New Yorkers may soon be paying more in closing costs. The amount of taxes paid in a residential real estate sale is increasing as of July 1, 2019. New York lawmakers have approved a new state budget that expands the mansion tax and increases the state transfer tax. These changes are expected to generate hundreds of millions of dollars in revenue for the state.
The revised taxes target expensive residential properties that sell for millions of dollars. The current mansion tax is a flat rate of 1% on homes sold for $1 million or more, but will soon expand on a graduated level, increasing as the sale price rises on properties that sell for $2 million to $25 million. The mansion tax maxes out at a rate of 4.15% for all properties sold for $25 million or more. The transfer tax places an additional .25% tax on properties that sell for more than $3 million.
Successfully navigating the multitude of tax laws and closing costs can be difficult when buying or selling a home. New York real estate attorney Melvin Monachan explains the various types of closing costs and who is obligated to pay the expenses in a residential real estate transaction.
What Are Real Estate Closing Costs?
Closing costs are the one-time expenses, taxes, and loan-related fees paid at the time of closing when the seller transfers the home to the buyer. In addition to taxes, closing costs generally include real estate agent fees and commissions, title and homeowner's insurance, title search fees, credit report fees, lender fees, inspection costs, flood certificates, and home appraisal and inspection costs.
Keeping track of these expenses may feel overwhelming, especially for first-time home buyers. As a general rule, the closing costs should not exceed 5% of the sale price. Closing costs are usually calculated as part of a buyer's mortgage loan estimate, although the exact amount owed at closing may vary from the original estimate.
Who Pays the Closing Costs - the Buyer or the Seller?
In New York, closing costs are generally paid by the buyer in addition to the purchase price of the home. The buyer pays the mansion and the mortgage recording taxes unless the buyer is exempt from the obligation. The seller, unless exempt, may pay the transfer tax on a property that sells for less than $1 million. Eligibility for tax exemptions varies based on the type of property involved and specific conveyance at issue.
Contact New York Real Estate Attorney Melvin Monachan
There are many complicated expenses involved in buying a home in New York. An experienced real estate attorney will help you to understand your closing costs and ensure that the right party covers the expenses. Attorney Melvin Monachan has years of experience representing both buyers and sellers in all types of real estate transactions. For help buying or selling your home, contact The Law Offices of Melvin Monachan, PLLC, by filling out an online contact form or calling (516) 714-5763.