What closing costs are negotiable in the current buyer's market?
Flip taxes and transfer fees are most ripe for negotiation.
iStock
If you’re in the market to buy real estate in New York City right now, you’re likely well aware that it’s a buyers' market, particularly in the higher price points. As a result, sellers—from individuals to luxury developers—are more open to making a deal than in the years prior to the current slowdown.
While buyers are coming to the table with offers under asking, many sellers prefer to sweeten the deal with concessions. Which is why those pesky (sometimes considerable) additional closing costs, are more negotiable than ever. (For a step-by-step list of what you can expect, you can also check out "Brick Underground's guide to closing costs.")
But not all closings costs are equally fair game. (Some are not, though.)
“It would be rare for a buyer to ask for a seller to pay their application fee, and rare for a seller to ask you to pay their move-out fees,” says Craig L. Price, partner at Belkin, Burden, Wenig & Goldman.
And some sellers (i.e., new construction versus a co-op re-sale) may be more amenable to picking up some tabs than others.
Most likely to be negotiated
“Flip taxes and transfer fees are most ripe for negotiation depending on where the market is at any given time,” Belkin says. “If it’s a heated market, sellers try to offload them to buyers, and vice versa in a slow market.”
Wiggle room with new construction
There is a lot of opportunity to get closing costs covered when buying in new construction right now. Why? “Developers don’t want to reduce prices,” says Eben MacNeille, an agent with Douglas Elliman. Covering closing costs is an easy way to keep the price up but lower buyers’ costs.
“The first such concession that I look for as a buy-side broker are the transfer taxes, which amount to 1.825 percent of the purchase price. This fee is covered by the seller in a resale transaction—but in contrast, it flips to the buyer’s responsibility in new construction,” says John Farrell, a broker with Citi Habitats. “Thankfully, most developers are picking up this charge during negotiation as the new development market continues to face challenges – especially on the luxury side.”
Maria Bromberg, an agent with Compass, concurs.
“Right now, due to the combination of the season and the market, new developments are highly negotiable,” she says. “To keep the price point high, sponsors are paying for their own closing costs, something buyers traditionally pay—transfer taxes—and for higher-priced products, months of common charges.” Some sponsors are even paying multiple years of common charges, like Extell, which is offering a deal to buyers who purchase by the end of 2018.
Farrell adds that other smaller fees, such as the working capital fund contribution and the fee to cover the buyer’s share of the resident manager’s unit can add up and should be potentially up for negotiation.
“A request to have them covered by the sponsor is something a broker should keep in their back pocket, if a negotiation should stall and it’s time to get creative,” he says.
When to negotiate with resales
Price points out that for resale transactions, guidelines as to who pays for what in co-ops and condos can vary from building to building. Some co-ops and management companies are more specific about which ancillary and administrative fees are covered by whom, and some are more TBD.
“It depends on how well the closing package is in place,” he says. Where there’s no answer or there's a gray area, there’s room for negotiation.
Big price cut? Pay up
If you have managed to negotiate a sale price under asking, much less likely that the seller will be so amenable to paying some of your closing costs.
“If the buyer succeeded in negotiating and getting the best possible price and it’s substantially lower than the seller originally asked, the seller will inform the buyer that there is a limit to what he can do,” says Elliot Bogod, managing director of Broadway Realty. However, it never hurts to ask. “Unless the buyer hears 'no' there is always room to negotiate more.”
