What Is a Transfer Tax in Real Estate?

A transfer tax is a government tax charged when real property changes ownership. It is assessed by the state, county, or city and is usually based on the home’s sale price. Transfer taxes must be paid at closing for the deed to be legally recorded.

💡 How Transfer Taxes Work

  • Local or state law determines the transfer tax rate.
  • The tax is typically calculated as a percentage of the sale price.
  • The fee must be paid before the deed can be recorded.
  • Some areas charge additional city or municipal transfer taxes.
  • Special exemptions may apply (e.g., gifts, divorces, family transfers).

Transfer taxes may appear on your Loan Estimate or final Closing Disclosure, depending on who pays them.

🏡 Why Transfer Taxes Matter in a Home Sale

  • Required for legal transfer: The deed cannot be recorded until taxes are paid.
  • Impact seller net proceeds: Transfer taxes can be one of a seller’s largest fees.
  • Vary widely by state: Some states charge $0; others charge thousands.
  • May be negotiable: Depending on the market, buyers may agree to pay them.
  • FSBO sellers must plan for them: They appear on closing statements regardless of agent involvement.

📌 Who Pays Transfer Taxes?

Who pays depends on the state and local custom:

  • Sellers typically pay in: California, Maryland, Delaware, New York.
  • Buyers typically pay in: Florida, Washington, Arizona, Colorado.
  • Split 50/50 in some states based on local norms.
  • Contracts can override local tradition if both sides agree.

For seller obligations, see:
Who Pays Closing Costs?

💵 Typical Transfer Tax Rates

Rates vary significantly by state:

  • 0% – Texas, Missouri, Alaska
  • 0.1% – 0.5% – Florida, Arizona, Ohio
  • 1% – 2% – New York State, Maryland
  • Up to 4%+ in certain cities (e.g., San Francisco transfer tax)

High-tax cities may also charge supplemental mansion taxes based on price brackets.

❗ FSBO Tip: Transfer Taxes Can Be Negotiated

While transfer taxes themselves are non-negotiable (set by law), who pays them is often negotiable. Buyers may agree to cover them in:

  • Competitive FSBO listings
  • Cash offers
  • Hot buyer markets
  • When asking for fewer concessions

Learn how concessions work:
What Are Seller Concessions?

Looking for more real estate terms? Visit our Real Estate Dictionary.

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