty large profit after closing, particularly with how expensive housing prices are in New York City. But, even if you’re expecting a large profit, it can be helpful to know exactly how much you can plan on taking home. In order to calculate that amount, you need to know what closing costs to anticipate.
What Do Sellers Pay For At Closing?
Let’s get the bad news out the way first. Closing costs for sellers can potentially add up to as much as 8% of the sale price of the home. Don’t lose all hope just yet; this certainly isn’t always the case. But if you have a mortgage that you need to pay off, 8% can be a huge chunk of the equity that you have invested in your home.
Many sellers are aware that they’re going to have to pay closing costs, but what exactly they’re paying is a commonly asked question. Where is all the money that you’re forking over going?
The vast majority of your closing costs are going to go towards real estate agent commissions. Unless you otherwise negotiated at the beginning of the sale, New York City sellers often pay both the buyer’s agent and the seller’s agent commission. These combined commissions are usually about 6% of the sales price of your home. That amount is then split 50/50 between the buyer’s and seller’s agents.
You can also expect to fork out for New York State and city transfer taxes. City transfer taxes that are covered by the seller and usually amount to 1% of the price of your property if it’s valued at $500,000 or less. If it’s more than $500,000, which the majority of properties in NYC are, you can expect to pay a property transfer tax fee of 1.425%. Sadly, that’s not all you’re going to pay. The state also has a transfer tax which is an additional 0.40% on the purchase price of the home. If you’re dealing with a sales price that’s greater than $3 million, lucky you, but your transfer taxes are going to increase even more, to 0.65%. Lastly, your closing costs are probably going to cover real estate attorney fees. These aren’t too expensive, generally ranging somewhere between $1000 and $5000. It’s pretty common for New York City real estate attorneys to charge a flat fee upon closing.
How To Offset Seller Closing Costs
When you break down all of these closing costs, you can see why they add up so quickly. But there are some ways that you can offset closing costs. The bad news is that transfer taxes are unavoidable and you will have to pay them. But they are also a relatively small percentage of the closing costs and certainly nothing compared to agent commissions.
Agent commissions are going to take the lion’s share of closing costs paid by the seller. There are some ways that you can avoid agent commissions, with the primary one being don’t use an agent! You won’t be able to control whether your buyer has an agent unless you’re picky, of course, but you can choose whether or not you have an agent yourself. This would involve putting your house up for sale by owner, which is a whole different ordeal.
But if agent commissions are going to cut too much into your equity and potential profit, this might be an option worth considering. If you opt to put your house up for sale by owner to offset paying agent fees at closing, don’t expect to be able to rid yourself of the entire agent price tag. Sure, you might not have to pay commission, but you will have to pay for services that an agent would have provided. The benefit of a real estate agent and the associated fees is that their services include things like professional real estate photography, listings, and marketing. So, if you choose to go with a for sale by owner option, make sure you factor in the price that it’s going to cost you to pay for those services out of pocket.
Closing costs can be a huge portion of the sale price of the home. Because this can cut so greatly into your equity and profit margin, accurately estimating closing costs is critical. There’s nothing more unpleasant than being surprised at closing when you find out you have to fork out 8% of the sales price of the home.
There are plenty of online websites that feature closing cost calculators to help you accurately estimate the fees you’ll pay. If you are using a real estate agent, they should also be able to help you estimate closing costs pretty accurately.
When it comes to closing costs, you simply won’t be able to offset everything. The fact is, you’re going to have to wave goodbye to some profit at the end of the day. The best advice is just to try and control what you can, where you can, and prepare yourself for the amount you will have to pay to sell your home.