Thursday, August 27, 2020 / by Vanessa Saunders
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
According to a survey conducted by ClosingCorp, over half of all home owners are surprised by the closing costs required to obtain their mortgage. Buyers in New York must have been a large number of those surprised home owners, because the survey showed that the state of New York has the highest closing cost average in the nation. Real estate transactions all come with closing costs, fees and taxes added by nearly any agency with a seat at the public trough. For many, transfer tax is often one of the biggest slices of the closing cost pie.
New York State imposes a transfer tax on all property transfers over $500. Other states, New York City and even smaller cities have their own rules which differ from New York's. The tax is loved by the state government, because it rakes in a very tidy sum without much effort for Albany. In 2019, the existing real estate transfer and mansion taxes generated about $1.1 billion in revenue for New York state.
The NYS transfer tax is 0.4% for properties below $3 million, and 0.65% for those $3,000,000 and up. After changes in 2019, New York State now charges 0.4% for those sold under $2,000,000 and 0.65% when above. New York City also charges 1.425% if the sale price is under $500,000 and a whopping 2.625% if over $500,000.
Who pays the transfer tax?
The transfer tax is a tax imposed on the seller (or “grantor”) during the conveyance (closing) of real property so it is typically their responsibility to pay. If the seller finds a way to not pay the tax (dies or just disappears), the responsibility to pay falls on the buyer. One way or another, the tax is going to get paid.
Who doesn’t pay transfer taxes?
We have some bad news here too – basically only the government is exempt from the tax with a few exceptions. Without getting into too much legalese, the following are exempt:
·To or from a non-profit organization.
·To any government body exempt from payment of the tax.
·Used to secure a debt.
·From an agent to its principal or vice versa.
·By an executor as outlined within a will. If a property is sold by an executor though, the transfer tax still applies.
·Where beneficial ownership remains the same.
If you think you may qualify for an exemption, be sure to have your accountant or tax advisor review your circumstances. In any event when selling a property, be sure your attorney tells you your total closing costs in advance so you don’t come up short. And so you don’t pass out from shock at the closing table.
To find out more about selling your home, or for more information, CONTACT US.