Sandra purchased a home in Montgomery County for $500,000. She is a first-time homebuyer purchasing this as her principal residence. Under Maryland law, what is the state transfer tax rate that applies to Sandra's purchase, and who is responsible for paying it?
Correct Answer
C) 0.25% paid by the seller on Sandra's behalf
Under Maryland law, the standard state transfer tax rate is 0.5% of the consideration. However, when the buyer qualifies as a first-time homebuyer purchasing a principal residence, the rate is reduced to 0.25%. Critically, Maryland law also shifts the responsibility for paying this reduced transfer tax to the seller — the seller pays the 0.25% on behalf of the first-time homebuyer. This shifting of tax responsibility to the seller is a uniquely Maryland rule that is heavily tested.
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Related Topics & Key Terms
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Related Concepts
The comparable sales approach estimates a property's value by comparing it to similar properties that have recently sold in the same market area. It is the most widely used and reliable approach for appraising residential properties.
The cost approach estimates a property's value by calculating the current cost to rebuild the improvements, subtracting accumulated depreciation, and adding the land value. It is most reliable for new construction and special-purpose properties.
Depreciation is an accounting method of allocating the cost of an asset over its useful life, allowing investors to deduct a portion of the asset's cost each year.
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- → The income approach to appraisal is most commonly used for which type of property?
- → Which formula correctly calculates the capitalization rate?
- → External obsolescence in Oklahoma:
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- → Three depreciation:
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