Selling a home in New York can be a lucrative venture, but it also comes with its share of costs—most notably, the state-imposed transfer tax. However, savvy sellers have a secret weapon to maximize their profits: the Consolidation Extension Modification Agreement, or CEMA.
The Burden of Transfer Taxes in New York
In the Empire State, sellers are subject to a transfer tax calculated on the selling price of the property. The rate is $2 for every $500 of the purchase price. While this may not seem like much at first glance, it can quickly add up, especially for high-value properties.
A Real-World Example
Imagine you’re selling a property in Kings County for $800,000. Without any tax-saving strategies, you’d be responsible for a transfer tax of $3,200. That’s a significant chunk of change that could otherwise go into your pocket.
The CEMA Advantage for Sellers
A CEMA can dramatically reduce this financial burden. It allows you to pay the transfer tax only on the difference between the selling price and your remaining loan balance. This is known as a “continuing lien deduction.”
The Savings Breakdown
Let’s say you have an unpaid loan balance of $450,000 on your $800,000 property. With a CEMA, your transfer tax would plummet to just $1,400. That’s a savings of $1,800—money that stays in your pocket.
How to Make CEMAs Work for You
For a CEMA to be effective, your lender must be willing to assign your mortgage to the buyer’s new lender. Once both parties agree, the necessary documents are prepared, and the terms of the existing mortgage and the new mortgage are consolidated into the CEMA.
Potential Hurdles
While CEMAs offer a fantastic opportunity for savings, they are not without their challenges. Not all lenders are willing to assign mortgages, and the process can add time to the closing. However, the financial benefits often outweigh these drawbacks.
The Bottom Line
In a competitive real estate market, every dollar counts. By leveraging the power of CEMAs, you can significantly reduce your transfer tax burden, maximizing your profits from the sale. It’s an opportunity that’s too good to pass up for any seller looking to make the most of their New York real estate transaction.
So, if you’re planning to sell your home in New York, don’t leave money on the table. Explore the advantages of a CEMA and consult with your mortgage lender to see how you can benefit from this often-overlooked opportunity.
