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Hidden Fees of Home Buying in New York City

What does it really cost to purchase a home in the city? More than you'd think; we break down the fees associated with buying in New York and apply that to two typical home purchases to see how much it adds up to

Sticker shock isn’t so shocking in New York City — this is the city known for tiny apartment units asking top dollar, $115 million condos, and rapidly rising prices in the formerly “lesser than” borough of Brooklyn, after all. Yet, even if you’re prepared for a high price per square foot, you may not be prepared for the shocking amount of extra costs associated with buying a property in the city, which can add thousands of dollars to the price of a home. Closing costs include fees for inspectors, attorneys, banks and credit reports, with total closing costs ending up between 2 and 6 percent of the sale. The buyer usually pays these fees at the time he or she closes on a mortgage. Then (more fees alert!) monthly payments kick in for insurance, property taxes and maintenance. Lest you be caught unawares, we’ve calculated the breakdown of extra costs for condo, co-op and home sales in New York City. Our guide to hidden fees is a must-read before heading out to open houses and preparing to buy in New York City.

NYC Real Estate Cost Infographic (Illustration: Loryn Brantz)

(Illustration: Loryn Brantz)

(Illustration: Loryn Brantz)

Inspection Fee
If think you’ve found the home of your dreams, the first cost you’ll encounter is an inspection fee. Inspection fees cost anywhere between $300 and $1,500, depending on the sale price of the property. The inspector will be able to tell you what needs to be repaired in the home and will better equip you to negotiate the asking price. Even if you’ve paid for a home inspection, that doesn’t mean the home is yours — the sale could still fall through in negotiations. So before you hire an inspector, make sure this is a home you’re serious about, because you may be paying for more than one inspection before you land the home of your dreams.

Attorney Fee
If the inspection has passed and your offer has been accepted, then you’ll need an attorney. The attorney will help you understand the offering plan (in a co-op or condo building) or the contract (for a home) and can help you negotiate lower taxes. An attorney typically costs between $1,500 and $2,000. Real estate attorneys typically charge a flat fee.

Bank Fees
Throughout the process of buying a home, you’ll be working with a bank or mortgage broker to secure a mortgage as well as any other needed loans. Bank fees constitute a large chunk of closing costs. Lenders require that the buyer conduct an appraisal on the property so the bank can asset its value. An appraisal fee costs between $350 to $1,500, depending on the size and price of a property. In addition to the appraisal fee, there are application and processing fees associated with taking out a loan, which come in around $650. Other bank fees can total as much as $750. The bank will disclose bank fees upon your mortgage application.

Title Fee
The title company oversees the closing as an independent party in your home purchase. The title company conducts a title search on the property, which makes sure all previous deeds on the property check out and that there is no question that someone else can claim ownership to your home. Title insurance is a type of an insurance that protects the buyer against any discrepancies associated with the home title. Banks usually insist that the buyers purchase title insurance to protect their investment. According to Douglas Elliman, the title insurance works out approximately as $450 per $100,000 of a sales price under $1 million and 15 percent on sales of $1 million or more.

Random Extra Closing Costs
The buyer will have to pay a recording fee, which costs between $250 and $750. The recording fee is charged by the local recording office for the recording of public land records upon the property sale. There’s also the credit report fee, which you’ll need to pay before you apply for a loan, and which costs around $30. For a house sale (not a co-op or condo), you’ll pay $350 to $500 for a municipal search fee. The municipal search goes through Department of Building and New York City Fire Department records to provide information on the property.

Monthly Fees Post-Closing
If you’ve successfully negotiated your contract, secured a loan from your bank, and put a down payment on your property, congratulations, you’re a homeowner, but the fees are long from over. On top of your monthly home payments, you’ll pay an annual property tax, (for houses, condos and co-ops), home insurance (for houses, condos and co-ops), common charges (for condos), maintenance fees (for co-ops) and utilities (for all homes).

To put all these numbers in perspective, check out this run-through of two different properties — a $1.5 million brownstone in Harlem and a $650,000 co-op in the East Village — and the payments tacked on to the sticker price.

What You’ll Pay
For a brownstone at 232 West 123rd St. in Harlem
(streeteasy.com/nyc/sale/931721-232-west-123rd-street-central-harlem-new-york)

Ask: $1.5 million

Inspector fee: Around $700, due to the high sales price.

Attorney fee: The buyer’s attorney will charge different rates depending on the case. Let’s estimate the attorney charges a flat fee of $1,500 for taking care of the contract.

Bank fees: Around $750. Add an application fee, $350, and a processing fee, $330, for your loan. Tack on another $900 for an appraisal of the property for the bank.

Title insurance: For a $1.5 million home, the insurance will cost 15 percent of the sales price, so the title insurance is a whopping $225,000.

Extra fees: A recording fee, $300, credit report fee, $30, and municipal search fee, $400.

CLOSING COSTS TOTAL: Roughly $230,260

Once you’re in that brownstone …

Homeowners insurance: About $400 a month. If in a flood zone, that cost is significantly higher. According to a recent report in the New York Times, the cost of flood insurance will likely jump to as much as $15,000 a year (or $1,250 a month) over the next decade.

Real estate property taxes: $153 a month, according to the listing.

Utilities: On average, NYC households spend around $400 a month on basic utilities like electricity, gas, phone, water and Internet service.

Renovation fees: A basic renovation can cost anywhere from $80,000 to $300,000. Older New York City homes often need updated mechanicals.

BASIC MONTHLY FEES: Roughly $953, not counting any renovation costs and not including the monthly house payment.

What You’ll Pay
For a two-bedroom co-op at 546 East 11th St. in the East Village
(streeteasy.com/nyc/sale/864372-coop-546-east-11th-street-east-village-new-york)

Ask: $650,000

Inspector fee: Around $500

Attorney fee: Again, let’s say your attorney charges a flat fee of $1,500 for taking care of your closing. In the case of a co-op sale, the attorney will help you understand the offering plan put forward by the co-op board.

Bank fees: There are fewer fees for an apartment than a house, so an estimate of $450. Add on top of that, an application fee, $350, and a processing fee, $330, for your loan. You’ll still need an appraisal, but it will cost less than a home sale, roughly around $800.

Title insurance: With a co-op you do not have to purchase title insurance. Instead, the buyer’s attorney has the option to hire a company to conduct a lien search to find any open liens filed against the seller. A lien search costs anywhere from $250 to $300. We’ll estimate this search costs the buyer $250.

Extra fees: A credit report fee, $30, and the recognition agreement, $200. The recognition agreement is unique to co-op sales. It’s a legal document between the co-op and the bank, in which the co-op recognizes the lender as having a security interest in the borrower’s unit. On the low end it will cost $200.

CLOSING COSTS TOTAL: $4,410

Once you’re in that co-op ….

Homeowners insurance: Co-op insurance varies, but insurance for a small apartment can go as low as $400 a year. We’ll estimate that this co-op owner pays $50 a month.

Co-op maintenance: According to the listing, $622 a month. The monthly maintenance fee covers the building property taxes, and in this case, it also includes hot water and storage. Add electricity, gas and Internet for another $100 a month.

BASIC MONTHLY FEES: $772 a month, not counting monthly mortgage.

To see the complete infographic, click here.

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