The cost of buying a home in Montgomery County to increase Sept. 1

Despite protests from the local real estate community, the Montgomery County Council last week unanimously approved an increase to the recordation tax, paid by homebuyers and sellers at closing, as a way to pay for school construction.

The recordation tax rate will now increase for the first $500K from $6.90/$1,000 to $8.90/$1,000 and for amounts above $500K from $10/$1,000 to $13.50/$1,000, a "pretty significant increase said County Council President Nancy Floreen who proposed the bill.

Put another way, a property purchased for $400,000 under the old tax rate would carry a recordation tax of $2,415 split between the buyer and seller. Under the new rate, the recordation tax will be $2,670, an increase of $255. A property purchased for $700,000 will see an increase of $1,155 in recordation taxes. A property purchased for $1,000,000 will cost an additional $2,205 in recordation taxes.

The median sales price in Montgomery County was approximately $411,000 last April, up 1 percent from a year ago.

Initially the tax increase was slated to take effect July 1, but the Council pushed it back to Sept. 1 amid protests from the real estate community who said they need more time to adjust to the change. The Council also opted to increase the county’s principal residence exemption from the first $50,000 to the first $100,000 in response to industry concerns.

Those in favor of the tax increase, such as the county’s Board of Education and the PTA, said funding increases for schools have not kept pace with growing enrollment. Montgomery County Public Schools is adding around 2,500 new students per year.

Those opposed to the tax increase said the financial burden was being unfairly placed upon a small subset of the county’s population. Roughly 13,000 units are bought and sold each year in Maryland’s most populous county that is home to over 1,000,000 residents. They also said increasing the recordation tax unfairly affects first-time homebuyers and elderly residents.

In the near future, the Council will examine ways to ease real estate tax burdens for senior citizens. They are also contemplating a 6 to 9 percent increase in property taxes.

Check back for updates as we hear more from County Council.

MoCo Council to consider increase to recordation taxes

The cost of buying a home in Montgomery County may soon increase, as County Council President Nancy Floreen has proposed an increase in the recordation taxes paid at real estate closings as a way to finance school construction.

The measure is projected to raise $185 million in revenues with $155 million earmarked for school construction, and a hearing on the bill is scheduled for May 10.

The current recordation tax in Montgomery County is $6.90 per $1,000 for the first $500,000 of purchase price. The recordation tax rate increases to $10 per $1,000 for anything over the $500,000 mark. Buyers and sellers customarily split the recordation tax 50/50.

For example, a purchase price of $400,000 at the current recordation tax rate would amount to $2,415 split between the buyer and seller. On a home sold for $600,000 the recordation tax would amount to $4,105 split between the buyer and seller.

Real estate agents are opposed to the tax increase saying it will hurt first-time homebuyers in particular and may have a negative impact on the local real estate market overall. Proponents of the legislation say it is necessary to fund school expansions in the growing county.

Montgomery County’s population has increased by more than 100,000 residents over the last 10 years and exceeds 1 million residents, making it the most populated county in Maryland.

Check back for updates on this legislation.

Did you know? Tenant Opportunity to Purchase Act in Takoma Park, Maryland

If you have been involved in real estate in the DC metro area you have likely come across the DC Tenant Opportunity to Purchase Act. But did you know that Takoma Park, Maryland also has a Tenant Opportunity to Purchase Act ("TOPA")?

The intent of TOPA is to promote the conversion of rentals to owner-occupied housing. Not complying with TOPA does leave the possibility that a court of competent jurisdiction may declare the transfer of the property void.  

As with DC, there are exceptions to the tenant opportunity to purchase. Some transfers that are exempt include transfers to a family member, transfers under a court order, transfers to the State or a local government and transfers of a minority title interest.  For a complete list of exempt transfers, please visit Section 6.32.020 of the City of Takoma Park Municipal Code.   

As the title company, Federal Title will require proof that the seller delivered a written offer of sale at the same price and terms as the third party contract of sale to each tenant, any registered  tenant association, and the City of Takoma Park by first class mail or personal delivery and, except for single family homes, that the offer was posted in a common area.  

For single family homes, the tenant has seven days from the date of receipt of the written offer of sale to provide a written statement of interest, and the City of Takoma Park has 14 days. For properties with two to six units, a group of tenants acting jointly have 14 days, then seven additional days for any individual tenant, then seven more days for the City.  

For properties with seven or more units, a registered tenant association representing at least one-third of the occupied rental units in the rental facility and the City of Takoma Park each have 45 days. (Please note that properties involving four or more units in Takoma Park will also need to comply with Montgomery County’s Right of First Refusal laws).

Similar to DC’s TOPA laws, a tenant does have the right to waive the rights but only if supported by consideration. Also, the closing must take place within 6 months of the offer of sale being mailed or personally delivered. Federal Title will additionally require that both the purchaser and the seller sign a TOPA affidavit. 

This is just a summary of the City of Takoma Park TOPA laws, but the full text can be found at Chapter 6.32 Tenant Opportunity to Purchase.

Headlines: Rents on the rise; 45% of homes deemed 'affordable' to DC metro middle class

Here's a look at what's happening in real estate in the District of Columbia and beyond.

Report: 45% of DC homes are affordable to middle class

Statistics refer to the DC metro area as a whole — a very large statistical area — not to DC proper. -Urban Turf

Rents skyrocket well beyond wages 

Rents are rising most in the local housing markets where renters are already stretched thinnest. In the five least affordable markets, rents are now 7.8 percent higher than they were a year ago. -CNBC

What buyers and sellers can do in a slow market

Buyers have more leverage in the negotiations, including price, earnest money deposits and contingencies. The longer a home sits on the market, the more control buyers will enjoy. -Washington Post

Inside the Atlantic Plumbing Building (Photos)

Developer JBG Cos. recently announced prices for its Atlantic Plumbing condos at Eighth and V streets, Northwest, with junior one-bedrooms starting in the high $300,000s to penthouses for $1.9 million. - Washingtonian Magazine

Md. regulation discourages referrals by real estate agents

Real estate agents making referrals to service providers in Maryland can now be fined up to $5,000 if they violate a new state Real Estate Commission regulation. -Washington Post

DC's historic buildings can anchor a neighborhood; some in jeopardy

Lists such as the National Register of Historic Places and the D.C. Inventory of Historic Sites were formed to preserve landmark buildings. Properties on the list are acknowledged and protected from being completely demolished because of their cultural significance. -Elevation DC

Close It™ House of the Week: A Tudor for entertaining

This week we're looking at a Tudor style home in Bethesda, Maryland with plenty of space for entertaining guests both inside and out. It's listed at $734,500.

This house has a large living room adjacent to the kitchen, which has a peninsula and granite counters as well as classic white appliances that include a brand new dishwasher and microwave. During warmer months, the deck is ideal for hosting outdoor dinner parties and barbecues. 

Assuming a homebuyer puts down 20 percent on a conventional loan, her cash to close number will be approximately $166,518.81. The monthly payments would then be around $4,087.31 per month. For a complete picture of the cash to close, or for a run-down of the seller's side of the deal, plug the numbers into the Web version of Close It™ or download the free iOS app.

  • Ways to save at closing

    Title charges are the largest chunk of closing costs and can vary by hundreds of dollars.

    Learn more

  • What are closing costs?

    The real estate closing process involves loan steps, legal steps and title steps.

    Learn more

  • What's title insurance?

    Insure your legal ownership just like you'd insure the building, but for lots cheaper.

    Learn more

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