If you’re considering buying a home in New York City, you’re probably excited and might even be a little bit nervous about the whole process, especially if you’re a first-time buyer.
With some exceptions, real estate transactions proceed on a predictable course. In fact, it’s predictable enough that skilled New York and New Jersey real estate attorneys have a real estate purchase roadmap so buyers can see what is ahead between the time they find their dream home to when they get the keys at the closing.
While the process differs slightly from state to state, it generally begins the buyer’s attorney preparing or reviewing the contract and discussing the estimated closing costs. Some of the closing costs can be estimated, while others, especially those set by statute, are fixed and easy to calculate.
Recently, there was a significant change in New York State with respect to this so-called mansion tax. And the change will affect New York City residential real estate transactions of high market value.
In a nutshell, there is a New York State transfer tax due on all residential real estate transactions within the state. It was 0.40%, but was increased when the state budget passed on March 31, 2019 to 0.65% for purchases over $3 million. Generally, the New York State transfer tax is paid by the seller at closing.
The other change in transfer taxes for residential real estate transactions involves the so-called “Mansion Tax”. Historically, since its original enactment about 40 years ago, the NYC mansion tax was an additional real estate transfer tax of 1% on properties with a purchase price over $1 million.
As a result of the recent change, the New York City mansion tax will begin increasing in increments when the purchase price hits $2 million, jumping to 1.25 % for purchases of $2,000,000 to $2,999,999, and continuing upwards to the maximum 3.90% for purchases of $25 million or more. The mansion tax is generally part of the buyer’s closing costs.
Understandably, not being advised of and prepared to pay such a potentially costly obligation could jeopardize the real estate transaction and even lead to litigation.
If you are considering buying or selling a home in New York or New Jersey, the real estate experts at Merlino & Gonzalez can help you. Contact us today to schedule a consultation.
From our offices in Staten Island, New York, and East Brunswick, New Jersey, we represent clients in both states in all aspects of commercial and residential real estate.