Heads Up, California Sellers: You’re About to Pay 3 Types of Transfer Taxes
Don't wait until the settlement statement to understand California transfer taxes, which are charged at the state, county, and city level.
Selling your home in California can feel like a bear, with closing costs amounting to as much as 6% to 8% of the total sale price. If you’re a California seller, you may have noticed a chunk of these costs going to different kinds of California transfer tax. So what are these fees, and why are they so expensive?
Transfer taxes are charges levied by various government bodies on the conveyance of homeownership from one party to another. The taxes are proportional to a home’s value, and since your home is likely your most valuable asset, those taxes can add up fast.
Don’t wait till your settlement statement to ask questions. Learn all about transfer taxes in California below.
Step one: Talk to an expert!
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What are transfer taxes?
The National Association of Realtors (NAR) defines transfer taxes as “a charge levied on the transfer of ownership or title to property from an individual or entity to another.” Put simply, when the title of your home — the document that entitles you to legal ownership of that property — is transferred to another party, the government levies a tax on that transfer. Depending on where you live, you’ll need to pay transfer taxes to the state, your county, and/or your city. The purpose of these California property transfer taxes is just like any other tax: to generate revenue.
Sellers customarily foot the bill
But who pays the California transfer tax might depend on where you live. Though it is most common for the seller to pay the state and county taxes, there are some parts of Northern California where buyers split or pick up the city transfer tax tab. A real estate agent with local experience is best equipped to help you understand which fees you’re on the hook for. These experts might also be able to help you make the most of whatever kind of market you’re in.
If you know you want to pass off transfer tax costs onto the buyer, Rick Fuller, an Antioch real estate agent with over 22 years of experience in real estate, recommends sitting down with your agent and making a plan for a multiple offer environment:
“It’s in multiple offer environments that these negotiations are most effective. When you have multiple buyers bidding on a property, it’s a lot easier to have the buyer pay for costs that may not be customary for them to pay for, like a transfer tax or a cost associated with an HOA transfer fee. These are things that we generally see the seller pay for unless they can create an environment where there are multiple offers, and a buyer is willing to pick up the cost of those items.”
The escrow company that handles your home sale will calculate the taxes and present them to you on your settlement statement. But by the time you’re reading the settlement statement, it’s too late to try and negotiate the fees, so make sure to talk to your agent about transfer taxes before sitting down at the closing table.
