It was with great interest that I read an article written by Jamie Smith Hawkins of the Baltimore Sun today.
It seems that Anne Arundel County, Maryland has decided to enforce a particular aspect of Maryland Real Property law which authorizes them to collect recordation taxes on not only the sales price, which is the norm, but also on the forgiven debt in a situation where the sales prices is less than what the seller owes on their current debt, your typical "short sale"
According to the article written by Ms. Hawkins the county only began requiring these additional funds last week without any warning to title agents or Realtors thus creating a situation where the deed recordings will be held up until it is determined exactly how much the county is looking for and from whom the funds will be collected. As you might imagine this is going to be a huge problem given that the closings have already taken place, funds have been disbursed and sellers have likely moved on.
In Maryland it is customary for the cost of documentary stamps to be split between buyer and seller. The additional sums that the county is asking for will be based on the current county rate of $7.00 per thousand. In addition to the documentary stamps the county will collect transfer taxes on the forgiven amount based on their current which equals 1% of the sales price.
In a situation where you already have a seller who is in financial distress and usually a buyer who is just barely able to get approval given today's stricter underwriting guidelines why does the Anne Arundel County think that this is the prime time to begin to "follow the law" according to Richard Drain, the Anne Arundel County controller.
This is nothing more than yet another attempt by the County to squeeze all they can from those who can least afford it. According to the article no other county in the State of Maryland is "following the law". Even Montgomery County, famous to squeezing consumers dry is not collecting on the forgiven debt at this time, waiting instead for "further clarification".
Maryland already has one of the highest closing costs rates in the nation. This is not the time to begin to further tax our consumers and to put additional burden on those who are already suffering.
As was stated by Mike Davis, associated broker with Champion Realty in Annapolis, the county thinks this will allow them to collect more money, but what will actually happen is the deals are going to fall through.
Comments(1)