The real estate transfer tax is a one-time tax paid on closing the property, and is considered a revenue stream for the state budget. This transfer tax, once collected is generally not used for housing-related purposes. The tax is based on the value of the property agreed upon by the parties to the real estate contract.
In the excitement of selling or buying a home, often the real estate transfer tax costs are ignored. Depending on locale, either buyer or seller pays taxes on closing or escrow, but beware in New Hampshire both buyer and seller pay, half of 1.5%!. In some states it can be a tremendous amount, you should be prepared for what the transfer taxes are, and who pays them, before you start your home search or list your home for sale.
The good news is, thirteen states have no real estate property taxes. They are: Alaska, Idaho, Indiana, Louisiana, Mississippi, Missouri, Montana, New Mexico, North Dakota, Oregon, Texas, Utah, and Wyoming.
The bad news is that the remaining thirty-seven states and the District of Columbia tax the transfer of property. The tax is only levied once when property is exchanged between parties, unlike the general property tax which is paid annually and is based on the appraised value. Real estate transfer taxes range from as low as 0.01% in Colorado to as high as 1.28% in Washington state.
Transfer tax variations include; in Arizona only tax on deeds. But Alabama and Florida charge a deed and mortgage. To avoid financial surprises, ask ahead of time who is paying (buyer or seller) and how much transfer tax will be charged. Some states dictate who pays taxes, and some just want taxes paid. These fees are usually negotiable between the parties. Consult an experienced real estate attorney.
Useful online links for transfer taxes for all fifty states.
[http://www.parealtor.org/content/AssetMgmt/Issues] Resource Center/ Realty Transfer Tax/ Transfer tax chart.pdf
