Prince George’s County homeowners and aspiring homeowners – take note. County Executive Rushern Baker recently released his budget proposal for fiscal year 2013. In it is a proposal to increase the County property transfer recordation fee by 20%, from .5% of the sales price to .6% of the sales price on a home purchase.
Upfront buyer closing costs; recordation fees, transfer taxes, property taxes, down payments and lender fees are the largest impediment to home ownership. Even more worrisome, Prince George’s County leads the Maryland DC Metro area in closing costs.
In today’s market, closing costs are a hurdle for sellers, too. In a market where sellers are already competing with foreclosures and short sales, which can drive values down, many sellers are bringing substantial sums of money to the settlement table in order to sell their homes.
So let’s take a typical sale in Cheverly – say $250,000. Transfer and recordation taxes along account for 2.4% of the closing costs of the property. That’s $6,000. The recordation tax accounts for $1,250 of that total. The proposed increase would bring it to $1,500. While this cost is typically split between the buyer and the seller, it is still a burden in an already over-burdened and fragile real estate market. Let’s face it, a robust real estate market benefits our entire economy – bringing jobs, services, and money into our county.
Let’s look at a few facts about home ownership in Prince George’s County:
- Over 70% of County tax revenue comes from residential taxes, 29% from business.
- Prince George’s leads the Maryland DC Metro area in closing costs. On a median priced home of $162,000 it costs almost 3% less to close on a property in Anne Arundel County and Montgomery County, and 15% less in Calvert County.
- Prince George’s ranks 3rd in closing cost expense statewide, besting 21 other Maryland Counties.
- In 2008, Prince George’s County raised property recordation fees by nearly 14% from $2.20 per $500 to $2.50 per $500. Using the $162,000 sale price example that’s an additional $97 in closing fees. The increase to $3.00 per $500 is an additional $162 to close. In total $259 more would be needed to close compared to 2007 (or a total increase of approximately 37 % from 2007), even more on a higher priced home.
- At 1.4% of the closing price, Prince George’s ranks 1st in the Maryland DC metro area in transfer taxes and, using the $162,000 home sale example, Prince George’s also ranks 1st statewide* in transfer tax burden.
- Prince George’s leads the Maryland DC metro area in property taxes. The annual property tax on a $162,000 residential Prince George’s property is $2,137 vs. $1,484 in Montgomery County and Anne Arundel County. Calvert County property taxes are $1,445 at a $162,000 assessment. Prince George’s bests these jurisdictions in property taxes by 30% and 32%, respectively.
- Prince George’s single family property settlements are down 4.1% compared to March 2011. Prince George’s Condominium settlements are down 5.7% compared to March 2011. Statewide, the average and median home sale prices are down 7.8% and 9.8%, respectively from 2009 to 2011.
- Prince George’s efforts to attract big and small businesses as well as Federal and state agencies will be hampered in settlement cost comparisons to neighboring jurisdictions.
Unfortunately, the County is experiencing a very challenging housing market. Foreclosures and short sales dominate the market and property values are at extreme lows compared to past values. It’s expected that there will be a significant number of foreclosures entering the Prince George’s marketplace in the very near future.
Prince George’s leaders should be encouraged to stabilize our market and incentivize buyer investment in Prince George’s County, not push buyers off (to other areas) because of our higher taxes and fees.
Homeowners are a large constituency in the County, but there is no powerful lobby out there, advocating for that constituency. Most of us don’t think about the costs of buying and selling until we are actually thinking about buying or selling! The REALTORS(s) have long been the voice for homeowners, fighting to keep the cost of buying and selling to a reasonable level. The Prince George’s County Association of REALTORS(r) urge all county residents to contact your elected Council member to express your concerns on this matter.
On a personal note, I am proud that Rushern is my friend and neighbor and I support his efforts to improve education and public safety, but I really feel this is a bad idea and the wrong way to offset the budget challenges that we face. Homeowners already do so much for this county – let’s not punish them for it!
*Baltimore City and Baltimore County impose transfer taxes at 1.5% of sales price with an exemption of $22,000.