New York, NY (PRWEB) September 10, 2008
Imagine this. A client is purchasing two apartments in the same building with the intention of combining them into one larger unit. Without the proper planning and guidance, they will likely pay substantially more in transfer and mortgage taxes than they need to--often in the tens of thousands of dollars.
On top of being home to some of the most expensive residential real estate, New York City real estate buyers and sellers are subject to amongst the highest transfer and mortgage tax rates in the nation. And if the property is commercial, the tax rates are even higher.
In some cases, residential properties are taxed at the higher commercial rates. The most common scenario arises when two residential condominium or coop units located in New York City are purchased by the same buyer with the intent to legally combine them into one unit after closing (1). In such cases, the New York City Department of Finance ("NYCDOF") deems the transaction a "bulk sale" and taxes at the substantially higher commercial rates, despite that the units are residential.
While payment of such higher transfer and mortgage taxes is required at the time of closing, many buyers and sellers (2) are entitled to a refund of the differential between the residential and commercial taxes paid. And these refunds can be substantial.
In the case of the purchase of two condominium units by the same buyer, each with a purchase price of $1,000,000 and a mortgage of $800,000, the differential in transfer tax and mortgage tax between the commercial and residential rates is $12,000 and $5,030 per unit respectively, for an aggregate refund of $34,060 (3).
TitleVest's transfer and mortgage tax consulting service advises clients how to structure multi-unit conveyances to ensure that the lower residential tax rates are achieved. TitleVest will also structure, submit, and monitor all applicable refunds post-closing. With proper planning and guidance, many transactions that are initially taxed at the higher commercial rates are entitled to a retroactive refund to the lower residential rates.
"We have a proven track record of navigating the technicalities of NYC and NYS tax laws and obtaining refunds on behalf of our clients," says Brian Tormey, TitleVest's Executive Vice-President. "To date, we have a 100% success rate in obtaining refunds on behalf of purchasers, sellers and borrowers."
For further information, contact Brian Tormey at 212-757-5800 ext. 220 or brian @ titlevest.com.
(1) In order to avoid being taxed at the higher commercial rate, the units must be physically combined with one kitchen at time of closing.
(2) In New York State, the seller typically pays the transfer taxes and the purchaser/borrower typically pays the mortgage tax.
(3) NYC transfer tax on an individual condominium unit selling for $1,000,000 is $14,250 and mortgage tax payable by the borrower on an $800,000 mortgage is $15,370. When taxed as a bulk transfer, the NYC transfer tax jumps to $26,250 and mortgage tax to $20,400. Note: NYS transfer tax is not affected by bulk transactions as there is only one rate regardless of property type and the Additional "Mansion" Tax is applied irrespective of bulk classification.
The TitleVest family of companies consists of TitleVest Agency, Inc., 1031Vest, LLC, and InsureVest Brokerage, LLC:
TitleVest (TitleVest Agency, Inc.) is a leading provider of title insurance, cooperative apartment lien searches, and related real estate services. TitleVest is a policy issuing agent for First American Title Insurance Company, Chicago Title Insurance Company, Fidelity National Title Insurance Company, Stewart Title Insurance Company, Old Republic National Title Insurance Company and Commonwealth Land Title Insurance Company.
1031Vest (1031Vest, LLC) is a leading Qualified Intermediary for IRC Section 1031 Tax-deferred Exchanges. A proud member of the Federation of Exchange Accommodators, 1031Vest is fully bonded and insured.
InsureVest (InsureVest Brokerage, LLC) is a full-service property and casualty insurance brokerage offering a full line of business and personal insurance products from its network of the leading and highest-rated insurance carriers.
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