In case you missed this news this week, I found this posted on the Michigan Association of REALTORS website.

Transfer Tax To Be Assessed Against Fannie Mae And Freddie Mac
10/25/2011

The Michigan Department of Treasury was asked by certain registers of deeds whether particular entities, such as Fannie Mae, were subject to the county and state real estate transfer tax.  On October 4, 2011, Treasury advised the Emmet County Register of Deeds that the answer was yes – Fannie Mae and Freddie Mac, as sellers of real estate in Michigan, must pay county and state transfer tax.  

Apparently, Fannie Mae and Freddie Mac had previously avoided paying both county and state transfer tax relying on an exemption in both those statutes for “written instruments which this state is prohibited from taxing under the constitution or statutes of the United States.”  In its letter, Treasury indicated that federal law generally prohibits the taxation of these entities by state and local governments.  However, Treasury has concluded that the real estate transfer tax is not a tax on real property, but instead is an excise tax on the instrument that is being recorded.  Thus, Treasury concludes that government sponsored entities, such as Fannie Mae and Freddie Mac are not exempt from real estate transfer tax. 

The law provides that a seller is responsible for payment of county and state transfer taxes.  However, a seller can contractually agree to have a buyer assume that obligation.  Generally, Fannie Mae and Freddie Mac use addendums which impose all liability for transfer tax on buyers.  Thus, in pending purchases for Fannie Mae and Freddie Mac, buyers will now need to deal with a new obligation, i.e., payment of county and state transfer tax as reflected on the HUD-1.  

Presently, there does not appear to be any viable theory for imposing liability on REALTORS® involved in the transaction where either there was a failure to pay the transfer tax or there is now transfer tax which must be paid by a buyer.  

Treasury’s October 4, 2011 letter is silent as to potential payment of transfer tax on properties sold by HUD.  However, there is a separate exemption to both state and county transfer tax for “a written instrument in which the grantor is the United States, this state, political subdivision or municipality of this state . . .”  HUD is obviously a part of the United States Government.  It is difficult to see how this exemption would not apply to it.  
 
Post is included in group: Michigan Real Estate
Post is included in group: Michigan Realtors

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David Elya ABR, CRS, e-PRO, GRI, SFR - Broker

Rochester, MI

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Read the premiere Macomb County Michigan blog. David Elya is the full-time Broker Owner of BROOKVIEW REALTY in Rochester, Michigan. David is a licensed builder, specializing in single family, new construction, multi-family, condominium and vacant land in Oakland and Macomb County, Michigan.


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