Sale of Brooklyn Properties: What Are the Costs Involved?

The headlines read: “Brooklyn Prices Hit Record High!” and from Clinton Hill to Bed-Stuy, it’s definitely a seller’s market here right now. But, while selling a home can indeed bring in fresh profits, not all of the money will go into your pocket. Between marketing your investment property, fees, and taxes exacted by both the city and the state, it really takes a cut out of your profit yield. But home sellers who know how to approach the deal smartly can substantially curtail transaction losses and maximize their yield.

Most people overlook the costs involved in selling a property because of a popular misconception that there are fewer expenditures involved than when buying. A former neighbor of mine, for instance, thought that the effect on her pocketbook would be minimal when she planned to put her north Brooklyn townhouse on the market. Her house was next door to mine and she knew that I’m a real estate investor so we chit-chatted about it a bit. When she mentioned that she didn’t anticipate her closing costs to be too much, I had to tell her no, no, no—especially not in New York!

The Price Tag for Selling a Brooklyn Property

New York is one of the more expensive states to sell a property in if you are not aware of some ways to navigate the transaction and mitigate the hit on your bottom-line. Most people approach the sale of their property with the false belief that they need a real estate agent when selling an investment property in addition to the customary attorney representation. Even more, the city and state both levy transaction taxes on the deal. Over the course of your sale, you’ll potentially be shelling out for a pretty wide variety of different costs, including:

Broker fees.

If you hire a broker to help you sell the property, you can expect to pay between 5-6% of the sales price to them. If you choose to sell the investment on your own, you may still have to pay 2-3% to a buyer’s agent. It’s your lucky day if a buyer comes to you without agent representation!

Attorney fees.

In New York, it is customary to be represented by an attorney during a real estate transaction—even if you already have an agent on board. The attorney will draft the sale contract, manage escrow monies, review the title report, and prepare the closing documents. Their fees can range widely, but expect to pay a minimum of $2,500 for a basic transaction.

Outstanding mortgage payoff.

Unless you have paid off your old mortgage in full, part of the sale proceeds will go straight to your mortgage company to retire this debt.

Miscellaneous title company fees.

The price tag for this will vary, but if you have a mortgage, expect to pay around $200.


To attract potential buyers, you are going to need solid marketing collateral and listing on every major real estate search portal that you can. An agent can handle all of that for you and it’s typically included in the commission you pay at closing. However, should you want to save a little money and list it yourself as an FSBO, you will need to hire a photographer, which can range from $175 to upwards of $400. Then, since you do not have access to the MLS, you will want to list the property on public search portals like Zillow or Trulia, which are both free. Streeteasy, however, costs $599 to $799 for your listing.

Federal Capital Gains Tax.

In simplified terms, capital gains on investment real estate is the difference between how much you spent on the house—to buy it and improve it—and how much you’re gaining by selling.

Sale Price – (Purchase Price and Improvement Costs) = Capital Gains
If you own the house for more than a year, the capital gain tax will be between 0-20%, depending on your income. However, you can claim an exclusion of $250,000 if you’re single and $500,000 if you’re married.

If you hold the property for less than a year, as many investors do, any capital gains are taxed at a rate of 25%.

Real Estate Transfer Tax (RETT).

This state-level tax is generally paid by the seller; however, in some rare cases, a contract can be negotiated so that the buyer covers it. Each real estate transaction is taxed at a rate of $2.00 for each $500, or 0.004%, of the sale price. However, if the sale price is $1 million or more, the seller must pay an additional “mansion tax” of 1% of the sale price.

Real Property Transfer Tax (RPTT).

In addition to the New York state’s RETT, you will have to pay the real property transfer tax. This tax is levied by the city on every sale or transfer of property of more than $25,000. For most residential properties the tax rate is 1% of the sale price if the value is $500,000 or less. If the property is valued above that, the seller will pay 1.425%. Rates are even higher for other types of residential properties.

A Case Study: A Typical Home Seller’s Closing Costs and Tax Obligations

A regular home seller will likely get hit pretty hard with all these charges at closing, but an investor should be smarter. Let’s examine how much of an investment would be required for a typical seller who is seeking to sell a property at an asking price of $1.425 million. The following fees would be paid after the offer is accepted.

Closing Costs for a $1.425 Million Home Sale by Resident Homeowner

Fee/ Tax Rate Decrease From Profit
Broker Fees 6% of Sale Price $85,500.00
Attorney Fees Varies $2,500.00
Real Estate Transfer Tax 1.004% $14,307.00
Real Property Transfer Tax 1.425% $20,306.25
Misc. Title Company Fees Varies $200.00
Total Fees/Taxes Due at Closing $122,813.25
Closing Costs for a $1.425 Million Home Sale by Resident Homeowner

While just these taxes and fees significantly dent the seller’s profit margin, she still has to consider her outstanding mortgage payoff and any capital gains tax that applies. Let’s say she bought her home in 1996—at the height of the market before the housing bubble burst—for $1.046 million. She has been paying on her 30-year fixed rate mortgage but still owes $550,000. This amount will be paid to the bank at closing.

Lastly, in addition to closing costs, the seller will owe capital gains tax. Since this house has been her primary residence for at least two years, she will be taxed at a rate that is in line with her income. This seller is financially comfortable but not rich, so will probably pay about 17% of the difference between her purchase price and sale price, or $379,000. Since she is single, she can exclude $250,000 of that profit from her tax duty. As a result, she will owe approximately $129,000 in capital gains taxes.

Let’s recap all of the charges against her profit when she sells:

Total taxes and fees due at closing: $122,813
Mortgage payoff: $550,000
Capital Gains Tax: $129,000

So, if she sells her home for $1.425 million, her net profit will be $401,813 for a ten-year investment.

A Comparison of Resident-Owner and Investor Home Sale Profits

I purchased a townhouse just six months ago from a distressed homeowner who reached out to me for help because he trusted my HomeVestors® franchise brand. With some major health issues and a resulting job loss, he could no longer make the mortgage payment. It didn’t make sense for him to rent out the house because his mortgage payment was considerably more than the current Brooklyn rental market will bear. He needed a way out and so I offered to give him a clean slate by making a cash offer for $475,000. The house needed some updating and minor repairs, like new paint, appliances, and cabinetry to the tune of about $23,000. All told, I’m in it for $498,000.

If I were to put it on the market for the same price as a comparable home, I would save some money by making different choices about how to go about the sale. For instance, as a HomeVestors® franchisee, I have access to the real estate investment analysis and valuation tool ValueChek™, an experienced Development Agent mentor, and a developed pool of ready buyers. I don’t need a real estate agent to market the property. And, since I buy and sell a lot of homes, my attorney will draw up the necessary paperwork at a discount. Let’s see how those options affect the closing costs compared to the homeowner we looked at earlier:

Closing Costs for a $1.425 Million Home Sale by Investor

Fee/ Tax Rate Decrease From Profit
Broker Fees None None
Attorney Fees Varies $1,000.00
Real Estate Transfer Tax 1.004% $14,307.00
Real Property Transfer Tax 1.425% $20,306.25
Misc. Title Company Fees Varies $200.00
Total Fees/Taxes Due at Closing $35,813.25

I will pay $87,000 LESS than our other, inexperienced seller in closing costs!

Of course, we have to consider the other expenses associated with selling the property as well. Remember, I paid cash, so I don’t have a mortgage to pay off. Still, you’re probably thinking about that hefty 25% capital gains tax on properties that are held for less than a year. And, you’re right—if I didn’t know what I was doing I would owe A LOT. However, I learned a few tricks from my fellow HomeVestors® franchisees. I could effectively reduce the capital gains tax owed on this transaction to zero through a number of strategies, including rolling the sale proceeds into a similar investment within 180 days. So, here’s what my selling costs would look like:

Total taxes and fees due at closing:   $35,813.25
Mortgage payoff: $0
Capital Gains Tax: $0

The bottom-line is that if I sell the property for $1.425 million, I get my initial $475,000 cash back and make another $914,786.75. That’s not too shabby for a few months’ worth of work!

The Value of Experience

The numbers speak volumes here. There are lots of costs involved in selling a house, but investors can reduce their fees if they handle the transaction carefully, especially investors in New York looking to take advantage of the current seller’s market. Leveraging the real estate investment tools and resources available to HomeVestors® franchisees, including the distinctive, lead-generating “We Buy Ugly Houses®” branding, can help maximize your return-on-investment compared to the average seller. If you would like to start using these resources in your own real estate investing business, you can request franchise consideration today.

Each franchise office is independently owned and operated.

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