Looking to buy or sell in Montgomery County, MD? Then you should be aware of a couple of big changes that are coming soon and that will impact your closing costs!
Recordation Taxes Increase for Montgomery County, MD Home Buyers and Sellers
The Montgomery County Council just - unanimously and unimpressed by REALTOR® protests - voted to raise recordation taxes on the purchase and refinance of Real Estate in the county. Starting September 1st, 2016, the recordation tax will be 0.89% for the first $500,000 and 1.35% for any amount over 500K. The good news is that the first 100K are exempt IF the home is going to be a principal residence - that's double the current exemption.
It's customary for the transfer and recordation taxes to be split 50/50 between buyers and sellers. Thus, this change will impact the bottom line of both parties.
How much are Recordation Taxes increasing?
Currently, the recordation tax is imposed on $200,000 of a $250,000 property at 0.69% - that's $1,380 or $690 for each, buyer and seller. For a $500,00 house that tax amounts to $3,105 or $1,552.50 respectively.
Starting September 1st, 2016, the tax will increase to 0.89% for properties up to 500K and 1.35% for any amount over 500K. That means that each party, buyer and seller, will be paying $22.50 less on a 250K property but $227.50 more on a 500K property.
The higher the price, the bigger the impact! On a $750,000 house the increase will be more significant:
Until August 31st buyers and sellers will be paying $2,802.50 each. Starting September 1st each will be paying $3,467.50, an increase of $665 for each party. That's no pocket change.
Considering that there are no detached single family homes for under 250K in Montgomery County and the average sales price for all detached homes in 2015 was $659,000, this change will increase the closing costs for many Montgomery County home buyers and sellers.
Recordation taxes are in addition to State and county transfer taxes which are 1/2% of the sales price to the State of Maryland (1st Time MD Home Buyers are exempt) and 1% of the sales price to Montgomery County.
Furthermore, the Montgomery County Council also voted to increase the property tax rate by 8.7% (NOT a typo) for the 2017 fiscal year!
Stay tuned for another big change coming soon for Montgomery County Home Sellers