A transfer tax is a state or local government charge triggered when real property changes ownership. For MLOs, understanding whether a transfer tax applies, how it is calculated, and who bears the cost is critical to an accurate Closing Disclosure and a surprise-free closing.
How Transfer Taxes Are Calculated
Most states calculate transfer tax as a percentage of the purchase price listed on the deed. Common rates: Delaware charges 4%, New Hampshire 1.5% split between buyer and seller, Maryland 0.5% state rate plus county rates, and New York 0.4% base rate with higher rates in New York City. Some states call it a real estate conveyance tax, deed tax, or documentary stamp tax but the mechanism is the same.
States With No Transfer Tax
Texas, Montana, Wyoming, Idaho, North Dakota, and several other states do not impose a state transfer tax. Even in no-transfer-tax states, individual counties or municipalities may impose local transfer fees. Always verify at the county level. Do not assume no state transfer tax means no transfer tax at all.
Who Pays and How It Appears on the CD
- ✦Transfer tax is typically a seller's cost in most jurisdictions, but local custom or contract terms can shift it.
- ✦It appears under Transfer Taxes on the Closing Disclosure.
- ✦If misallocated between buyer and seller, the CD is incorrect and must be revised before closing.
- ✦First-time buyers in some states are exempt from transfer tax; confirm eligibility early in the process.
Aria can identify transfer tax obligations by state, explain who typically pays, and clarify exemptions that may apply to first-time buyers or affordable housing transactions. Ask at vicariointel.com.
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