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Transfer Fees, Conveyance Tax & Revenue Stamps

Instructor: Eileen Cappelloni

Eileen worked for the Orange County Asssociation of Realtors for 31 years. She has written real estate courses and exams for other publishing companies

Location can affect how much a buyer pays for a property, but it can also affect the fees involved. This lesson will go over transfer fees, conveyance taxes and revenue stamps and explain how they are calculated.

Price Differences in Real Estate

Sarah buys a house in Florida for $155,000. Tom buys a house in New York for $155,000. They both use a lawyer to close on their purchase, so their costs should approximately be the same. Right?

Nope! Even if they both bought a home in New York, their charges may be quite different because of the various fees and taxes charged.

''Location, location, location'' is a phrase used by agents to claim that where a house is constructed is the most important factor in determining value. But it is also important to remember that most real estate transfer fees are extremely local in nature.

Let's take a closer look at some fees and taxes that both Sarah and Tom will have to deal with.

Transfer Fees

Both Sarah and Tom will need to deal with transfer fees. Transfer fees are charged when a new owner purchases a property. What county a property is located in, what school district it encompasses, and how much local industry is in the area to support the tax base all influence the total transfer fees that will be charged to either the purchaser or the seller of the property.

Although it is perfectly legal to charge either party for various fees, the distribution of responsibility for all fees must be spelled out prior to the real estate closing. Both buyers and sellers generally both have costs associated with a real estate closing. Typically, the buyer pays for any fees related to the mortgage loan and the seller typically pays various fees relating to the transfer of the property.

Conveyance Tax

A conveyance tax is generally based on a percentage of the sale price of the property. Depending on its location, the seller typically pays this tax, although this should be spelled out clearly in the contract to purchase the property. There is no law that stipulates who pays it, only that it be paid.

The conveyance tax is not a federal tax, but rather a tax imposed on real property transfers at the state, county or municipal level. Had Sarah inherited her house, instead of purchasing it, transfer taxes would probably not have to be paid. But, since she purchased it, either she or the seller will have to pay a transfer fee.

When Sarah heard about the conveyance tax, she wondered if she could get around it. Her cousin had been thinking about selling his house in an area she likes. What if he just sold it to her for a dollar? Well, unfortunately for Sarah, the local government will often consider the transaction a gift and tax it with a gift or inheritance tax.

Some transactions are exempt from conveyance taxes though, and those include transfers between spouses, or sales to certain non-profit entities and foreclosures. There is generally a formula that is specific to a state or local region.

In Connecticut, for example, the state conveyance tax is 0.75% of the sales price up to a maximum of $800,000. If the property exceeds $800,000, it is taxed at a higher rate, and there are many municipalities that are allowed to impose an additional tax.

Revenue Stamps

Revenue stamps are named for the ink stamp that is placed on property deeds when all the appropriate transfer fees have already been paid to the city, county or state. Not every state and county collects real estate stamp taxes, but the revenue that these stamps generate is usually used to develop or improve, schools, parks, and other community facilities.

Revenue stamps, sometimes called 'documentary taxes' are used to collect taxes or fees and are added to deeds and other relevant documents to signify payment of the appropriate fees. They often look very similar to postage stamps.

In order for a deed to be filed and recorded, these stamps, in some states such as Florida must be purchased by either the seller or the buyer and attached to the deed before presenting it for filing. They are usually received from the county or municipal court and are generally calculated as a percentage of the value of the property. As of 2019, the tax on the deed in Broward County, Florida is calculated at the rate of $0.70 per $100 of the sales price of the property. 

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