There is a common misconception about Recordation and Transfer taxes in the District of Columbia, and if you aren’t careful, it’ll cost you a lot of money.  When real property is bought or sold in the District of Columbia, the Recorder of Deeds charges two hefty taxes, the Transfer Tax and Recordation Tax.  The taxes are calculated on a percentage of the sale price and easily run into thousands of dollars.  I’ve noticed that there is a misconception in the industry that there is a law requiring the Seller to pay the Transfer Tax and the Buyer to pay the Recordation Tax.  I’m here to tell you, there is no such law.  The split of the taxes is customary, but they are entirely negotiable.  And if you aren’t careful, you can end up paying both and it’ll cost a ton.  Let’s do some math:

On an $800K sale, the Transfer Tax is $11,600.  The Recordation Tax is $11,600.  If you don’t negotiate a split, you’ll end up spending an extra $11,600.  Wow!

And this happens more often than you think.  Fresh out of law school, I worked for a firm that had many mega-builders as clients.  The mega-builders would use contracts that called for the buyer to pay both the Transfer and Recordation tax.  It was amazing how infrequently the contract was read and equally amazing how the figures were ignored on the settlement statement.  People simply looked at the amount needed for closing and brought a check.  And even if the non-split was noticed at settlement, it was too late.  The buyers had already signed the contract.  Yikes!

At Lawyers Realty Group, we read that contract.  Especially the part about Transfer and Recordation Taxes!  Buy Smart.  Live Well.