Typical Costs in Real Estate Closings for Homebuyers

Closing costs are those expenses associated with the purchase of a property other than the contract down payment. Closing costs fall into two major categories: Bank Related Expenses and Title Related Expenses.

Bank Related Expenses – These expenses are those incurred in obtaining the mortgage to complete your purchase. They include:

Points – A point, equal to one (1%) percent of the amount of the mortgage, is a fee paid to either the lender, or its designate (in the case where a mortgage broker has placed the loan), for the opportunity to obtain a mortgage loan from that lender. Points are 100% tax deductible when the mortgage is used to purchase a primary residence.

Mortgage Bank’s Attorney – Unfortunately, a Purchaser is customarily obligated to pay the Bank attorney’s fee, in addition to their own attorney’s fee, as a condition of obtaining the mortgage. This fee ranges from $400 to $700 depending on the lender.

Tax Escrow – Most lenders will undertake to pay the real estate taxes on properties it grants mortgages against. In order to have sufficient monies to pay these taxes, a lender will require a Purchaser to deposit 1/12th of the annual real estate tax bill in an escrow account with the lender, along with the monthly mortgage payment. In addition, a Purchaser will be required to make an initial deposit, usually equal to 50% of the annual tax bill, in order to have sufficient funds set aside to make the first tax payment after closing of title.

Private Mortgage Insurance (PMI) – Anytime a Purchaser borrows in excess of 80% of the purchase price from a lender, that lender will require that the Purchaser obtain private mortgage insurance from a third party provider. The Lender will arrange for this coverage and pass the cost through to the Purchaser. This coverage must remain in place until the principal balance of the mortgage falls below 80% of the value of the property. The first year’s premium must be paid at closing, and varies according to the amount of the mortgage.

Homeowners Insurance – A Lender will also require that a Purchaser maintain homeowners insurance in an amount necessary to replace the dwelling house. In addition, most lenders require that the first year’s premium be paid in advance of the closing.

Misc. Fees – Lenders shall also assess various fees depending upon their internal procedures. Some of these fees include: Tax Service Fees, Document Preparation Fees, and Application and credit Fees. These fees vary depending on the particular lender.

Title Related Expenses – These expenses are those required to complete the transfer of title and to record the necessary documents associated with the closing. They include:

Title Insurance -Required by all mortgage lenders, title insurance guarantees that the Purchaser is obtaining good and marketable title from the Seller. This one time expense, set by statute, varies according to the purchase price of the home and the amount of the mortgage.

In New York, Purchasers must also pay the following fees during closing.

Mortgage Recording Tax (MRT) – Anytime a mortgage is recorded in the State of New York, there is a one time fee assessed against the Purchaser. In New York City, the fee is equal to 1.75% of the amount of the mortgage, less $25.00. The fees in the outlying counties vary, depending upon the local regulations, with a minimum of .75% of the amount of the mortgage, less $25.00. This “tax” is not tax- deductible.

Recording fees – In addition to the MRT, the Purchaser is obligated to pay a nominal fee to the County Clerk to record the original mortgage and deed. This one time expense is approximately $100 to $150, which varies according to county.

New York Mansion Tax– New York buyers are also required to pay a 1% tax on the property purchase price on property worth over $1 million.


 

Advertisements

FAQ for Homebuyers in New York

Should I sign the offer or binder agreement that my real estate agent prepared?

A Binder Agreement is the written offer that your real estate agent or broker may ask you to present to the Seller. The Binder is a written offer to purchase a property at a given price. It usually details what items are included in the property and incorporates mortgage financing. The Binder Agreement is also typically accompanied by a nominal earnest money deposit between $100 and $500.

A Binder can be interpreted as a formal agreement, so it should always be subject to review by an attorney and the execution of a formal contract containing the basic terms of the offer. In addition, if the offer is being made on an existing home, the binder should also be subject to a satisfactory inspection of the dwelling by a licensed engineer.

Should I get the property inspected?

The only inspection usually required by a lender is a termite or wood destroying insect inspection. Most lenders will require an “Infestation Certificate” showing that there is no visible evidence of infestation in the home. You must provide this certificate to the lender before they will clear your file for closing.

However since you are buying the property “As Is” it is a good idea to have a structural inspection performed by a licensed inspector or engineer. The inspection will give you the opportunity to accompany the inspector around the property and learn recommended maintenance for your new home. In addition, you may be able to negotiation a discount in the purchase price for some defects found during the home inspection.

Depending on the age and condition of your building, you may choose to get inspections in the following areas: radon, septic, well, home heating oil tank, asbestos, mold, stucco and/or lead paint.

You will generally have between 10-14 days to get the inspection done and submit the results to the Seller’s attorney. You should schedule an appointment with an inspector immediately following attorney review. Any defects will be submitted by your attorney for the Seller’s attorney to address, usually with a credit at closing or a repair of the defect.

This is an out of pocket expense that you pay directly to the inspector. You will work with your real estate broker and the seller to coordinate this.

When should the Contract be signed?

Once an offer has been accepted and an inspection has been completed the Seller’s attorney will draft the Contract. The attorneys will review the technical aspects of the contract with their clients and negotiate terms on their behalf. Be sure that you understand your obligations under the contract before you sign. Once you are prepared to sign, the down payment negotiated in the contract will be due.

What is a title search?

A title search is a search conducted by licensed agency to find any judgments against the parties, show any unpaid tax liens and provide a copy of the recorded deed and mortgage for the Seller. It is conducted to make sure that the Seller can provide clear title to the property to the new Buyers. Our law firm will order the title search after attorney review is complete. It takes approximately two weeks for the title search to be completed. When title is received, it is reviewed by our office for defects, and then submitted to your lender. Your lender needs to approve the title before they will clear you to close. Once you close, you will have insured title to the property even though the actual title insurance policy will not be issued for many months after the closing.

What is title insurance?

Title insurance is an insurance policy that covers your ownership interest and the mortgage interest of your lender. You will be required to purchase title insurance for your property by your lender. Title is ordered from an independent title company. Title insurance prices are state regulated, so that the cost of title insurance does not change from company to company. We charge you the amount that is charged to us by the title company.

Who orders the survey and why do we need a survey?

The survey is a like a map that shows the placement of the dwelling relative to the perimeter of the property lines. Our law firm will order the survey together with the title search once attorney review is complete. Almost all lenders require that a survey be drawn and submitted to them for approval, prior to closing. In some cases the lender will accept an existing survey if it is not too old and if the Seller can give an Affidavit saying that there have been no changes to the property since the date of the survey. If an existing survey is available, and you wish to rely upon it, you must let us know so that we do not order a new survey for you. Title insurance, title searches and the survey costs are paid at closing.

Do I need an appraisal?

The appraisal determines the market value for the property you are purchasing. It is ordered by the lender and generally the buyer is charged a fee by the lender for the appraisal. The appraisal is not provided to us in advance, and usually is not available at the closing. Most lenders require that you send them a letter within 90 days after the closing in order to receive a copy of the written appraisal.

What do I need to bring to the closing?

At the closing you will need to bring a certified check, bank check, or cashier’s check. You will be provided with the exact amount of the check as soon as the numbers are available to us.

In addition, you should bring proof of homeowner’s insurance (declaration page and one year paid receipt). It is also a good idea to bring a few personal checks in the unlikely event minor adjustments need to made between the parties at closing.

If you are married, bring your spouse, or if you purchased the home with a partner, you must both be present at the closing.

Who will be at the closing?

The closing will be attended by the purchasers, sellers, their attorneys, the lenders attorney, a representative for the title company and the real estate brokers.

Where will the closing be held?

It is custom in New York, and most Contracts provide, that the closing will occur at the office of the Buyer’s attorney. If you are buying new construction, the closing will most likely occur at the office of the builder’s attorney.

FAQ for Sellers in New York

Should I sign the offer or binder agreement that my real estate agent prepared?

A Binder Agreement is the written offer that your real estate agent or broker may ask you to present to the Seller. The Binder is a written offer to purchase a property at a given price. It is usually details what items are included in the property and incorporates mortgage financing. The Binder Agreement is also typically accompanied by a nominal earnest money deposit between $100 and $500.

A Binder can be interpreted as a formal agreement, so it should always be subject to review by an attorney and the execution of a formal contract containing the basic terms of the offer. In addition, if the offer is being made on an existing home, the binder should also be subject to a satisfactory inspection of the dwelling by a licensed engineer.

What Documents Will I Need?

Following Attorney Review you will be asked to provide a number of documents. The closing process with be much smoother if you have these documents ready.

The Deed – This is the legal document, which transferred title to you when you purchased your home. If verifies that you are the rightful owner of your property, describes the legal bounds of your property, and defines the manner in which you may transfer your property to a third party.

The Survey or Survey Certificate (if it is a condominium)- This is the map outlining the legal boundaries of your property and how you home is situated on your property. The recital of your property lines should match those contained in your deed.

Certificate of Occupancy (C.O.) – This is the document which verifies that your home met the requirements of your local building code at the time that it was built. Depending upon the age of your home, you should have a C.O. for each permanent structure on your property. This includes any additions or extensions as well as detached garages, in ground pools, cabanas and certain decks and patios. CO’s are handled by the municipalities. Check with your municipality to determine their requirements and to schedule an inspection as soon as possible.

Condominium Owners– you will be asked to provide contact information for the Homeowner Association so the Buyer can obtain a copy of the bylaws, financial statements, insurance information and a Closing Statement that will confirm when monthly maintenance is paid through, as well as any move in/out fees.

Mortgage and Note – In a high interest rate environment, a mortgage which may be assumed by a purchaser is a valuable asset. If your mortgage is not assumable, it will have to be satisfied at closing. A copy of your last mortgage statement will assist your attorney to obtain payoff figures to satisfy any outstanding mortgages or other obligations.

Tax / Utility Bills – Although these are not critical, an informed buyer may ask about the real estate taxes and fuel charges.

What are my expected closing costs?

  • Payoff existing mortgage.
  • Real estate commission for the services of the real estate broker
  • Attorney’s fees.
  • Realty Transfer Fee: NY State requires that the seller pay a realty transfer fee when property is transferred in NY. The fee is $2 for every $500 of the selling price. The fee for a home worth $300,000 would be $1,200. New York City also requires the seller to pay a realty transfer fee. The New York City Real Property Transfer tax (RPT) is usually 1% of the sale price for sales less than $500,000.

    .

FAQ for Sellers in New Jersey

My agent has asked me to sign a contract of sale, should I?

Yes, in New Jersey it is customary for a real estate broker to prepare a standard form contract. This contract is subject to a three day Attorney Review Process. So make sure that you contact your attorney immediately because Attorney Review starts with the first business day.

What is Attorney Review?

After signing the contract of sale, the parties have three business days to have the contract reviewed by their attorney. During this time period, your attorney will review the contract and prepare what is called a rider or letter addendum to the contract. The Rider will create additional provisions to the contract, both attorneys trying to make the terms most favorable to their client and addressing any issues that have not been already addressed by the initial contract.

Some of the issues that will be addressed during the attorney review are:

  • What is included in the sale price, appliances, draperies, etc.
  • The amount of the down payment
  • Date of settlement and possession date
  • Contingencies to the sale–inspections or required improvements
  • Whether the transaction is an “As-Is” deal

Once the attorneys and their clients accept each other’s newly added terms, the attorneys will sign off on the final Rider and inform all parties that attorney review is concluded. All time periods (for the mortgage contingency and inspection results) will start from this date (not the date you signed the initial contract with your broker).

What Documents Will I Need?

Following Attorney Review you will be asked to provide a number of documents. The closing process with be much smoother if you have these documents ready.

The Deed – This is the legal document, which transferred title to you when you purchased your home. If verifies that you are the rightful owner of your property, describes the legal bounds of your property, and defines the manner in which you may transfer your property to a third party.

The Survey or Survey Certificate
( if it is a condominium)- This is the map outlining the legal boundaries of your property and how you home is situated on your property. The recital of your property lines should match those contained in your deed.

Certificate of Occupancy (C.O.) – This is the document which verifies that your home met the requirements of your local building code at the time that it was built. Depending upon the age of your home, you should have a C.O. for each permanent structure on your property. This includes any additions or extensions as well as detached garages, in ground pools, cabanas and certain decks and patios. CO’s are handled by the municipalities. Check with your municipality to determine their requirements and to schedule an inspection as soon as possible.

Smoke Detector Certificate, Carbon Monoxide Certificate & Fire Extinguisher Requirements
New Jersey State law requires the issuance of smoke detector and carbon monoxide certificates in the sale of homes. New Jersey law also requires that at least one portable fire extinguisher, rated for residential use and no larger than ten pounds, be mounted within ten feet of the kitchen area and not more than five feet above the floor. You must schedule an appointment with the fire code official to inspect your home to determine that you have the requisite number of smoke and carbon monoxide detectors and that they all work. They will also determine if your home is compliant with the Fire Extinguisher Law. The inspection should be scheduled as soon as
possible; delay may lead to the delay of your closing.

Condominium Owners– you will be asked to provide contact information for the Homeowner Association so the Buyer can obtain a copy of the bylaws, financial statements, insurance information and a Closing Statement that will confirm when monthly maintenance is paid through, as well as any move in/out fees.

Mortgage and Note – In a high interest rate environment, a mortgage which may be assumed by a purchaser is a valuable asset. If your mortgage is not assumable, it will have to be satisfied at closing. A copy of your last mortgage statement will assist your attorney to obtain payoff figures to satisfy any outstanding mortgages or other obligations.

Tax / Utility Bills – Although these are not critical, an informed buyer may ask about the real estate taxes and fuel charges.

What are my expected closing costs?

  • Payoff existing mortgage.
  • Real estate commission for the services of the real estate broker
  • Attorney’s fees.
  • Realty Transfer Fee: NJ requires that the seller pay a realty transfer fee when property is sold in NJ. The amount is based on numerical formula. The expected realty transfer fee on a $500,000 home is approximately $4,175.
  • Gross Income Tax- In addition, if you are a Nonresident of New Jersey you are required to pay an estimated gross income tax. If you may be considered a Nonresident of New Jersey you should inform your attorney and discuss the tax implications with you accountant.

FAQ for Homebuyers in New Jersey

My agent has asked me to sign a contract of sale, should I?

Yes, in New Jersey it is customary for a real estate broker to prepare a standard form contract. This contract is subject to a three day Attorney Review Process. So make sure that you contact your attorney immediately because Attorney Review starts with the first business day.

What is Attorney Review?

After signing the contract of sale, the parties have three business days to have the contract reviewed by their attorney. During this time period, your attorney will review the contract and prepare what is called a rider or letter addendum to the contract. The Rider will create additional provisions to the contract, both attorneys trying to make the terms most favorable to their client and addressing any issues that have not been already addressed by the initial contract.

Representing a Buyer, your attorney should try to extend the deadlines for your mortgage commitment and inspection report, as well as giving you the most flexibility to get out of the transaction, if your inspection report is unfavorable or if you are unable to secure a mortgage.

If you are buying a condominium, co-op or a townhouse, this firm will put in a provision requesting copies of important documents, including the Master Deed, Bylaws as well as the House Rules of the Condo Association, in addition to the financial documents, including a budget, and/or financial statements, which will show the financial stability of the building.

Once the attorneys and their clients accept each other’s newly added terms, the attorneys will sign off on the final Rider and inform all parties that attorney review is concluded. All time periods (for the mortgage contingency and inspection results) will start from this date (not the date you signed the initial contract with your broker).

Should I get the property inspected?

The only inspection usually required by a lender is a termite or wood destroying insect inspection.
Most lenders will require an “Infestation Certificate” showing that there is no visible evidence of infestation in the home. You must provide this certificate to the lender before they will clear your file for closing.

However since you are buying the property “As Is” it is a good idea to have a structural inspection performed by a licensed inspector or engineer. The inspection will give you the opportunity to accompany the inspector around the property and learn recommended maintenance for your new home. In addition, you may be able to negotiation a credit at closing for some defects found during the home inspection.

Depending on the age and condition of your building, you may choose to get inspections in the following areas: radon, septic, well, home heating oil tank, asbestos, mold, stucco and/or lead paint.

We also strongly suggest that you order an underground oil tank sweep, to determine if there are underground oil tanks on the property. Often, in the contract, the sellers represent that there are no underground oil tanks on the property, when in fact there is a tank that the seller is not aware of.

If there is a well and/or septic system on the property we suggest that you have it inspected. The buyer pays for this inspection. There are a few different types of septic inspections available. You should discuss the various available tests with your home inspector.

If there’s a well on the property, the parties will have to comply with the recently enacted Private Well Testing Act, N.J.S.A. 58: 12a-26 to 37. Typically the seller pays for the cost of the well testing. The tests currently take a long time to complete, so they should be ordered as soon as attorney review is completed. At closing both parties are required to sign a certificate reflecting that they have both received and reviewed the well test results.

You will generally have between 10-14 days to get the inspection done and submit the results to the Seller’s attorney. You should schedule an appointment with an inspector immediately following attorney review. Any defects will be submitted by your attorney for the Seller’s attorney to address, usually with a credit at closing or a repair of the defect.

A structural inspection generally runs about $250 for a condominium and $300+ for a one family home. This is an out of pocket expense that you pay directly to the inspector. You will work with your real estate broker and the seller to coordinate this.

What is a title search?

A title search is a search conducted by licensed agency to find any judgments against the parties, show any unpaid tax liens and provide a copy of the recorded deed and mortgage for the Seller. It is conducted to make sure that the Seller can provide clear title to the property to the new Buyers. Our law firm will order the title search after attorney review is complete. It takes approximately two weeks for the title search to be completed. When title is received, it is reviewed by our office for defects, and then submitted to your lender. Your lender needs to approve the title before they will clear you to close. Once you close, you will have insured title to the property even though the actual title insurance policy will not be issued for many months after the closing.

What is title insurance?

Title insurance is an insurance policy that covers your ownership interest and the mortgage interest of your lender. You will be required to purchase title insurance for your property by your lender. Title is ordered from an independent title company. Title insurance prices are state regulated, so that the cost of title insurance does not change from company to company. We charge you the amount that is charged to us by the title company.

Who orders the survey and why do we need a survey?

The survey is a like a map that shows the placement of the dwelling relative to the perimeter of the property lines. Our law firm will order the survey together with the title search once attorney review is complete. Almost all lenders require that a survey be drawn and submitted to them for approval, prior to closing. In some cases the lender will accept an existing survey if it is not too old and if the Seller can give an Affidavit saying that there have been no changes to the property since the date of the survey. If an existing survey is available, and you wish to rely upon it, you must let us know so that we do not order a new survey for you. A survey for a one family house costs approximately $500.00 and a survey certificate for condo costs about $225.00. Title insurance, title searches and the survey costs are paid at closing.

Do I need an appraisal?

The appraisal determines the market value for the property you are purchasing. It is ordered by the lender and generally the buyer is charged a fee by the lender for the appraisal. The appraisal is not provided to us in advance, and usually is not available at the closing. Most lenders require that you send them a letter within 90 days after the closing in order to receive a copy of the written appraisal.

What do I need to bring to the closing?

At the closing you will need to bring a certified check, bank check, or cashier’s check. You will be provided with the exact amount of the check as soon as the numbers are available to us.

In addition, you should bring proof of homeowner’s insurance (declaration page and one year paid receipt). It is also a good idea to bring a few personal checks in the unlikely event minor adjustments need to made between the parties at closing.

If you are married, bring your spouse, or if you purchased the home with a partner, you must both be present at the closing.

Who will be at the closing and how long will it take?

The closing will be attended by you and your spouse or partner, and you will be represented your attorney. Usually a representative of the lender does not attend the closing but sends all documentation by overnight delivery or email. The other party, represented by their attorney, will also be present at the closing. However, it is not unusual for a Seller not to attend in person, but to pre-sign all closing documents and to send an attorney as their legal representative. Often, the realtors will also attend the closing. A closing usually takes approximately 1 to 2 hours.

Where will the closing be held?

It is custom and practice in New Jersey, and most Contracts provide, that the closing will occur at the office of the Buyer’s attorney. If you are buying new construction, the closing will most likely occur at the office of the builder’s attorney.


Hello world!

Welcome to the Real Estate in New York and New Jersey Blog. This blog is here as a resource for real estate news and law in the New York City and New Jersey area. Be sure to check back for the latest news!

Disclaimer

The information contained in the njnycrealestate blog is provided for informational purposes only, and should not be construed as legal advice on any subject matter. No recipients of content from this site, clients or otherwise, should act or refrain from acting on the basis of any content included in the site without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. The content of this Web site contains general information and may not reflect current legal developments, verdicts or settlements. S. Jason & Associates, LLC expressly disclaims all liability in respect to actions taken or not taken based on any or all the contents of this site. Any information sent to S. Jason & Associates, LLC via Internet e-mail or through the Web site is not secure and is done so on a non-confidential basis. The transmission of this website, in part or in whole, and/or communication with S. Jason & Associates, and any recipients. The firm does not necessarily endorse, and is not responsible for, any third-party content that may be accessed through this Web site.