In this Hauseit tutorial, we will be showing you How to Use the New
Development Closing Cost Calculator available at Hauseit.com
If you're not already on the calculator page itself, you can get here by visiting
Hauseit.com. The spelling is up here in the middle and once you're on the
website navigate to the calculators tab hover
over the by option. Go to the right and scroll down to new development
calculator. This is one of the more complex calculators available on the
Hauseit and it's incredibly useful for anyone who's thinking about
purchasing a new development property in New York City. This calculator applies to
the purchase of a new build say condominium a large condo condo building
It does also apply to the purchase of a condo conversion so if if there's an
existing building probably a pre-war type building that has been converted
into condominiums, it is considered to be a sponsor sale and therefore this
closing cost calculator would apply and this calculator would also apply in the
rare instance you are purchasing a co-op conversion those are less common here in
the city but they do appear from time to time. So the benefit of this calculator
is that it is highly optimized for the particular scenario of buying into a new
development. In particular, you'll see here that there are some newer line
items that we do not have in our traditional buyer closing cost
calculator which is for existing units so we have the sponsor attorney and
document fees, we have working capital contribution we also have the super
apartment contribution. Furthermore, there is the ability down here on the left for
you to toggle these items so such as the working capital contribution you can
enable it completely. If that does apply to your particular purchase you can
disable it the same goes for the super apartment contribution
and for all of these so-called sponsor closing costs you can actually toggle
this on if the sponsor is willing to pay. So this will help you prepare for a
negotiation you can figure out your bottom line and as you negotiate with
the sponsor. Hopefully over some of your closing costs, you can actually model out
the implications for you based on what you're able to negotiate so let us start
with a hypothetical. Example let's say we are purchasing a 1.5 million dollar new
construction condo and we are going to finance 80% so this is really all we
need to input in order to start getting an output here so you can put in the
price amount financed and the housing type so if you go here on the right
you'll see that we have the new construction related closing costs the
New York City Transfer Tax and the New York State Transfer Tax are usually paid
by sellers in the case of an existing unit being resold
However for new developments condo conversions sponsor sales however you
want to describe them it's customary for the buyer to pay now that being said. It
is also possible for you to negotiate these closing costs with the sponsor or
the developer so let's quickly go back down here to the other optional sponsor
closing costs and in this case let's pretend we're buying into say 250 unit
building. So it's a pretty large new development ground up brand new building
and let's say the sponsor attorney and document fees are four thousand five
hundred the working capital contribution which is usually a month or two of your
common charges is saying four thousand and the super apartment contribution is
thirty five hundred. So if we go to the right here we'll see that the new
construction related closing costs now have been incorporated based on our
inputs down here on the left as far as typical buyer closing costs are
concerned your largest closing cost is going to be the
mansion tax. Now that does apply to purchases in New York City of 1 million
or more and it becomes a little more interesting. Once you hit the 2 million
mark and that's because the mansion tax was updated in 2019 into a more
progressive eight tax bracket system and what that means is that the tax rate of
1% it actually goes up once you hit the 2 million dollar threshold it caps out
around three point nine percent. If you're buying ultra luxury 25 million or
more possibly a penthouse type unit but for this example we are below the 2
million dollar threshold where it goes up so we're still at 1%
The other line items here are going to be your typical buyer closing costs for
the case of the condominium. So you have your title insurance, you have your own
attorneys fee, you have various fees for moving in possibly building related
application fees and some other small things such as a deed recording fee and
a credit check. Again these these items here are pretty standard so whether or
not, you're buying a new construction. These are closing costs that you you
will be facing now for your financing related closing costs. I will say that
they do increase your total closing costs considerably here in New York City
and the reason for that is the mortgage recording tax. The mortgage recording tax
is a little over 2% on average of the loan amount so the more you finance the
more you'll be paying in the mortgage recording tax and consequentially the
more you'll be paying in total buyer closing costs. There are some other
financing related costs such as title insurance specifically the premium which
protects the mortgage lender against claims future claims against your title
And you also have other miscellaneous fees such as your loan application fee
your bank's attorney fee appraisal fee and the mortgage recording fee as well
So again, the typical buyer closing costs and the financing related costs are not
necessarily sponser related closing costs so if
you're thinking about buying a sponsor unit and you're looking at this number
and you know your total closing cost and you're thinking wow this is really big
you may want to consider. What your buyer closing costs are in the case of a non
new development and then analyze the difference based on on the incremental
amount that you're going to be paying for the new construction versus existing
construction and obviously if you're buying new construction there's a
specific type of property you're looking for. You're looking for presumably
high-end finishings a large high-quality developer. If you're buying a really
large building luxury type product so there is an additional cost associated
with those types of requirements both in terms of your price per square foot that
you're going to pay as well as your your closing costs. Now with that said it is
certainly possible again to negotiate. The spots are related closing costs on a
transaction. The ability for you to do this is largely going to depend on the
amount of leverage that you have and the amount of leverage you have is based on
the level of other interests in purchasing these types of units so if
the sponsor has an 800 unit building, the market is slow you'll have a lot of
leverage. If it's a smaller building possibly already sold the majority of
the units you'll have little or no leverage to ask the sponsor to pay for
the sponsor related closing costs. Now let's assume though that we were able to
persuade the sponsor to cover the New York City and New York State Transfer
Taxes, this is a pretty common thing that's negotiated so you in general
would have a good shot of getting some or all of those to be paid for so if we
toggle this button here for sponsor pays, you're immediately going to see down
here a change in the amount that the buyer pays and the sponsor pays. So if we
until-- it you'll see that a hundred percent of these closing costs are being
paid by the buyer. Whereas if we toggle this on you're gonna see that now the
sponsor is picking up a pretty decent amount of your total buyer closing cost
or spawn related closing costs. The breakdown of
New York City and New York State Transfer Taxes are at the top now we can
also try to negotiate the sponsor attorney and document fees so these fees
are usually mino' listed in terms of the offering plan. So we have an example down
here of kind of what that looks like. Oftentimes they call it a a closing fee
and the actual fee amount may vary based on whether or not you're financing and
where the closing may occur. For example in this case it is $4,000 as a base fee
however if you are financing there appears to be an additional fee of 850
dollars. Furthermore if the closing is held in a different office there appears
to be an additional fee also this building is offering parking spots and
storage cages for sale. So if you're buying one of those, you need to increase
the fee as well so you'll find the summary of these closing costs by asking
your buyer's agent to contact new Development Office or if you're in touch
with the new Development Office, directly they will send those to you but it is
generally speaking a good idea to request the buyer closing credit. If you
are purchasing new construction and that's because in general most
developers are paying similar if not the same commission rate, if the buyer does
not have an agent so if you involve a buyer's agent and you're able to receive
a portion of that commission back through a buyer closing credit. You can
reduce your Buyer Closing Costs by up to 2% of the total amount so if we go back
to the sponsor closing costs. Let's go ahead and assume that we got the sponsor
to pay for these document fees so if we toggle this on you're gonna see the
sponsor pays amount is going to go up by 4,500 and that's exactly what happened
We can do the same thing for working capital contribution
and the super apartment contribution. Now as far as the working capital
contribution we don't want to get your hopes up on this one. It's usually very
very hard if not impossible to persuade the sponsor to cover the working capital
contribution and/or the reserve fund contribution and that's because this
money that you're contributing is going into a building in which you're
purchasing a pro rata share of ownership. So although this money is leaving your
bank account and going into a different bank account in theory, it's still
technically some of your money and that's why the sponsor is usually not
going to pay. Also to be more specific most of the time for a much larger
building you'll be asked to contribute say one month of maintenance or common
charges to the working capital fund and another month to the reserve fund so
they're - they're basically two funds that the building will have they fill it
with money and then they use that for unexpected repair and other expenses
over time.Now as far as the super apartment contribution is concerned, this
is really only a consideration. If you're buying into a medium to large size
building where it is necessary to have a live-in super and essentially what
happens is the living super of course needs an apartment and in order to
purchase that apartment all of the people who are buying into the building
will divide up the cost of that apartment based on the percentage of
common interests assigned to the unit being purchased. So for example, if you're
buying a 1.5 million dollar unit in a large new development and someone else
is buying a 3 million dollar unit in that same building. In theory, they should
they should be paying about twice as much as you will be paying for the
contribution to the Super's apartment also known as the apartment for the
residential manager's unit and just to be a little more specific the amount of
the super apartment contribution is not a hundred percent dependent on the
asking price that you're paying versus someone else's. It's based on the
percentage of common interests and usually there is a formula in the
offering plan which sheds light on how exactly those are calculated but in
theory larger units units and higher floors units with better views better
layouts the more optimal the property is and the larger it is the greater
percentage of common interests of the building in total is assigned to that
unit and the common charges that you pay every month are also determined by the
percentage of common interests assigned to your specific apartment. So going up
here again we can toggle the super apartment contribution and the working
capital and you can see that it's changing our closing cost situation so
realistically let's assume we're unable to persuade the sponsor to pay for the
working capital and super contribution but we were able to get them to pay for
the transfer taxes and the dock fees under this scenario. We are paying really
only four point two one seven percent in closing costs and the sponsor is picking
up the extra two percent so that this is not bad because if you consider the
difference between this and a existing apartment that's not new construction
there's actually not going to be a huge difference in terms of this versus what
you're paying for that other type of apartment. So we hope this was a helpful
overview of the New Development Closing Cost Calculator. There are some other
calculators for you to look at if you are interested. You have more specific
calculators for the mansion tax the mortgage recording tax. You can also
learn a little bit more about purchasing on if you're buying an existing
apartment and you're financing you may be able to save a little bit of money
using that strategy as well. And one final note, you can email yourself the
results of this calculator and you can also generate a PDF that you can save
down and print about. If you have any comments leave us a note below the video
and if there's anything else we can help you with please don't hesitate to email
us text us or give us a call