Lieb at Law: The True Cost of Moving On Up in the Hamptons
Your first Southampton home cost you $1,000,000 and now you want to move to a $1,500,000 East Hampton house. What are your total transaction costs for completing these two buys and a sell? For this exercise, we will assume that you put 20% down at all times, paid closing costs (approximately, as set forth below) out of pocket, and sold and bought at the same price.
To buy the $1,000,000 Southampton home you paid:
| Category | Cost | % of Purchase Price | % of Equity in Purchase |
| Bank Attorney | $850 | 0.09% | 0.43% |
| Purchaser’s Attorney | $2,500 | 0.25% | 1.25% |
| Title Insurance | $5,439 | 0.54% | 2.72% |
| Misc. Mortgage Fees | $1,700 | 0.17% | 0.85% |
| Mortgage Recording | $6,370 | 0.64% | 3.19% |
| Transfer Tax | $28,000 | 2.80% | 14.00% |
| Total | $44,859 | 4.49% | 22.43% |
To sell the $1,000,000 Southampton home you paid:
| Category | Cost | % of Sale Price | % of Equity in Property |
| Real Estate Broker | $60,000 | 6.00% | 30.00% |
| Seller’s Attorney | $2,500 | 0.25% | 1.25% |
| Transfer Tax | $4,000 | 0.40% | 2.00% |
| Updated CO | $250 | 0.03% | 0.13% |
| Total | $66,750 | 6.68% | 33.38% |
To buy the $1,500,000 East Hampton home you paid:
| Category | Cost | % of Purchase Price | % of Equity in Purchase |
| Bank Attorney | $850 | 0.06% | 0.28% |
| Purchaser’s Attorney | $2,500 | 0.17% | 0.83% |
| Title Insurance | $7,651 | 0.51% | 2.55% |
| Misc. Mortgage Fees | $1,700 | 0.11% | 0.57% |
| Mortgage Recording | $9,570 | 0.64% | 3.19% |
| Transfer Tax | $43,000 | 2.87% | 14.33% |
| Total | $65,271 | 4.35% | 21.76% |
So, the total transaction costs are $176,880 or 59% of your current equity position in your new East Hampton home, which, by the way, was 88.4% of your former equity position in your Southampton home. However, these transaction costs can and often are made more palatable to you (a/k/a, misleading you) by explaining that they are just 11.8% of the home’s value.
Interestingly, a purchaser wishing to go through with these moves would need $476,880 to maintain a 20% equity position on the $1,500,000 purchase, which cannot be liquidated without further transactional cost. What often gets lost in translation is that most service providers talk about price in terms of line-item closing costs relative to total property value rather than relative to the purchaser’s equity.
Mind you that these numbers do not include carrying costs, improvement costs, maintenance costs or capital gains costs, which all making moving even more expensive. Needless to say, the cost of moving on up with a residence should be a lifestyle choice and not a short-term financial investment.
Andrew M. Lieb, Esq., MPH, is the managing attorney of Lieb at Law P.C. and a contributing writer for Behind the Hedges.
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