If you are buying in a new development or a conversion, watch out - the new development closing costs NYC buyers pay can be significantly higher than buying other existing apartments in the city. Most buyers don’t know that there are additional points to be negotiated. It’s like Vegas, if you fail to ask for something, you rarely get it, and you may be shocked after you sign a contract.
Most of the extra closing costs are in the form of transfer taxes. These taxes are typically paid by the seller, but new developments and conversions are the exceptions. In these cases, the default is for the buyer to pay the transfer taxes. If you don’t negotiate in your offer that the sponsor (seller) pays them, then guess what you are going to pay them twice - once when you buy, and again when you sell. They quickly add up! You will also be expected to pay the seller’s attorney fees unless separately negotiated.
If the sponsor isn’t willing to negotiate and you are getting a mortgage, you could pay more than 5% in new development closing costs in addition to the purchase price. Most of this is made up of transfer taxes plus seller attorney fees of an additional $3,000 or more. For example, when buying a $2,000,000 apartment in a new development you should put aside roughly $110,000 for closing costs (you can estimate your costs with Prevu’s NYC buyer closing cost calculator). These are only the closing costs to buy, you will have to pay hefty costs when you sell as well.
To learn more about transfer taxes, you can reference: New York City Real Property Transfer Tax.
Absolutely! Depending on the strength of the market and demand for the unit, these transfer taxes can be negotiated with the sponsor. Strong real estate agents will help you navigate the relative pricing and strength in the market. If it’s a hot market, you’ll likely have to bite the bullet and pay all of them. In a neutral to buyer’s market, most developers are more reasonable.
If you are early to a building, many times you may get special incentives for a period of time because a developer is trying to get the building a certain percentage sold, after which they can raise prices and bargain less on other things.
The extra closing costs you encounter when buying in a new development in NYC are less than ideal, however you are able to offset these fees by receiving a commission rebate. Modern, tech-enabled platforms like Prevu enable NYC homebuyers to get up to 2% of their purchase price cash back in the form of a buyer commission rebate. Prevu offers the largest commission rebate in NYC and is able to pass along such high savings thanks to technology that enhances your customer experience and increases our agents' efficiency.
The possibilities are endless but we have had clients ask for storage units, parking spaces, custom closets, or bespoke improvements over stock finishes. Again, if you don’t ask for it, you will not get it! We have had customers get custom California closets throughout the apartment and others have received free storage units that are worth six figures.
Between you and your broker gauge the level of interest in the building and negotiate accordingly.
Below is an example of what you can expect to pay if you are unable to negotiate concessions from the sponsor.
Despite having to pay sky high prices for apartments in NYC, some buyers may not realize that there are additional closings costs they haven’t considered. The extra costs can really add up, especially for condos.
August 30, 2018