How Much to Buy a House in NYC (Besides the Purchase Price)?
2023 was a challenging year for the real estate industry because of the volatility mortgage interest rates resulting in many priced-out buyers. Many real estate professionals, however, are anticipating a nice rebound in 2024. With easing of interest rates and a hopeful increase in inventory, real estate market predications are optimistic. That means good news for potential buyers who have been waiting patiently on the sidelines. To be sure you’re ready to pull the trigger when an opportunity presents, especially as a first-time home buyer, and important inquiry is to ask: how much to buy a house in NYC besides the purchase price?
The New York City real estate market is known for its diversity, offering a wide range of options for potential homebuyers. From trendy neighborhoods with a vibrant atmosphere to luxurious areas boasting top-notch amenities and an iconic skyline, NYC has something for everyone. However, the cost of buying a house in the city can vary significantly based on location, neighborhood amenities, and property features.
Factors influencing the cost of buying a house in NYC include the neighborhood’s desirability, proximity to public transportation, local schools, and the current state of the housing market. Understanding these factors is crucial for potential homebuyers to make informed decisions based on their budget and preferences.
Average Cost of Buying a House in NYC
One thing that is not a surprise is that housing is expensive in New York City. Manhattan was recently listed as the most expensive housing market in the United States, with an average home price of over $2.4 million. The average cost of buying a house in NYC, however, varies significantly across different neighborhoods. According to data from realtor.com, in November 2023, the median listing price across New York City was $839,000, and the median sales price was $730,000. Variances in median home prices are dependent many factors, including location and amenities (popular neighborhoods tend to command higher prices), property type (NYC is unique with so many housing types, including condo buildings, co-op buildings, and traditional homes all in very close proximity), specific property features like dining room, outdoor space, hardwood floors, proximity to public transportation, and great schools commanding higher prices.
What Costs Are Involved in Buying NYC Real Estate?
Much of the news and data about the cost of buying real estate in New York City is focused around the large metrics, such as the median asking price (which may be skewed when accounting the price for luxury listings) and the average price per square foot in certain neighborhood. In addition to the purchase price, however, prospective buyers should consider additional costs when buying a house in NYC.
1) Possible Real Estate Agent Commission
When buying a house in NYC, it’s important to factor in real estate agent commission fees. Generally, and in many transactions, the seller is the party responsible for paying the seller agent’s commission, who comes to an agreement with the buyer’s agent about splitting the commission for bringing the parties together. These fees vary from agent to agent, but they generally range between 1-6% of the purchase price of the house.
Sometimes, however, a seller will negotiate down the commission, and as a result, the commission to the buyer’s agent is reduced. Some buyer’s agents will request that the buyer pay them a sum of money at closing to help compensate for the reduced commission.
Example: Seller negotiated the listing agent’s commission at 2.5%. Listing agent is offering 1% commission to the buyer’s agent, and will take 1.5% for their commission. Because of the inequitable split, and the work done by the buyer’s agent, the buyer’s agent may ask their client, the buyer, to pay the .5% difference (or some other agreed-upon amount) at closing to supplement their reduced commission.
2) Mortgage Loan Costs
There are several costs associated with obtaining a mortgage, including the mortgage broker fee, origination fee, appraisal, and escrows. Many mortgage loan officers make their income as a commission for every mortgage that they successfully process, which will be deducted by the mortgage lender from your loan amount and paid at the closing. This fee is typically a percentage of the loan amount and can vary.
An origination fee is often charged by the lender for processing the loan application, and it is usually a percentage of the loan amount as well.
The appraisal fee is the cost of having a professional appraiser assess the value of the property being purchased, ensuring it meets the lender’s requirements.
Escrows refer to the funds that are set aside in an account for the payment of property taxes and insurance premiums. These costs, along with other potential fees and charges, should be considered when budgeting for a mortgage.
3) Survey
While surveys may not be as relevant to condo owners or co-op owners, they are highly advisable when you are buying any type of property where there is fencing or other items around the property. A survey is a map of the property that shows the boundary lines, and may reveal any encroachments. The reason you want to know about encroachments is because you are paying taxes on the property, and you want to make sure that you have possession of all the land you are paying taxes on.
Additionally, in many contracts, the parties will include some kind of language that, if there is an encroachment, the seller would be responsible for curing the same prior to closing. If the encroachment isn’t resolved prior to closing, then presumably the buyer takes it subject to that encroachment.
4) Home Inspection Fees
Obtaining a home inspection is of paramount importance when purchasing a property as it allows potential buyers to thoroughly examine the property for any defects or issues that may not be immediately visible. The inspection provides an opportunity to identify any necessary repairs or maintenance that may be required, which is essential for negotiating the terms of the contract.
By skipping the home inspection, buyers are essentially taking the property in “as is” condition, meaning they will be responsible for any repair costs or issues that arise post-purchase. A comprehensive inspection provides peace of mind and allows buyers to make an informed decision about the property, ensuring they are aware of any potential expenses or risks associated with the purchase. It is a prudent step in the home-buying process that can save buyers from unforeseen expenses in the future.
5) Attorney Fees
Having an attorney represent you in a real estate purchase is vital. A lawyer’s expertise and experience ensure that your interests are protected. From reviewing contracts and negotiating terms to conducting thorough due diligence and resolving any title issues that may arise, an attorney acts as your advocate, working towards a smooth and secure transaction.
Many attorneys will offer a flat fee for a real estate transaction, which will include contract review, review of title, and then appearance at closing.
6) Title Searches and Title Insurance
Mortgage lenders require title insurance when you are buying property because it helps to protect their investment in case there are any issues with a property’s title. A title report is obtained during the purchase process to thoroughly examine the history of the property’s ownership and any potential issues that may affect the title’s validity. This report can uncover problems such as liens, encumbrances, or legal disputes that may impact the buyer’s ownership rights or create financial liabilities. By requiring title insurance, lenders ensure that they are protected from any unforeseen legal or financial issues that may arise, providing them with a sense of security and safeguarding their financial interests in the property.
7) Title Closer Fee
The title company plays a crucial role in the real estate closing process by acting as the party responsible for ensuring that all financial obligations are met. By handling the financial aspects, the title company provides peace of mind for both parties involved, knowing that all financial obligations will be met and that the transaction will be completed accurately and legally.
Their representative, known as the title closer, is the individual who oversees the closing proceedings and ensures that all necessary payments are made. During the closing, both the buyer and the seller pay the title closer for their services.
Tips for Informed Homebuyers
As you can see from above, there are many costs to be considered when looking at homes for sale beyond the listing price of homes. These additional closing costs can cause potential buyers to avoid moving forward with a purchase. A few tips to help control these costs include:
1) shop around for loan products: different lenders offer different loan products, which can often reveal a range of mortgage rates. Be sure to check with different lenders to see what options they offer to help control your housing monthly cost moving forward;
2) ask for fee pricing upfront: don’t be afraid to ask the professionals that will be assisting you, including your attorney, the surveyor, the appraisal, etc. how much they will charge for their services;
By considering these additional costs and budgeting accordingly, potential homebuyers can make more informed decisions when buying a house in NYC.
Conclusion
In conclusion, buying a house in NYC offers a multitude of options for potential homebuyers, each with its own unique characteristics and price points. By understanding the factors influencing the cost of buying a house, exploring different neighborhoods and their average house prices, considering additional costs, and being aware of financing options and additional considerations, potential homebuyers can make informed decisions in the NYC real estate market.
In conclusion, if you are in the process of buying a house, it is crucial to seek the guidance and expertise of professionals who can ensure a smooth transaction. The Law Office of Richard Kistnen is dedicated to providing exceptional legal services tailored to the specific needs of homebuyers. With their extensive knowledge and experience in real estate law, they can offer invaluable advice and assistance throughout the entire homebuying process. If you are ready to move forward with buying a house in NYC, contact the Law Office of Richard Kistnen today to review your transaction by calling (718) 738-2324 or scheduling your no obligation virtual consultation here.