Transfer Tax/New Construction?
A friend of mine is conetemplating a unit in Be@Schermerhorn. One of the flyers they gave her says “Transfer Taxes are calculated and added to the purchase price (for tax purposes only) and then recalculated based on the bulked up price.” Can anyone tell me what that means, in plain English? thanks!
A friend of mine is conetemplating a unit in Be@Schermerhorn. One of the flyers they gave her says “Transfer Taxes are calculated and added to the purchase price (for tax purposes only) and then recalculated based on the bulked up price.” Can anyone tell me what that means, in plain English?
thanks!
ALSO, BEWARE that if you are buying the property for 983K-999K, the fact that you are paying the additional consideratnion for the transfer taxes will put you above the million dollar threshold and you will then be responsible for also paying the mansion tax.
And at Be@Schermerhorn – where they’re lucky to sell anything right now, your friend should DEFINITELY be able to negotiate away the transfer taxes.
That is correct. By law, the Seller is obligated to pay both the state and city transfer taxes based on a percentage of the sales price (the percentage for city transfer tax varies based on the type of property and varies by location: NYC, Yonkers, Mount vernon all have different rates). With new developments and other sponsor sales, however, it is market practice for the purchaser to pay the tax. This means in addition to the accepted purchase price, you will be responsible to pay the tranfer taxes (when seller pays they are customarily netted out of the purchase price). Because the purchaser is paying this additional money, it is deemed addtional consideration on which the taxes must be paid. This is called a “true up” of the purchase price or consideration. So, to calculate the transfer taxes, you first calculate the percentage due on the accepted purchase price, let’s say the taxes due are $20,000. Then you calculate the transer taxes would be due on the $20,000 due of additional consideration and the purchaser would pay the total amount. Also note, for residential properties where the purchase price is equal to or greater than $1,000,000 there is an additional transfer tax commonly referred to as “mansion tax” which by law the purchaser is obligated to pay (therefore, not included in any true up). As the commenter above noted, it is not out of line in this market to negotiate that the Seller pay the transfer taxes in a new development or sponsor sale; certainly many are offering it as an incentive to lure purchasers.
That is correct. By law, the Seller is obligated to pay both the state and city transfer taxes based on a percentage of the sales price (the percentage for city transfer tax varies based on the type of property and varies by location: NYC, Yonkers, Mount vernon all have different rates). With new developments and other sponsor sales, however, it is market practice for the purchaser to pay the tax. This means in addition to the accepted purchase price, you will be responsible to pay the tranfer taxes (when seller pays they are customarily netted out of the purchase price). Because the purchaser is paying this additional money, it is deemed addtional consideration on which the taxes must be paid. This is called a “true up” of the purchase price or consideration. So, to calculate the transfer taxes, you first calculate the percentage due on the accepted purchase price, let’s say the taxes due are $20,000. Then you calculate the transer taxes would be due on the $20,000 due of additional consideration and the purchaser would pay the total amount. Also note, for residential properties where the purchase price is equal to or greater than $1,000,000 there is an additional transfer tax commonly referred to as “mansion tax” which by law the purchaser is obligated to pay (therefore, not included in any true up). As the commenter above noted, it is not out of line in this market to negotiate that the Seller pay the transfer taxes in a new development or sponsor sale; certainly many are offering it as an incentive to lure purchasers.
don’t they teach algebra in the NYC schools? they want rP(1+r). duh. Imagine a realtor trying to explain “well we need you to pay the interest, and then the square of the interest. Trust me, it’s right. Just pay it.”
I think what it means is this. The seller is supposed to pay the tax, but in new developments they, of course, try to make the buyer pay the tax. But because for some reason the buyer can’t actually pay the tax, the buyer at closing pays the seller the amount of the tax, who then pays the tax. Alas, because then you are giving the seller money, this is viewed as part of the purchase price and thus you must pay more tax to compensate for the tax on the amount you gave the seller to cover the tax. Thus the recalculation. Of course you can just negotiate the seller to pay the tax, which should be a no-brainier these days.