Understanding Closing Costs When Selling Your Manhattan Home

Selling a home in Manhattan can be thrilling, but don’t let unexpected expenses catch you off guard. Picture this: you’re preparing to sell your property, anticipating a nice return, only to discover that several costs reduce your profit. Welcome to the world of closing costs. Preparation is key to making sure these expenses don't surprise you.

Let's walk through the typical costs sellers face, why they exist, and strategies to retain more of your money when selling your Manhattan home.

What Are Closing Costs?

Closing costs encompass the final expenses you incur to complete the sale of your property. They include fees for title transfers, legal services, and more. In Manhattan, sellers typically pay between 6% to 10% of the sale price in closing costs.

Being aware of these costs ahead of time will help you budget and avoid any last-minute financial surprises.

The Most Common Closing Costs for Home Sellers

1. Real Estate Agent Fees

Real estate commissions remain a key expense for many sellers, but recent changes have made them more flexible and negotiable. Sellers are no longer required to cover the buyer’s agent commission, and all commission agreements must be clearly disclosed and agreed upon upfront.

How Much Do Commissions Cost?

Traditionally, commission rates ranged from 5% to 6% of the sale price. However, with the new rules, commission structures vary more widely and are subject to direct negotiation between sellers, buyers, and agents.

Who Pays the Commission?

• Sellers may still choose to pay the buyer’s agent commission, but it is no longer an industry standard.
• Some buyers may now be responsible for paying their own agent’s commission.
• Listing agents still charge a fee for marketing, negotiations, and transaction management, but the rate is now more customizable.

2. Transfer Taxes and Recording Fees

Transfer taxes are required by the state and city of New York to legally transfer ownership of real estate.

• How much do they cost? They can range from 1% to 2% of the sale price.
• Who pays these fees? In Manhattan, the seller often covers this cost, though it can sometimes be negotiated with the buyer.

3. Title Insurance (Owner’s Policy)

Title insurance protects against any legal claim or dispute over the property. While the buyer typically gets their own policy, sellers might have to pay for the owner’s policy.

• Is it mandatory? It isn't required, but it's often a standard part of home sales.
• Cost: Generally between 0.5% to 1% of the sale price.

4. Escrow and Closing Fees

Escrow services manage the funds and documents to ensure the transaction is secure. These fees cover the paperwork and process needed to close the sale.

• What do escrow companies do?
• Hold funds in a secure account.
• Ensure contract terms are met before disbursing funds.
• How much do these fees cost? Between $500 and $2,000, varying by provider.

5. Prorated Property Taxes

Property taxes in Manhattan are paid annually. You'll need to cover your share up through the closing date.

• How is it calculated? The tax amount is prorated based on how many days you've owned the property in the year.
• Example: If annual property taxes are $12,000 and you sell halfway through the year, you owe $6,000.

6. Homeowners Association (HOA) Fees

If your property is part of an HOA, there will likely be extra fees at the time of closing.

• Unpaid dues: Any outstanding fees must be settled before closing.
• Transfer fees: Some HOAs charge fees ranging from $200 to $1,000 for processing the ownership change.

7. Attorney Fees (If Required)

In New York, having a real estate attorney review and finalize the transaction is typically required.

• Cost: Generally between $500 to $1,500.
• What do they do?
• Review contracts and closing documents.
• Ensure everything is legally compliant.

How to Reduce Your Closing Costs

Closing costs can take a sizable chunk out of your home sale profits, but the good news is that there are ways to cut back on these expenses. Whether through negotiation, strategic choices, or finding cost-effective service providers, you have options to keep more money in your pocket. Here are some practical ways to lower your closing costs as a seller.

Sell Without an Agent (FSBO) — this means no listing agent commission. However, you’ll still need to:

• Pay the buyer’s agent commission (usually 2.5% to 3%).
• Handle marketing, negotiations, and paperwork yourself.

FSBO works best if you have experience in real estate or a buyer already lined up.

Ask the Buyer to Cover Some Costs

• In some deals, buyers agree to cover certain closing costs instead of negotiating a lower sale price.
• This works best in a seller’s market, where buyers compete for homes.

Shop Around for Service Providers

• Get multiple quotes for title insurance, escrow services, and attorneys.
• Some companies offer discounts for bundled services.

Preparing for Closing

As you approach the finish line of your home sale, there are still a few final steps to take before closing day. Proper preparation can help avoid last-minute surprises and ensure everything goes smoothly. Here’s what you need to do before handing over the keys.

1. Review the Closing Disclosure Early

• You’ll get a Closing Disclosure a few days before closing that lists all costs.
• Review it carefully to catch any unexpected charges.

2. Finalize Repairs and Paperwork

• Complete any agreed-upon repairs before closing.

Make sure liens, HOA fees, and taxes are paid to avoid delays.

Final Thoughts

Successfully selling a home in Manhattan involves more than just finding a buyer. Closed costs may add up quickly, but with proper planning and awareness, you can maximize your profits.