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Updated over 7 years ago,
Transfer Taxes on Double Closing
How many Wholesalers doing Double Closings are paying the Real Estate Transfer Taxes?
These can be quite expensive in some places. For instance The State of Pennsylvania charges 1% of the sales price and the municipality and school district USUALLY charge 1% between them for a total of 2% (i.e. 2% X 100,000 = $2,000). By custom, the buyer and seller split the cost.
Before a deed, security instrument, or other writing can be recorded in the office of the clerk of the superior court, the real estate transfer tax must be paid. If a Wholesaler does a double closing in PA the transfer costs could amount to 4% - Failure to pay those costs will create a problem for the end buyer and anyone who subsequently buys from them.
Many Counties are now looking at increasing the rates in order to obtain more revenue. Who knows how much you should be paying in each State and particular Counties and Cities?
When you look at possibly paying 4% in transfer costs on a double closing (or at least half of that - as the end buyer would pay half) does paying $10,000 on a $500,000 house seem a bit dumb? Especially when you can keep closing costs down to under $1,000 by not double closing?
How are wholesalers managing the payment or non-payment of transfer tax?