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Understand Transfer Taxes Before You Close

July 14, 2015

TransferTaxWhen it comes to buying real estate, there are fees and taxes to take into consideration during the process of a sale. Whether you are the buyer or seller, purchasing alone or with your spouse, or changing your current mortgage loan, Transfer Taxes are something that you may not be aware of but should understand as they directly affect your bottom line.

A real estate transfer tax is a tax imposed by states, counties or municipalities for the privilege of transferring property from one entity or person to another. Basically this is another source of income for the governing body that imposes the tax. Comparing California to other states, a County Transfer Tax is a relatively low percentage at $1.10 per $1,000 of the value of a property. This is exclusive of any liens that may exist at the time of the transfer. However, over the last year or so there have been changes applied in several counties and cities, raising the end result of the tax, as well as increasing the scope of circumstances to which a Transfer Tax is applied.

Per state regulations, a Transfer Tax is imposed on any deed, instrument or writing in which any lands, tenements or other realty is sold within the county between two or more parties. There are situations in which the Transfer Tax is not applicable, such as a recording of an instrument to secure a debt, transmissions as part of a bankruptcy, foreclosures, gifted or bequeathed property and transfers of property due to a marriage dissolution. Now however, Contra Costa County has imposed a Transfer Tax that affects married couples directly effective June 1st of this year. This tax change has been “on the books” for some time, however, it is now being enforced.

Unless a deed transfer is due to a dissolution of marriage, married couples are required to pay the Transfer Tax in Contra Costa County. So if you are changing your current mortgage, such as adding a credit line or refinancing, there will be a Transfer Tax of $1.10 per $1,000 on half of the assessed value of the property.

In addition to a County Transfer Tax, some cities like Oakland and Emeryville, have relatively high fees, usually split between buyer and seller, of $12.00 to $15.00/$1000. ​San Francisco, as usual, has its own way of doing things and uses a sliding scale tax rate based on purchase price for the entire county with no separate County Transfer Tax.

Regardless of where you live or are moving to, we recommend including the estimated Transfer Tax at the start of any real estate transaction so you can be better prepared for what the tax bill will be when the closing process is completed.

Understanding what the Transfer Tax rate and applicable situations are will help you be better prepared for the amount of taxes due at the closing of a sale. As Realtors®, it is our job to help you navigate through the tax implications for your sale, whether you are the buyer or seller, and no matter what the circumstance of your real estate transaction may be. When you are ready to sell or buy a home, myself and my team are ready to help you through the entire process. We make the business of real estate a pleasure for you to experience. Contact us today at (925) 634-7820, or by email at realestate@cecily.com.

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