Big question, “How much money will you actually see from the sale of your home?” It’s one of the first questions sellers ask when they put their home on the market. But there are a lot of factors that come into play when calculating your home sales profits. And sellers are often blindsided by the closing costs.
What are Closing Costs?
In New York, real estate closings are very technical procedures. And when you close on a property, it involves costs.
Closing costs are fees paid by the buyer and the seller when the title of the property is transferred from the seller to the buyer at the close of a real estate transaction. And they are separate from your agents’ commissions.
Buyers pay for more at closing than the seller does. But it’s usually the seller’s responsibility to cover both agents’ commissions. And real estate agent commissions run between 4 to 6 percent of the purchase price.
As the seller, your closing costs are subtracted from the profit you make on the home.
What Fees are Deducted from the Sale of Your Home?
According to Mosheslaw.com, the closing costs you can expect to be deducted from the sale of your home at closing can include:
- Fees the lender charges you to process and finalize your loan
- Appraisal fees
- Inspection fees
- Credit search fees
- Title search fees
- Real estate attorney fees for closing
- Transfer taxes
- Prepaid property taxes
- Prepaid interest
- Homeowner’s insurance
These costs vary by lender. They also vary depending on what type of property you are purchasing – a house, co-op, or condo. And they equal about six to ten percent of the sale price of your home.
Transfer taxes are a major fee that you as the seller will pay. In New York, transfer taxes depend on the type of property you’re selling. But you can plan on paying 1 percent of the sale price for a residential property selling for $500,000 or less. If the sale price is $500,000 or more, you can expect to pay a transfer tax of 1.425 percent. The State of New York charges the seller $4 for every $1,000 of the sale price.
You should also be aware that as the seller, you may incur a Capital Gain tax when taxes come due at the end of the tax year.
What are the Average Closing Costs for Sellers in New York?
Closing costs for sellers in New York are slightly higher than costs for buyers. They range from 8 to 10 percent for sellers. It’s crucial to have an experienced real estate attorney with you throughout the entire real estate transaction, but especially during closing. Why? Because simple mistakes made during the property sale negotiation or when the paperwork is being filled out could cost you thousands of dollars. And an attorney who doesn’t practice real estate law, much of the real estate transaction process will be foreign to them. Thus, it is extremely important that you hire an experienced real estate lawyer.
As a seller in New York, you can expect to pay the following closing costs:
- Attorney’s fees vary depending on the time they spend preparing documents and giving advice
- County clerks charge $30 to $100 for recording fees
- Transfer Tax in New York is about 1.825 percent of the sale price
- Mortgage contracts provide for the repayment of the outstanding mortgage. Buyers won’t take usually take a property unless the mortgage for the property is paid off before closing. This cost depends on the amount of the remaining mortgage, so this amount is impossible to estimate.
- Your real estate broker’s commission is 5 to 6 percent of the sale price
What You can Expect Before and at Closing
Before closing, a lender is required to list all closing costs in detail on an initial loan estimate when you apply for the loan. And they must update their closing costs estimate a few days before you and the buyer close. These updated closing costs must be disclosed on the Closing Disclosure. This allows you to know what your closing costs will be and allow you to be prepared for them before closing actually takes place.
Closing usually occurs between 60 and 90 days after the contract is signed. After the contract is signed, the buyer sends your attorney a down payment. Down payments in the State of New York average around 10 percent of the purchase price. And the down payment is held in an escrow account.
If the buyer walks away from the contract before closing day, they risk losing their down payment without a justified reason, aka a mortgage contingency clause.
In preparation for closing, your real estate attorney will:
1. Order a title report to determine if there are unsatisfied liens or property violations for you to resolve before closing
2. Complete paperwork requested by the lender and deliver the documentation required
3. Help the buyer calculate the amount owed to you at closing
4. Determine how much you will owe to lenders, the title company, and third-parties (co-op boards for example) who are involved in your real estate transaction
5. Represent you making sure the deed, transfer tax returns, and mortgage documents are in order, and that they state what you agreed to previously
At closing, you will pay your real estate attorney and other closing costs.
Assisting You in the Sale of Your Home in New York
There are a lot of additional requirements and local real estate transaction customs in New York City. Again, an experienced real estate attorney will walk you through your real estate transaction making sure everything is correct and without issues.
If you are considering the sale of your home, contact me, Charles D’Alessandro, your Brooklyn Real Estate Agent with Fillmore Real Estate. With over 30 plus years as a Brooklyn real estate agent and broker, I can direct you to an experienced real estate attorney and help you sell your home.
Our office is completely shut down and committed to your safety during the COVID-19 health crisis in compliance with the State of New York public health policies. I can be reached by phone at (718) 253-9600 ext. 1901 or by email at email@example.com.
Your Brooklyn Real Estate Agent
718-253-9600 ext. 1901
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SOURCE: Brooklyn Real Estate Blog – Read entire story here.