Conveyance tax facts you need to know

As of July 1, 2005 there was a change in the amount of conveyance tax that sellers pay when transferring property. A conveyance tax, much like the name implies, is a tax paid to the state of Hawaii "for all transfers or conveyance of realty or any interest therein..." (Section 247.2 HRS) Prior to July 1, 2005, the tax paid was a flat .10 per $100 of value. For example, if you sold property for $400,000 your conveyance tax was $400; for a $1,250,000 sale the tax was $1,250 regardless if it was a single family residence, condo or land.

Now if you sell a home, condo or land, you pay .10 per $100 for sales up to $600,000, .20 per $100 for sales from $600,000 up to $1M with the highest tax rate of .30 per $100 of value reserved for sales $1M and over. That's quite an increase! The $700,000 sale that used to cost you $700 is now $1400!

But it gets even better. This 2005 law increased not only the cost of selling a property in Hawaii, but it also unfortunately penalizes the seller if you are selling a single family residence or condo and the buyer is an "investor." Yes you heard me right. If you buyer is an investor (i.e. ineligible for a county homeowner's exemption on property tax) your tax rate will be as follows: (this does not apply to land)

(A) .15 per $100 for properties less than $600,000;
(B) .25 per $100 for properties from $600,000, but less than $1,000,000: and
(C) .35 cents per $100 for properties with a value of $1,000,000 or greater.

Now your $700,000 sale to an investor will cost you $1750.

You may be wondering, why do YOU have to pay more simply because YOUR buyer is an investor?- Well that's still a mystery to me. So why should you know this? It's simple: If your buyer is an investor you may want to ask your real estate agent to negotiate for the buyer to pay the difference. Admittedly, in today's buyer's market, it's hard to get buyer's to acquiesce to much of anything but you just may find yourself in a situation where there is room for negotiating and you may be able to save yourself a few dollars. Even if you do not use this as a bargaining tool, you should be fully informed as to what your expenses will be upon the sale of your property. Seller beware!

Questions and comments are always welcome. Just call or email.

Aloha,

Elaine Schaefer (R, GRI, ABR)
Broker in Charge - Princeville Resort Office
Graduate, Realtor's Institute
Accredited Buyer's Representative
Top Producer 100% Club

RE/MAX Kauai
Princeville Resort Office
POB 223632
Princeville, HI 96722
cell: 808 639 2935
home fax: 1 808 440 4552
email:soldonkauai@yahoo.com
website: www.kauairealestatenow.com

......you can have your own piece of paradise
ask me how!