Posted by Art_MD on 1/21/10 6:54am
Msg #318754

New way for state to get $$

Heard a report on the radio that a certain county in MD is trying to collect more $$ on short sales.
When a property is purchased in MD, there is a transfer tax to the state and county based on the purchase price. What is proposed is that the tax be on the value of the outstanding loan on the property.

i.e. Property with $400K mortgage is short sold for $300K. 2% transfer tax would be on $400K = $8K instead of 2% of $300K = $6K. Extra $2K to state/county. Guess they are figuring that the buyer will factor this extra $$ in and bid less for the property.

Art

Reply by CopperheadVA on 1/21/10 6:59am
Msg #318755

Sounds like a brilliant new way to try and get more money for the county, yet they fail to grasp the "cause and effect" notion that they may end up inhibiting sales, growth, and recovery in their county due to the extra taxes.

Just like how in CA, many businesses are moving out due to the high tax cost of doing business there (and I lived in CA most of my life).

Reply by PAW on 1/21/10 7:33am
Msg #318756

Must be more to it. For example, if the property is valued at $400K but the outstanding principal is only $300K, then the county lost $2K (2% of $400K minus 2% of $300K).

If they're setting up special rules and calculations for unique circumstances, this may well be opening the flood gates for a whole bevy of special rules for every different circumstance that could be dreamed up.

Reply by Art_MD on 1/21/10 8:13am
Msg #318758

Effectively, they are saying that they want the 2% of the higher of 1) the sale price or 2) the outstanding mortgage.

Art

Reply by PAW on 1/21/10 8:29am
Msg #318759

Sounds like there may be some issues if they go that route. I was involved in a similar situation with state government. What was finally done was a tax on both the sale and the mortgage. That is, when the house was sold, the buyer effectively paid a sales tax on the purchase. (It was called a sales tax, of course!) If the buyer financed the house, then the mortgage was also taxed. The state got what they wanted, and the homeowner got screwed. I don't know if it is still that way or not, but there was a lot of disgruntled homeowners. Here in Florida, it is still that way. It's not considered a "sales" tax, but to me, it's the same thing.

Reply by PAW on 1/21/10 11:58am
Msg #318795

Parenthetical phrase needs to be corrected.

It should read - (It wasn't called a sales tax, of course!)

Reply by MW/VA on 1/21/10 9:52am
Msg #318763

I'm not getting this. How can they charge a "transfer tax" on an amount different from the actual transfer of the property?

Reply by Art_MD on 1/21/10 10:07am
Msg #318766

They will call it something else... they make the rules the way they want.

Art