Who Pays the Transfer Tax?

By
Real Estate Agent with Davis R. Chant, REALTORS RS301772

Part of the paperwork I provide my buyer clients when making an offer is a Buyer's Estimate of Closing Costs worksheet.  This sheet is preliminary and is only an estimate, but I do my best to make it as accurate as possibleBuyers Estimate of closing Costs so that there are no suprises at the settlement table.

There are a few items that raise eyebrows among buyers from out of state who have purchased property before (but not in Wayne or Pike County PA), and one of those items is the Real Estate Transfer Tax.

This transfer tax, charged on all real estate transactions, is 2% of the purchase price.  In some states, such as New York, the seller pays this tax. However, in Pennsylvania, the buyer and the seller typically share this tax equally, unless negotiated otherwise with the seller. 

In the case of bank foreclosures, it is not uncommon for the bank to require the buyer to pay the entire 2%.

This is normal and the way things are done in our area.  It needs to be stressed over, and over - real estate is local.  Each state has its own real estate procedure.  Even within a state, various counties may do things a little differently.

It really is important for consumers to use local attorneys and real estate agents for their transactions to ensure a smooth sale.  I would not dream of trying to facilitate a transaction in an area where I am unfamiliar with the standard practice of real estate. 

I recently closed a transaction that took two weeks longer than normal because the buyers insisted on using their Pittsburgh attorney to handle their side of the transaction.  This attorney even admitted to us that "It's really difficult being out of the loop - I don't know how you do things over there!"

Ya think?  Personally, I think it would have been prudent for that attorney to refer her clients to a local attorney who could serve their needs more efficiently; they would have been in their new home two weeks sooner.

 

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Homes For Sale & Local Info for Pike County, Wayne County, & Lake Wallenpaupack in Northeast PA.

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Karen Rice (that's me!) lists & sells in Tanglwood, Wallenpaupack Lake Estates, Hideout, Indian Rocks, Masthope, Fawn Lake, Tink Wig, Woodland Hills, Walker Lake, Hemlock Farms, & more in Pike & Wayne County.

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. D B 01/26/2010 03:07 PM
  2. Bonnie Vaughan 01/27/2010 01:22 AM
Topic:
Home Buying
Location:
Pennsylvania
Groups:
Realtors®
The Lounge at Active Rain
Pennsylvania Professionals
Weichert Realtors
Pennsylvania Realtors
Tags:
transfer tax
buyers closing costs
wayne pike county pa real estate

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Rainmaker
158,078
Carol Pease
JP & Associates Realtors - Bastrop, TX
CRS, Broker-Associate 512-721-6320

Karen:

2% is an astronomical amount to pay at closing.  I'm glad I don't live in Pennsylvania but you seem like a diligent agent who does her job well. 

Jan 26, 2010 09:22 AM #39
Rainmaker
537,003
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

I do personally think the 2% is an unfair amount; however on the flipside: our property and school taxes in general are lower than our neighborhing states - some of the yearly property taxes are 1/3 of what our buyers from NY and NJ are paying in their home states.

 

Jan 26, 2010 10:11 AM #40
Rainer
15,110
Mark Towler
Southeast Mortgage - Atlanta, GA

In Georgia it used to be the seller that paid. Now it is the buyer.

Jan 26, 2010 11:05 AM #41
Rainmaker
192,049
Gregory Bain
Mezzina Real Estate & Insurance - Little Egg Harbor, NJ
For Homes on the Jersey Shore

Many a home owner that thinks they will flee the state of NJ after receiving hundreds of thousands of dollars in various benefits to themselves and their children, which is not provided in the new state of residence, are surprised to find they must escrow a capital gains tax upon closing at the settlement table.

What I would have like to have seen was all the property that was getting an undue (IMO) tax break be required to pay back taxes on the NEW re-sale value going back 5 or 10 years. That would have keep our state a lot more green than the new twist on the "going green" slang. It would have paid the towns for the new infrastructure required to maintain the new developments.

Let's pick which services we want to eliminate so that we can stop the taxes. You go first.

Jan 26, 2010 11:08 AM #42
Rainmaker
266,262
Dan Derito
Success! Real Estate - Brockton, MA

Hi Karen, here in MA it is referred to as "Tax Stamps" which are due from the seller at the rate of $4.56 per thousand of the sale price.  Outside of the business it is a fee that very few sellers are aware of so, I always try to enlighten the seller as soon as it is appropriate and often when an offer comes in. 

Jan 26, 2010 11:12 AM #43
Rainmaker
537,003
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

re: services cut to lower taxes.  If I could have faith that a lot of our tax dollars are not being WASTED on THE FATTED PIG (PORK STUFFED PROGRAMS....)

There is so much WASTE in our governments that I don't even want to get started and that's not the topic for this thread anyway.

Thanks everyone for the great comments and sharing what is done in your own areas.  It's very interesting to see how different it is from state to state.

Jan 26, 2010 11:23 AM #44
Rainmaker
257,254
R.E. Renée Hoover, Salesperson
Century 21 Geba Realty, Milford, PA; Licensed in PA & NYS - Milford, PA
Poconos, Pike, Wayne, Monroe Counties, PA; PA/NYS

Karen, I always submit an offer with the 2% transfer tax split between buyer and seller, unlike many agents in our area who automatically put it in the buyer's column.  It is not law that it be the buyer's responsibility, and only done so in practice by some.

Having moved to Pike County from NY, I can say with all honesty that one of the best parts of coming across the Delaware River to PA is the low taxes.  When I sold my home in NY, I had to Pay the 2% transfer tax as the seller in NY, and then half of the transfer tax in PA because the 2% was split between buyer and seller.  I was not pleased, but by living in PA I now save so much in real estate taxes, it really seems like a trifle now.

We have a great area to market in Pike and Wayne Counties - lower prices and low taxes compared to our neighbors - and so much to offer culturally and recreationally.

An additional point - one of the advantages of building versus purchasing resale for shoppers to consider - the transfer tax can be paid on the land purchase only.

Jan 26, 2010 11:59 AM #45
Rainmaker
537,003
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

Everyone - once again - thanks for the lively discussion and sharing your viewpoints and experience in your own areas.  Amazing how different real estate can be from locale to locale!

Jan 26, 2010 12:34 PM #47
Rainer
295,058
Brian Morgenweck
Power Realty Group, LLC Bergen County, NJ - Hackensack, NJ
Broker/Owner, GRI, CRS, ABR, SRS

Interesting thread!

Add to that the highest RE taxes in the country & welcome to the Garden State!

We strongly recommend using attorneys, but I stay very involved in the entire process and on top of the attorneys.

I'm kinda' glad about that. I'd hate to see what my E&O premiums would be if I were thought to be giving "legal advice"!

All the best!

Brian Morgenweck, Broker/Owner

Power Realty Group, Hackensack, NJ

Jan 26, 2010 01:44 PM #48
Ambassador
1,509,132
Renée Donohue~Home Photography
Savvy Home Pix - Allegan, MI
Western Michigan Real Estate Photographer

Fannie and Freddie are exempt but typically sellers pay here.  You can contract around it and try to get the top amount of seller paid concessions for the buyer's loan program................unless it is a seller's market.

Jan 26, 2010 02:18 PM #49
Rainmaker
161,892
Satar Naghshineh
Satar - Amiri Property and Financial Services Corp. - Irvine, CA

"but you may find that the seller, who has already paid a 1% transfer tax when he purchased the home is unwilling to pay 2% to sell the home and there you have it."

And that's fine. Then the seller doesn't want to sell.

"It will all boil down to who wants the transaction to close more."

Exactly.

"The standard practice is the standard practice - buyers can not demand the rules of New York or Massachussetts or New Jersey or Canada to apply in Pennsylvania."

But of course they can. Like I said, everything is negotiable.

"One deal fell completely apart because the buyer did not want to pay 1% of the transfer tax. In her mind, the entire thing should be borne by the seller."

Well, that is just bad negotiation (no fault of yours) as the objectives of both parties have not been met.

 

Jan 26, 2010 03:12 PM #50
Rainer
333,502
Frank Castaldini
Compass - San Francisco, CA
Realtor - Homes for Sale in San Francisco

I get a copy of how these costs are customarily handled from my title company and provide this list to the buyer or seller.  Of course, everthing is negotiable but the customs do take precident.

Jan 26, 2010 04:06 PM #51
Rainmaker
59,093
Mark VanBuskirk
Cassidon Realty - Lehighton, PA
PA REALTOR Specializing in Carbon & Monroe County

They are now requiring on the bankers good faith estimate both the buyers and the sellers % be shared. Clarity or confusion? Whose is more accurate? Realtors or Bankers? Sometimes I wonder if we are duplicating! Thanks for the great blog! 

Jan 26, 2010 04:10 PM #52
Ambassador
769,886
The Somers Team
The Somers Team at RE/MAX Access - Philadelphia, PA
Real People. Real Dreams. Real Estate.

Karen - Well said !  Consumers should definitely be using local experts to not avoid confusion and to avoid mistakes as well.  In regards to the transfer tax, it is 4 percent in Philadelphia, which definitely causes some concern and questions for out-of-state buyers : )

Jan 26, 2010 09:26 PM #53
Rainmaker
537,003
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

Christopher & Stephanie - 4%????!!!! OMG!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  That's all I can say about THAT!

Jan 26, 2010 11:02 PM #55
Rainmaker
436,260
Tom Bailey
Margaret Rudd & Associates Inc. - Oak Island, NC

Karen, Thanks for the post. Your info and the comments have been very enlightening. I will save this to show to clients who complain about our $2.00 a thousand rate in NC.

Feb 13, 2010 12:26 PM #56
Rainer
125,365
Kim Skumanick
Keller Williams Real Estate - Tunkhannock, PA

Karen, It's 4% in the City of Scranton too. The mayor actually wanted to raise it from 3.7 to 4.9% a few years ago, but our local REALTORS stormed city hall to protest. Many home rule charter municipalities have higher realty transfer taxes than the 2% "norm". Wilkes-Barre, Kingston, Reading, and I think even Pittsburgh are also higher than 2%

Feb 16, 2010 02:43 AM #57
Rainmaker
537,003
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

Kim - I think it's just outrageous when you consider the millions of dollars citizens pay the government each year in taxes and you see how it is wasted/misused...and the solution is always "raise taxes more" rather than clean house....  :(

Tom, thanks for the comment.  I think everyone will ALWAYS complain about taxes....no matter how much they are!

Feb 17, 2010 10:45 PM #58
Rainmaker
650,487
Keith Landis
Keystone Home Finance - NMLS#834342 - Conventional - FHA - VA -USDA - Jumbo Programs - Direct Phone 412-726-1654 - Pittsburgh, PA
Pennsylvania - "Your Pennsylvania Mortgage Source"

The city of Pittsburgh has a 4% transfer tax.  2% is standard for most of the rest of western PA but there are several municipalities in the Pittsburgh suburbs that have transfer taxes of 2.5% or 3%.  In almost all cases it is evenly split between buyer and seller, with a few negotiated exceptions.

Mar 09, 2010 02:22 AM #59
Rainmaker
94,274
Sharon Harris
Keller Williams Keystone Realty - Hanover, PA
Realtor

Ran into the problem with the buyer not wanting to pay the entire tax ..Which with most bank owned they do. Made the buyer most unhappy..

Apr 14, 2010 08:18 AM #60
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