What is a purchase CEMA in New York City real estate? The purchase CEMA is one of
the most confusing and lesser-known topics in the city which we will aim to
demystify in the following video. For those who aren't familiar, I'm Nick at
Hauseit. Hauseit is the largest buyer agent commission rebate and for sale by
owner company in New York City established in 2014.
Visit us at www.hauseit.com to learn about ways you can save money when buying and
selling real estate in New York City. If you enjoy today's video, please make
sure to like, comment and subscribe and we'd love to hear from you with any
further questions or ideas for other topics. So what is a purchase CEMA?
Well we already mentioned that the majority of industry participants have
no idea what this means consequentially. Most consumers buyers
and sellers have no idea what this means again because most agents and many
attorneys have again no idea what on earth. This means well we're gonna tell
you exactly what it is, how it works and why you should not forget about it
when you're buying or selling a property in New York City. More specifically a
purchase CEMA is a strategy for reducing closing costs on the purchase or sale of
real property in New York City. A purchase CEMA is applicable to
condominiums and houses but it is not applicable to cooperatives because co-op
is not a form of real property purchase. CEMA itself stands for purchase
consolidation extension modification agreement. The purchase CEMA itself would
only assist you in saving money. If the seller has an existing loan balance on
the property that is being sold, the act of utilizing a purchase CEMA is to
assign the existing loan balance from the seller to the buyer,hereby reducing
the amount of new loan money which must be originated and recorded with the city of New York. The act of assigning the current loan balance as opposed to
recording a new mortgage alleviates the need for the purchaser to pay the
mortgage recording tax on some or all of the loan balance
associated with the purchase. The mortgage recording tax is one of the
largest buyer closing costs in New York City. The mortgage recording tax is 1.8%
percent for loans below five hundred thousand and 1.925%
for loans of $500k or more.
Therefore the purchase CEMA allows some or all of this particular buyer closing
costs to be eliminated. In addition a purchase CEMA also allows the seller to
reduce her or his seller closing costs. More specifically, it helps the seller
mitigates the New York State transfer tax on the sale any amount of the loan
balance which is assigned to the purchaser would alleviate the need to
pay the New York State transfer tax. On that particular portion of the sale
price, the New York State transfer tax is 0.4% to 0.65% depending on
the property type as well as the sale price. So just to summarize, a purchase
CEMA saves both the buyer and the seller money the buyer saves money on the
mortgage recording tax and the seller saves money on the New York State
transfer tax. A purchase CEMA is a no-brainer, if you're buying a property
and financing and the seller has an existing loan balance and you're
purchasing a condominium or a house, you can calculate the amount of potential
savings with a purchase CEMA using the houses purchase CEMA calculator
available at www.hauseit.com. Here's an example of how we would use the
calculator to figure out how much money can potentially be saved using a
purchase CEMA in New York City. Let's assume that the outstanding seller loan
principal is $500,000, the buyer loan amount is $1,000,000 and the sale price
is $1.5 million. The property type is a condominium. The buyer mortgage
recording tax without the purchase CEMA is $19,250
dollars. Whereas with the purchase CEMA, the buyers mortgage recording tax is
reduced considerably to just $9,625
dollars. That is the savings on the mortgage recording tax
$9,625. On the side of the seller, the New York State transfer tax without
the purchase CEMA is $6,000. With the purchase CEMA, the
seller's New York State transfer tax is reduced to $4,000. The
transfer tax savings is therefore $2,000, and if we add up the
mortgage recording tax savings with the New York State transfer tax savings, we
have a total figure of $11,625. This
is money that doesn't go to the government and instead it goes to the
buyer and the seller in the form of reduced overall closing costs associated
with the transaction. One important thing to keep in mind with a purchase CEMA is
that you can't just do this as a purchaser without the authorization and
permission of the seller. The seller has to agree to allow their existing loan
balance to be assigned to the purchaser. Furthermore the sellers lender must also
be open in principle to allowing the loan balance to be assigned to the new
purchaser. Therefore although the buyer stands to save much more money on the
mortgage recording tax then the seller stands to save on the New York State
transfer tax. It's usually the case that the buyer and the seller negotiate and
agree to split the savings equally after all this seller has the most leverage.
You need the seller's permission. At the same time, the buyer has a lot of savings
to offer as well so usually it split 50/50 but in some instances, if perhaps
the buyer is paying a full ask and as a seller you never even thought you'd get
a price anywhere close to that and then they ask for all of the savings from the
purchase CEMA well it's not a lot of money at the end of the day compared to
the purchase prices in New York City. We hope you found this video helpful. Please
remember to like, comment and subscribe. If you're looking to buy or sell real
estate in New York City and you're curious as to how you can save money
when doing so give us a shout and check out our website www.hauseit.com save up to 6%
as a seller in New York City and save up to 2% or perhaps more as
a buyer in New York City. Thanks for watching!