Craig Yoskowitz | Brooklyn Real Estate Expert

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Closing Costs For Buyers: Condo vs Co-op

New York City Real Estate Closing Costs For Buyers:
Condo vs Co-op Breakdown 2023

Despite paying sky-high prices for apartments in New York City, many NYC buyers are unaware of the additional closing costs to consider when finalizing their budget. The extra costs can really add up, particularly for condos. In this post, I'll compare condo vs. co-op closing costs that NYC buyers pay.

Buying a condo can be more expensive than buying a co-op, not just in terms of the purchase price but also in real estate closing costs. This is because when purchasing a condo with a mortgage, you are required to pay a mortgage recording tax and typically need to purchase title insurance. In contrast, when buying a co-op with a mortgage, you are not required to do so. Technically, buying a co-op means buying shares in the co-op and having a proprietary lease on the apartment. While purchasing title insurance for a co-op is possible, most buyers choose not to.

When buying a co-op in New York City, buyers should plan to pay approximately 1-2% of the purchase price. If the apartment costs over $1 million, buyers should expect to pay around 2-3%. Regarding condos, buyers can expect to spend 2-4% of the purchase price. The lower end is for properties under $1 million with small mortgages. If you’re buying new construction, closing costs can be much higher, sometimes exceeding 5%.

CLOSING COSTS TO PLAN FOR WHEN PURCHASING REAL ESTATE IN NYC

Although the mansion tax threshold in New York City is $1,000,000, it is unlikely that most people would consider a property at that price to be a mansion. The mansion tax, technically a transfer tax, is paid by the buyer on properties equal to or greater than $1,000,000. The tax amount is graduated, beginning at 1% and increasing based on purchase price ranges, up to a maximum of 3.9% for properties valued at $25,000,000 or more.

Regarding Attorney Fees for Condos and Co-ops, you can expect the transaction fee to fall somewhere between $1,500 and $4,500. The rate is typically fixed and should not change based on how much time they spend on your deal.

Title insurance is required when purchasing a condo with a mortgage. The cost of this insurance can vary based on the provider, but most estimates put it at around 0.45% of the purchase price. Although it is an expensive addition to closing costs, title insurance protects buyers and lenders against claims on the property's title before you acquired it. Unpaid property taxes or liens against the property are examples of issues that title insurance covers. While it is an added expense, most mortgage lenders require title insurance before lending money for the purchase.

Condo buyers are hit with another cost known as the mortgage recording tax. This tax requires buyers to pay 1.8% on mortgage amounts under $500,000 and 1.925% on mortgage amounts exceeding $500,000. It's important to note that this tax is based on the loan amount, not the purchase price. Unfortunately, this is a significant cost that must be paid upfront and cannot be recouped. For instance, if you were to purchase a  Brooklyn condo for $1,500,000 with a 20% down payment, you would be required to pay 1.925% on the $1,200,000 loan amount, resulting in approximately $23,100 for the mortgage recording tax.

The flip tax refers to a transfer fee paid to a co-op corporation during the sale of a co-op apartment. While it's not technically a "tax," it is still a fee that must be paid during the transaction, and it is not deductible as a property tax as a government entity does not impose it. The amount of the flip fee and who is responsible for paying it (buyer or seller) varies from co-op to co-op, but this information is typically outlined in the building's proprietary lease or co-op by-laws. In many cases, the seller pays the flip tax, and is approximately 2% of the purchase price.

It's important to remember several other closing costs, such as mortgage fees, appraisals, surveys, move-in deposits, application fees, recording expenses, and incidentals for condos and co-ops. Although they may seem insignificant compared to the more substantial costs associated with the purchase price, these fees can add up quickly. Some of these costs, such as mortgage fees, may be negotiable, so always inquire with your bank, attorney, and real estate agent along the way.

When purchasing a new development condo in NYC, it's important to factor in New York State and NYC transfer taxes. These taxes are typically negotiable with the sponsor and vary depending on the unit's value and market demand. The New York City Real Property Transfer Tax is either 1% or 1.425% of the price, depending on the unit's price. In addition, the State charges an additional 0.40% transfer tax on the purchase price, which increases to 0.65% for residential transactions over $3,000,000. 

NYC CONDO CLOSING COSTS EXAMPLE
$2,000,000 purchase price | 25% down payment

  • Mortgage Recording Tax: $21,656

  • NYC Mansion Tax: $15,000

  • Title Insurance: $6,750

  • Attorney Fees: $4,000

  • Other Closing Costs (mortgage fees, appraisals, move-in deposits, application fees, recording expenses, etc): $4,000

  • Bank Attorney: $1,500

    Total: $52,906

NYC CO-OP CLOSING COSTS EXAMPLE
$2,000,000 purchase price | 25% down payment

  • NYC Mansion Tax: $25,000

  • Attorney Fees: $4,000

  • Other Closing Costs (mortgage fees, appraisals, move-in deposits, application fees, recording expenses, etc): $4,000

  • Bank Attorney: $1,500

  • Title Insurance: $0

  • Mortgage Recording Tax: $0

    Total: $34,500


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