Who pays transfer taxes?
Transfer taxes can take a first time seller by surprise. Simply subtracting the sales price from the purchase price of a property will not amount to the size of the seller’s check at closing. Transfer taxes and other settlement charges feed into the equation. Condo buyers in New York City must watch out too. In the case of a new development, the buyer may be expected to pay the seller’s transfer tax. A buyer also pays this if the seller neglects to pay the transfer tax.
Also, if the seller is not a US citizen or resident alien then the seller must sell 15 percent of the purchase price to the IRA. If the seller neglects to do that or get a FRIPTA (Foreign Investment in Real Property Tax Act) form signed by the seller, then the burden falls upon the buyer to pay these taxes.
How much are they?
If the sales price for a new condo is below $500,000, then the New York City transfer tax is 1 percent. If the price is above $500,000 then the tax is 1.425 percent. That’s not all. Albany wants in too. There is an additional New York State transfer tax of 0.4 percent on purchases. High rollers have to cough up more. For properties that sell above $3 million, the state transfer tax rises to 0.65 percent.
Can they be negotiated?
A buyer’s market, when sellers are desperate, is a great time to try and negotiate. The developer — ie the sponsor — will sometimes offer to pay the tax. There are some cases where property transfers are exempt from the tax. These include transfers to or from the United Nations or another international organization of which the U.S. is a member. Also, exchanges involving non-profit organizations, those from the federal or New York State government or by an executor of a will are also exempt. However, if the executor sells the property, the tax applies.
The New York City transfer tax is formally known as the Real Property Transfer Tax, or R.P.T.F.
As a result of the 2020 state budget, The New York State transfer tax was increased for purchases of more than $3 million, but the New York City transfer tax was not changed.
(Featured image courtesy of Corcoran)