Transfer taxes are any type of tax charged when the title of a property changes hands. For types of property that require a legal title (like real estate, bonds, or stocks) there is usually a surcharge by the state or local government to process the change. The federal government also charges transfer taxes, through estate and gift taxes, but these are far less common than the real estate transfer tax that you are likely to face.
Location is vital to figuring out how much transfer tax you will have to pay. Each state charges a different amount, as does every county. Some charge nothing, others have simple flat fees, and a few charge exorbitant percentages (2.65% in certain parts of New York). Finding out yours should not be difficult, your local real estate agent or the attorney used in closing should know your local area’s rates.
Transfer taxes are usually assessed on the sale of the property; however, in most locations it is not set in stone whether the buyer or the seller must pay. All that is required is that a payment must be made to the governments involved, which is why transfer taxes usually become a negotiating point during closing. In strong markets, usually the buyer pays the tax, since the seller can choose between multiple buyers until they find one who will pay. However, in today’s typical real estate market, the seller ends up paying the tax because they simply do not receive many offers, and must take what they can get. There are some locations that dictate who must pay the tax; in that situation your only wiggle room will be risking a higher asking price to cover the tax.
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