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Barrister
Barrister, Lawyer
Category: Real Estate Law
Satisfied Customers: 33781
Experience:  15 years real estate, Realtor. Landlord 26 years
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I am buying a house in Maryland as a first-time homebuyer.

Customer Question

I am buying a house in Maryland as a first-time homebuyer. The house is a foreclosure and the bank has already taken ownership. The contract used is the standard MAR Residential Contract of Sale. Paragraph 24 of the contract provides that “the entire amount
of recordation and local transfer tax shall be paid by the Seller of property that is sold to a first-time Maryland homebuyer, unless there is an express agreement that the recordation tax or any state or local transfer tax will not be paid entirely by the
Seller.” It continues: “RECORDATION AND LOCAL TRANSFER TAX. If the Buyer is a first-time Maryland homebuyer, Buyer and Seller expressly agree … that payment of recordation tax or local transfer tax shall be shared equally between the Buyer and Seller unless
a ‘First-Time Homebuyer Transfer and Recordation Tax Addendum’ is attached, which contains a different express agreement.” The Maryland First-Time Homebuyer Transfer and Recordation Tax Addendum IS attached to the contract, and it starts with “For use only
when … the parties intend to provide for an express agreement on terms different from those contained in paragraph 24 of the contract of sale.” The addendum provides, among other things, as follows: 1. The state transfer tax is reduced from 0.5% to 0.25% and
will be paid entirely by seller. (This is mandated by state law.) 2. “The entire amount of recordation tax and local transfer tax shall be paid by the seller unless there is an express written agreement between the parties that the recordation tax and local
transfer tax will NOT be paid entirely by the seller.” Below that, there is a paragraph which reads, “Buyer and seller expressly agree that the cost of recordation tax and local transfer tax shall be paid as follows:” None of the options are initialed, so,
absent another agreement to the contrary, the seller would pay these taxes. There are also several seller-provided addenda. One starts with, “in the event that any provision of this addendum conflicts in whole or part with the terms of the contract for sale,
or any addenda to the contract, the provisions of this addendum will control unless such provisions are contrary to any laws or others applicable legal prohibition, in which case the contract shall govern only to the limited extent necessary for compliance
with the same.” And ends with, “If any provision of this Contract is held to be illegal, invalid, or unenforceable under the present or future laws, such provisions shall be fully severable, this Contract shall be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part of this Contract; and, the remaining provisions … shall remain in full force and effect and shall not be affected by such illegal, invalid or enforceable provision or by its severance from this
Contract.” Within this seven-page addendum, there is a paragraph which states “Seller is able to refer a title company to facilitate the closing, however all fees will be the responsibility of the buyer, including, but not limited to: Owner’s Policy, Transfer
fees, recording fees, etc.” * There is no other paragraph in this addendum that is related. Since state law requires that the state transfer tax be paid by the Seller, the above provision that includes that the buyer pays “transfer fees” is contrary to state
law.** So the question is, what is the effect? Is the entire “all fees will be the responsibility of the buyer, including owner’s policy, transfer fees, recording fees, etc.” stricken? Or just the “transfer fees” phrase? Or just the (unspecified) state transfer
tax portion of “transfer fees” (with other transfer fees/taxes still valid)? * A separate addendum states that if Buyer uses Seller’s recommended title company, Seller will pay for Buyer’s owner’s title policy. ** This assumes that “fees” and “tax” are interchangeable.
(If not, then perhaps the argument is easier, since the addendum requires that the buyer pay “transfer fees” and “recording fees”, not “transfer tax” and “recording tax”, but that seems like a stretch.)
Submitted: 1 year ago.
Category: Real Estate Law
Expert:  Barrister replied 1 year ago.

Hello and welcome! My name is ***** ***** I will try my level best to help with your situation or get you to someone who can.

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So the question is, what is the effect? Is the entire “all fees will be the responsibility of the buyer, including owner’s policy, transfer fees, recording fees, etc.” stricken? Or just the “transfer fees” phrase?

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When a clause in a contract comes into conflict with state law, then that clause is just marked through and voided as if it wasn't in the contract. Since the law refers to just the recording and transfer fees, that is the only portion that would be the responsibility of the seller assuming the First-Time Homebuyer Transfer and Recordation Tax Addendum was included in the contract.

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An owner's title policy would be the owner's responsibility to pay for since it is not a tax or recording fee unless they reached some other agreement with the seller (i.e. use their title company).

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As an aside, I used to be a closing attorney for 4 separate lenders and have closed probably a couple thousand loans..

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thanks

Barrister

Customer: replied 1 year ago.
Thank you. The state transfer tax is the only one mandated to be paid by the seller. Per the First-Time Homebuyer Addendum, the "recordation tax and local transfer tax shall be paid by the seller unless there is an express written agreement between the parties that the recordation tax and local transfer tax will NOT be paid entirely by the seller". So I would be on the hook for the recordation tax and local transfer tax, then, correct? (I'm not worried about the owner's policy; I would expect to have to pay for that.)
Expert:  Barrister replied 1 year ago.

So I would be on the hook for the recordation tax and local transfer tax, then, correct?

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Correct, since the default is the seller is responsible unless there is a specific clause changing that, and there is a specific clause changing that, then that makes you responsible.

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This being the specific clause "Seller is able to refer a title company to facilitate the closing, however all fees will be the responsibility of the buyer, including, but not limited to: Owner’s Policy, Transfer fees, recording fees, etc.”

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So absent that clause, the seller would pay everything.

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thanks

Barrister

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