On top of that, there's the separate mortgage recording tax, which varies based on location and even the number of housing units in the building. In New York City, it's 1.8 percent for buildings with three housing units or fewer, and 2.55 percent for other buildings. On parts of Long Island it's 0.8 percent; in Rockland and Westchester it's 1.05 percent; in other parts of the state it's 0.75 percent, and Yonkers adds 0.8 percent to that, making it 1.55 percent.
In New York, the lender pays a mortgage tax of one-quarter of a percent of the loan amount, says Michael Moskowitz, president of
Equity Now, a lender based in New York City. "We don't have that in New Jersey and we don't have that in Connecticut," Moskowitz says. "Obviously, if we want to make the same amount of money, we have to charge a little more in New York.
"Nobody cares about the little guy -- just make it more complicated. Of course, the more complicated it is for us, the more expensive it is to do business," Moskowitz adds.
Who's involved in a closing
In New York, as in most northeastern states, lawyers customarily conduct closings. "Generally, the buyer has an attorney, the seller has an attorney, the bank has an attorney. Right there you have three attorneys in the mix and it's going to be a little bit more expensive," says Neil Garfinkel, partner in charge of real estate practices for the New York-based law firm of Abrams Garfinkel Margolis Bergson.
In some states, especially in the west, title agents and escrow officers customarily conduct closings. They tend to earn less per hour than lawyers, and that holds down costs.
Sky-high title insurance
Title insurance is another budget buster, and New York and Texas have some of the country's most expensive title insurance. In each state, the insurance department sets (or "promulgates") the rates, with heavy input from the title agencies and insurance companies. Because the state establishes the rates, title companies don't compete for consumers by offering lower prices.
How do title insurers compete in states where regulators set prices? According to a report issued in April by the Government Accountability Office, "title agents do not market to consumers, who pay for title insurance, but to those in the position to refer consumers to particular title agents, thus creating potential conflicts of interest." The report says the industry is rife with kickbacks and undisclosed referral fees among title agents, real-estate agents and lenders.