Issue 111 – Closing Costs: What You Should Know

In New York City real estate, just when you think you’ve reached your limit, there’s always more. Enter: the infamous closing costs. These fees are substantial and in addition to the purchase price. Many buyers find them shocking and disheartening at the closing table. 

The term “closing costs” can encompass the friction costs associated with the resale of condos and co-ops, as well as new construction. Each one has a nuanced cost specific to that type of ownership, such as attorney, brokers and bank fees, capital contributions, the mortgage filing recording tax, transfer taxes, title insurance (condos and townhomes), the flip tax (for co-ops), the mansion tax (if the purchase is over $1 million), and a portion of the Resident Manager’s Unit [RMU] (if in new construction).

When buying or selling a property, the total sum of closing costs can be hefty, sometimes as high as 10 percent over the purchase price. A buyer will typically pay between 2 percent to as much as 6 percent on a resale, depending on whether it is a condo, townhouse or co-op; that amount can be substantially higher for new development purchases. Conversely, a seller who originally bought into new construction and had to pay transfer taxes with that purchase now has to pay them again when selling.   

Those purchasing in a new development should be aware that additional breadth of friction costs will be incurred, as the building has not yet been occupied. Those fees include contributing one to two months of common charges to the building’s reserve fund to comply with Fannie Mae and Freddie Mac loan requirements, as well as purchasing a portion of the Resident Manager’s Unit [RMU] if the building has a resident manager or superintendent.  

All properties listed for over $1 million are subject to adjusted mansion taxes, which are based on a sliding scale determined by the sales price, in addition to transfer taxes typically paid by the sponsor (i.e., the developer).  

According to StreetEasy, a third-party listing site for New York City, “A good rule of thumb for buyers is to be prepared to spend 2-5% of the purchase price in closing costs, and expect the percentage to be on the higher end for condos, townhouses, homes over $1 million, and new developments.”

*Table provided by StreetEasy – Exact mansion tax rates are as follows:

Mansion Tax Rate

Purchase Price

1.0%

$1,000,000 – $1,999,999

1.25%

$2,000,000 – $2,999,999

1.50%

$3,000,000 – $4,999,999

2.25%

$5,000,000 – $9,999,999

3.25%

$10,000,000 – $14,999,999

3.50%

$15,000,000 – $19,999,999

3.75%

$20,000,000 – $24,999,999

3.90%

$25,000,000 or greater

 

For example, the mansion tax is 1.25% for properties listed between $2 million and $2.99 million, 1.50% for homes between $3 million and $4.99 million, and as much as 3.90% for a property with a sales price of $25 million.

This amount is compounded by the combined city and state transfer tax, which has also increased substantially, going from a flat rate of 1.825% (regardless of the sales price) to a sliding scale model, as outlined below:

  • 1.4% for sales below $500,000
  • 1.825% for sales between $500,000 and $3 million
  • 2.075% for sales of $3 million or more 

Therefore, a buyer purchasing a property for over $3 million could end up paying nearly 7% of the price just for the mansion tax and transfer tax.

Consider this only-in-NYC scenario: In 2019, billionaire Kenneth C. Griffen bought a penthouse at 220 Central Park South for a record-breaking $238 million, making it the most expensive residential sale in U.S. history at the time. Although the exact closing costs are not publicly available, estimates indicate the mansion tax alone would have been around $9.282 million! He would have also had to pay the transfer tax at the 2.075% rate, equaling over $4 million!  

The only upside to some closing costs is that they offer the ability to negotiate, depending on the market conditions. When buying in a new construction, for example, the sponsor typically expects the buyer to absorb these costs. However, in a down market, the buyer can potentially pass the mansion and transfer tax costs back to the sponsor, who may be willing to absorb the fees as a concession, thereby adding to the net savings for the buyer. 

In some cases, a buyer could even try to incorporate closing costs into the mortgage. Whether or not this happens, ultimately depends on how creative your mortgage broker is in structuring the loan. Certain banks are also able to make exceptions versus maintaining ‘vanilla’ loans that offer no flexibility.

According to an article by Evelyn Battaglia in BrickUnderground, “The responsibility for some of these taxes is not set in stone. When the market is slow, inventory is high, or an apartment is difficult to sell, a seller or developer may be willing to cover some costs to seal a deal.”

Assembling a team of well-versed and experienced professionals can make a substantial difference in the amount you have to spend. The key is identifying what to ask for and when, which can save you as much as 5% to 10% over the negotiation of the sales price, creating a quite compelling deal. 

It’s essential to work with people who know how to effectively close these kinds of deals. You should also price shop, comparing quotes from all the professionals you work with, notably real estate attorneys and mortgage brokers (or lenders), to understand the specific costs associated with each transaction and explore strategies for reducing them, as all those friction costs certainly add up.

The person who understands the structure in critical detail and knows how to negotiate it ultimately yields the most success. It is an art form to know how to structure deals effortlessly and garner the most profound value in real-time for their clients.

By exploring strategies for reducing all these costs—and most importantly, examining the total value proposition—you can have a stress-free closing, knowing that you were ultimately able to lock in savings before you even move in!

Issue 127 – The Price Isn’t the Price

A new calculation is changing what a New York apartment is actually worth. For decades, NYC real estate has been obsessed with price per square foot. However, now we may be entering the era of cost per year.

Consider two apartments of the same size, price, amenities, light, view, and location. If one has $6,000 in carrying costs and the other $11,000, are they really worth the same amount?

Increasingly, I would argue they are not because buyers aren’t simply purchasing apartments anymore. They are purchasing the economics of the buildings they’re in, which are starting to matter enormously. Think: insurance, labor, utilities, repairs, taxes, assessments, energy compliance, staffing, capital improvements, and reserves. While monumentally important, none of these photograph well, but all determine whether an apartment is easy to own — and eventually sell.

We have always understood that certain characteristics affect value: a lower floor trades differently from a higher one, an awkward layout matters, a protected view commands a premium, and poor light equals a discount. However, I contend another discount is related to the aforementioned carrying costs.

The sexiest amenity in New York real estate may soon be a healthy balance sheet. That sounds less exciting than a lap pool, unless you are the one writing the checks. Operating costs in New York have been rising, putting pressure on building budgets and making previously deferred capital projects harder to ignore.

The 2026 New York City Price Index of Operating Costs — which tracks expenses for the city’s rent-stabilized building stock — illustrates the broader pressure. Over the five years through 2026, insurance costs in that index increased more than 80%. Maintenance increased 29%, utilities more than 26%, administrative costs more than 21%, and labor nearly 16%.

Those figures aren’t a direct proxy for every condominium or cooperative in Manhattan. But they illustrate something anyone involved in operating New York buildings already understands: buildings are getting more expensive to run.

One mistake buyers can make is falling in love with the apartment and treating the building as secondary. In New York, you aren’t just buying four walls; you’re buying into a small economy. You’re inheriting its management decisions, staffing structure, physical plant, reserve philosophy, insurance exposure, and capital planning.

A building that deferred maintenance may appear inexpensive today because it hasn’t yet charged owners for the work it needs. That doesn’t necessarily make it inexpensive. It may mean the bill hasn’t arrived yet. Conversely, a building that recently completed an expensive façade project, replaced major mechanical systems, or invested in energy efficiency may initially appear less attractive because owners have already absorbed those costs. We need to consider which building presents the greater risk over the next decade. The answer isn’t always obvious from the monthly maintenance number.

Buyers understandably love low carrying costs, and brokers value them because they make a property easy to market. But low monthly charges deserve as much scrutiny as high ones. A good broker asks: Why are they low? Is the building extraordinarily well managed? Does it have other income? Are the reserves substantial? Or has the board resisted increasing common charges while postponing expensive work?

An important distinction exists between efficient and underfunded. A well-run building with appropriately funded reserves may ultimately be far more economical than one with artificially low monthly charges followed by recurring assessments. It’s not just the number that is meaningful, but the story behind it.

Few words cause more anxiety in a New York transaction than “assessment.” Even here, context matters because not every assessment is a red flag. An assessment financing a necessary capital improvement can actually strengthen the building. A new roof, elevators, façade work, upgraded mechanical systems, or energy improvements may protect long-term value.

The more important questions a sales pro considers are: What is the assessment for? Why didn’t reserves cover the expense? Is it part of a thoughtful capital plan or the latest in a recurring series of emergencies? And, perhaps most importantly, what comes next? A $500 monthly assessment with a clear end date concerns me considerably less than a building with no assessment, minimal reserves, and several million dollars of foreseeable work.

New York’s environmental requirements add another layer of complexity. Local Law 97 places emissions limits on many large buildings and creates increasingly stringent requirements over time. The encouraging news is that the overwhelming majority of covered privately-owned buildings are currently meeting the applicable limits.

But buyers should still understand what their particular building is facing; Has the Board commissioned the appropriate studies? What capital improvements may eventually be required? Has money been allocated? Is compliance incorporated into long-term planning? The concern isn’t whether a building faces a penalty today; it’s whether the building has a credible plan for tomorrow. That, increasingly, is part of due diligence.

New development creates its own version of this problem. Buyers are understandably attracted to pristine buildings with spectacular amenities and, sometimes, surprisingly reasonable initial common charges, but what will the building actually cost to operate when it is fully functioning?

Pools, spas, private dining rooms, screening rooms, landscaped terraces, playrooms, fitness centers, and mechanical systems all require staff, maintenance, and money long after the sales office closes.

The glossy brochure tells you what you’re getting. The budget tells you what you’re buying — both matter.

This conversation also requires nuance when comparing co-ops and condos. A co-op’s maintenance can initially look dramatically higher because it often incorporates expenses that a condo owner pays separately, including the shareholder’s proportionate share of the building’s real estate taxes. A condo may show a lower common-charge number while property taxes sit alongside it.

So, comparing maintenance to common charges without understanding what each includes is meaningless. The correct question isn’t: Which monthly number is lower? It is: What is my total cost of ownership, and what am I receiving in return? I believe strong building economics will increasingly become an amenity in their own right.

Brokers spend an immense amount of time learning how to talk about marble, appliances, ceiling heights, views, and finishes. We should be equally capable of explaining the financial health of the building we’re selling, because that is a big part of valuation.

None of this means price per square foot is irrelevant. It’s still an important metric. But like any metric, it becomes dangerous when used without context.

I’ve spent my career watching New York buyers pay premiums for things that cannot easily be replicated, including light, views, ceiling height, architecture, location, outdoor space, great proportions. But I always add another thing to the list: financial soundness. That may not command the same emotional response when someone walks through the front door. But increasingly, it may command something just as valuable – confidence, which matters in uncertain markets.

For years, we’ve asked buyers how much apartment they can afford. Now we need to start asking them how much building they can afford.  Because in New York, you don’t just buy the apartment — you inherit the economics beneath it.

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