Who pays the transfer tax in Centre County, PA?

Who pays the transfer tax in Centre County, PA?

A question came up on a real estate website today regarding who pays the transfer tax in PA.  We responded by answering how the transfer tax is handled in our area and recommended that the person asking the question contact a real estate professional in the specific area within which they are searching. 

So, who pays the transfer tax?  First let's address what the transfer tax is.  The transfer tax is a fee paid to the municipality when a property changes ownership.  When a property is transferring between family members there often is not a fee.  We work with several top notch attorneys that can further discuss this point.  What we are talking about is when a property is sold from one set of owners (the seller) to another (the buyer).  The transfer tax is a percentage based on the purchase price of the property.

So, who pays the transfer tax?  The Standard Agreement for the Sale of Real Estate form provided via the Pennsylvania Association of Realtors has language on the first page that states the transfer taxes are divided equally between Buyer and Seller unless otherwise stated (paraphrased from page 1, paragraph 3(G) line 34 PAR form A/S-R).  Less technically, the transfer tax is split between the buyer and seller unless otherwise negotiated.  Once this is agreed upon in the Agreement of Sale, this is how the transfer tax will be collected on the closing statement. 

When does the seller pay all of the transfer tax?  What we are seeing is in some instances a seller will pay the transfer tax in an effort to help the buyer purchase the property.  This would be indicated on the first page of the Agreement of Sale.  With the change in banking regulations, it is best to ensure that if the buyer is utilizing a mortgage, the lender is agreeable to this "credit" from the seller prior to finalizing the contract between the buyer and the seller.

When does the buyer pay all of the transfer tax?  When a property is a bank owned property, we have often seen where a buyer will pay the entire transfer tax.  This is typically stated in the advertising of the property or in the notes to all real estate agents showing the property.  Knowing this fact before even looking at the property helps the real estate professional best advise the buyer as to how and if to proceed.

When choosing a real estate professional, you should feel comfortable asking any questions and obtaining clarification as to who is paying what fees and why.  In Centre County, PA the transfer tax ranges from 2% to almost 3% depending on the municipality in which the property is located.