Paying Sponsor Closing Costs No Longer a Given
The Pass Along
One fact of life that will become immediately apparent when purchasing an apartment from a sponsor, is that sponsors like to pass along costs.
From the sponsor's perspective, since they have just laid out many millions of dollars for construction, recouping costs is of major interest, once units start getting sold. Ordinarily, the seller pays the New York City and New York State transfers taxes in connection with the sale of an apartment. For New York City, this tax amounts to 1 percent of the purchase price for apartments under $500,000 and 1.425% for apartments priced at $500,000 or more. The New York State transfer tax is .004 percent of the purchase price (which equals $4 per $1,000 of purchase price). In sponsor sales, the sponsor attempts to pass along those transfer tax costs to the purchaser. If you were buying an apartment for $1,000,000, that would add approximately $18,000 onto the purchase price. It's actually a greater cost, because when you sell your apartment, those transfer taxes won't be paid by the purchaser. In addition, you will also be paying the sponsor's legal fees for closing on the purchase of the unit which can add up to another $1,500 or more, when high end law firms are preparing tare handling the closings.
Things Have Changed
In the old days, the sponsor would not even consider picking up these costs, and the burden of the transfer taxes and sponsor’s attorneys fee would be foisted on the buyer. In many cases today, things have changed, and these costs are items of negotiation. With sponsors holding so much inventory, a deal won’t be lost because a buyer does not want to pay the transfer taxes or attorney's fees. You may not always get the sponsor to go along, but under current financial conditions, it would be foolish not to ask. Remember, one of the ten commandments of real estate transactions: "If You Don't Ask, You Don't Get."
For more about sponsor transactions, see "Buying From A Sponsor--The Basics."
