The Scourge of Real Estate Transfer Taxes by Jim Woodard on Creators.com

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The Scourge of Real Estate Transfer Taxes

As local, county and state governments face growing, and sometimes desperate, economic needs, they increasingly turn to real estate transfer taxes as a source of funding. This is a tax that may be imposed at the closing of home sales or other real property transactions.

These taxes typically range from .01 percent to 4 percent of the sale price. It can be paid by either the buyer or seller, or shared by the parties.

"Unlike property taxes, real estate transfer taxes are state and local taxes that are assessed on real property when ownership of the property is transferred between parties," as was noted in a report by the National Association of Realtors.

"These taxes are used in many areas to fund programs designed to preserve rapidly depleting open spaces in commercial or residential areas, and to fund housing programs for low-income residents."

Some states have a variety of transfer tax laws, which may include specific exemptions for certain types of buyers based on buying status or income level. One state, for example, exempts certain first-time buyers from a percentage of the total or excludes a portion of the property's sales price from taxation altogether.

Transfer taxes are not without controversy. Most real estate professionals view them as another obstacle in encouraging home ownership and achieving recovery in our struggling housing market. This is the worst time to impose such a tax, many property owners believe.

Q: What's the prognosis for new home production?

A: Production of new single-family homes and apartments rose 9.3 percent to a seasonally adjusted annual rate of 685,000 units in November, according to figures released by the U.S. Commerce Department. This marks the fastest pace of housing starts since October 2008.

"While we still have a long way to go back to normal, the latest numbers are one more indication that housing is slowly turning the corner," said Bob Nielsen, chairman of the National Association of Home Builders. "In scattered markets across the country, buyers who have long sat on the sidelines are starting to take advantage of today's very attractive prices and interest rates."

Q: Why aren't more people buying and selling homes these days?

A: One recent study shows that prospective homebuyers believe now is a good time to buy, given today's low home prices and low mortgage interest rates.

But potential sellers are nearly unanimous in reporting that it is not a good time to sell a home, citing difficulty in finding buyers at desired sales prices, according to a study released by the Mortgage Bankers Association.

The study, entitled "The Great Recession and Attitudes Toward Homebuying" and sponsored by MBAs Research Institute for Housing America, utilizes 30 years of data from the University of Michigan's Survey of Consumer Attitudes to examine consumer attitudes toward homeownership before, during and after the most recent recession to see if consumer sentiment changed toward home buying and selling.

Q: How many people buy homes with all-cash?

A: Despite record low mortgage rates, 2011 saw a surprisingly high level of cash home purchases, reported by Hanley Wood Market Intelligence.

"Between tight lending standards and a desperate search for yield by investors, cash purchase of homes (especially distressed properties) became even more common in 2011 than during the previous year. About 38 percent of homes purchased in 2011 were bought with all cash. That's up from 34 percent in 2010, and double the 19 percent rate in 2006," the report noted.

The trend is likely to continue in the near term, with investors being responsible for an increasing share of home purchases as prior homeowners abandon the ownership market and head back to rentals.

Q: Is mortgage counseling really effective?

A: Apparently, it is. Homeowners who receive foreclosure prevention counseling are at least 67 percent more likely to be current on their loans nine months after a loan modification than those who do not, according to a report from NeighborWorks America.

Also, among homeowners who receive mortgage modifications, those who participate in counseling decrease their monthly payments by $176 more than those who do not, the report noted.

To find out more about Jim Woodard and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate website at www.creators.com.