Our recent post outlined the typical condo closing costs that run from 2-5% of the purchase price. As a co-op buyer you are in luck; your costs will be much lower. While the actual costs vary by market — with New York City being at the high end — you’ll find similar items in your co-op closing costs wherever you are buying.
For the sake of easy comparison to the condo closing costs example, let’s look at the typical fees you’ll encounter buying a $400,000 New York City co-op, including a rough dollar estimate for each item. ($400,000 will buy you a studio or 1BR unit in a market rate co-op in many of the neighborhoods popular with first time buyers.)
Your attorney’s fee $1,500
– This attorney is in your corner throughout the purchase process, and should be well-versed with co-op transactions.
Share Loan application fee $500
– Fee to the bank that gives you a share loan to buy the co-op, to cover their initial expenses. (Most people refer to the share loan as a mortgage — and it functions like one — but technically it’s not a mortgage.)
Appraisal fee $300
– Payment to cover the cost of an independent appraisal of the apartment for the bank.
UCC- 1 filing fee $75
– Your share loan is governed by the Uniform Commercial Code, and this filing puts into public records your lender’s a security interest in your co-op until the loan is paid off.
Lien search $250
– Lien search will uncover if there are any liens on the unit that must be paid before a sale, for example, so called Mechanic’s Liens placed by a contractor who claims he’s owed money for work on the unit.
Bank attorney’s fee $500
– Yes, you’ll have to pay for the bank’s closing lawyer, too!
Recognition agreement $350
– Fee paid to the co-op for recognizing the rights of the lender to receive notice in the event the shareholder (buyer) defaults on his financial obligations to the building (maintenance fees, any assessments, etc.) that could put the unit into foreclosure.
Co-op maintenance fee adjustment $350 (est. ½ month)
– To adjust for monthly maintenance fee paid by the seller for post-closing time period (Note: co-op maintenance fee includes property taxes.)
Move-in deposit $500
– The co-op may require you to give a deposit to protect the building for any damages your move-in may cause, for example, damage to hall wallpaper.
These estimated closing costs total $4,325, or about 1.1% of the purchase price. Your actual closing costs may be more or less, but using 1% of purchase price as a starting point, gives you a rough ballpark of the extra amount you need to save for your co-op purchase. With the $400,000 purchase price in our estimate, if you were planning to put down 10%, or $40,000, you’ll need to actually save about $45,000 in order to have enough to close the deal.
While it does not impact our example, you should know that if you purchase a $1 million+ co-op or condo, you will also have to pay so called mansion tax, equal to 1% of the purchase price.