Real Estate Contracts

A:  Generally, it is up to the parties to decide how to allocate transfer and recordation taxes. Seller could pay all, Buyer could pay all, or the parties could split.  The default mode is to split 50/50 but parties may negotiate any other term, and this is often adjusted in an extreme buyer or seller market, for example.  The only time Maryland law mandates a particular allocation is in the context of a first time home buyer - in that case, 1 of the 3 transfer / recordation taxes is reduced in half and the Seller must pay that half.  Transfer and recordation taxes can be signi
 - usually several thousand.  When Arden Law prepares a real estate contract we’ll be happy to give a quick estimate of the likely transfer and recordation taxes. 

A:  While the parties can allocate settlement or closing costs as they agree, in most cases the buyer pays the settlement fee in Maryland and the seller pays only the cost of deed preparation and clearing any seller liens. Who pays settlement fees should be clearly spelled out in your contract. 

A:  There are three (3) different taxes that apply to most sales or deed transfers in this state - 1) a state transfer tax, 2) a county transfer tax and 3) a recordation tax.  The state transfer tax is 1/2 of 1% while the other taxes vary by county.   But other taxes may apply — for example, there may be capital gains tax.  If the seller is not a Maryland resident, they may need to remit a portion of the sales price (8% or more) at the time of the sale (withholding tax).  

A:  A sales contract is a legally binding document and unless there are built-in contingencies, you may not be able to “back out” of the deal.  You are strongly encouraged to review contracts with your attorney BEFORE signing.  A contract may give the other party the right to seek “specific performance” or basically force the deal.  In some cases, parties can negotiate termination of a contract, often in exchange for some sum of money.   If there are contingencies (say financing contingency or an inspection contingency) the buyer may be able to terminate the contract with appropriate notice.   However, note that standard MAR contracts may not automatically release the deposit and instead may require both parties to agree to return a deposit.