I often have to educate some of the newer investors I work with about this fact. This is at least the case in DC, Maryland and Virginia, that the buyer of an REO pays 100% of the transfer taxes and redecoration taxes.
In these jurisdictions a standard sale typically splits these fees 50/50 between buyer and seller, but banks are exempt from this so the buyer pays 100% of the fees. Depending on the county or city you are in, these costs can run as high as 3% of the purchase price. Baltimore City for instance has a tax of 1.5% for the city, plus .5% to the state for transfer taxes, then $10 per $1,000 for redecoration taxes. This can add significant amounts of money to your closing costs.
Another huge issue I often see with REO's is HVAC systems that are either dead, or very close to death. These systems may not have been run in years, and while they may appear to function when you buy the property, often die soon after.
So often a buyer merely looks at the price of the REO and think that it is a deal, but do not realize these extra costs that come along with buying an REO.
Wow...posts like this make me thankful, once again, I live in Texas. When we say redecoration, we're either talking about a new sofa & love seat or going to the cemetery to put fresh flowers on the graves!
Stupid auto correct changed "Recordation" to"Redecoration"
Sorry to disagree, but I've been a licensed broker In Virginia for 30 years and I never done a deal where buyer and seller split recording fees.
@Mark Guy I do plenty of transactions in Virginia and that is the norm up here in the DC metro area. What is the norm down there?
buyer pays recording fee and state and city tax stamps. Seller pays grantor tax
What is the difference in the cost on the buyers and sellers side? In each of our three jurisdictions who pays what is technically a little different, but it all comes out to essentially a 50/50 split. For instance in DC one side pays the transfer taxes, and the other the recordation taxes...but the tax rates are equal to create a 50/50 split. On the Maryland side the recordation and transfer taxes are not the same rate, so they get split equally 50/50. On the Virginia side there are the grantor taxes, the transfer taxes, the county tax and the regional congestion relief tax. The title companies split these so they create essentially a 50/50 split on the Virginia side. This may be a byproduct of our metro area having three "state" jurisdictions as well as the many seperate county and city jurisdictions we have to deal with to do business here.
never heard title companies splitting anything. Must definitely be a by product of the area (though I practiced in NoVa from '87-'97 and never saw it). I'm in VA Bch area and is definitely not the practice here. For example, on a $250k sale with 10% down, the buyer's recording and stamp fees are about $1700. The seller's grantor tax is $250. Hardly 50/50.
The take-away from this is to check with a settlement atty or title company to determine the practice in your area. Real estate is very site specific.
It is the law in MD that these fees are split 50/50 unless otherwise specified in the contract. However this is a negotiable item. When you buy from me You pay 100%. When you sell to me You pay 100%. - Heads I win, tails you lose.
This is why you need to read and understand the contracts you sign.