Buying or selling in Frederick and wondering why transfer and recordation taxes keep showing up on your closing estimate? You are not alone. These line items can be confusing, and they directly affect your bottom line. In this guide, you’ll learn what each tax covers, how they’re calculated, who typically pays in Frederick County, and how to build a reliable net sheet so you avoid surprises. Let’s dive in.
Transfer vs. recordation taxes
Understanding the difference helps you plan your cash to close or net proceeds.
- Transfer tax: A tax on the conveyance of ownership when a property changes hands. It is usually a percentage of the consideration, most often the sale price. In Maryland, there is typically a state portion and a county portion.
- Recordation tax: A tax charged when certain documents are recorded with the county, most commonly a new mortgage or deed of trust. It is usually calculated as a percentage of the principal debt amount being recorded.
- Recording fees: Separate, smaller clerical fees for recording and indexing documents like the deed and mortgage.
Other closing costs also appear on your statement, such as title insurance, prorated property taxes, settlement charges, lender fees, and commissions. These are not transfer or recordation taxes but still affect your final numbers.
How the taxes are calculated
Rates can change over time. Always confirm current Frederick County and Maryland rates with your title company or settlement agent before relying on any figure.
Transfer tax formula
- Total transfer tax equals state transfer tax rate plus county transfer tax rate, multiplied by the sale price or other consideration if different.
- Some transactions qualify for narrow exemptions based on the parties or type of transfer. Confirm any eligibility with your title company or attorney.
Recordation tax formula
- Recordation tax is generally the recordation rate multiplied by the principal amount of the new mortgage or deed of trust.
- If a loan is assumed or modified, the recordation posture can change. Your settlement agent can tell you what applies to your situation.
Recording fees
- Recording fees are flat charges set by the county for each document you record, such as the deed, deed of trust, and any satisfactions.
- Ask your title company for the current fee schedule for Frederick County.
Who typically pays in Frederick County
Payment is negotiable, and your contract controls. That said, local custom provides a helpful starting point:
- Seller: Commonly pays transfer taxes associated with conveying title and often provides the owner’s title policy. The seller also covers deed preparation and any mortgage payoff costs.
- Buyer: Commonly pays the recordation tax on a new mortgage and the recording fees for loan documents. The buyer also typically pays lender-related title insurance and lender fees.
- Prorations: Property taxes, HOA dues, and utilities are prorated between buyer and seller based on the closing date.
In certain negotiations, a seller may agree to pay part of a buyer’s closing costs, or a buyer may agree to adjust the allocation to win a competitive home. Your agent and title company will reflect the final allocation on the Closing Disclosure or settlement statement.
Worked example: illustrative only
The following example is for demonstration. Replace the sample rates with the current Frederick County and Maryland rates provided by your title company.
- Sale price: 400,000 dollars
- Buyer’s mortgage: 320,000 dollars (80 percent loan-to-value)
- Assumed example rates for modeling only:
- State transfer tax: 0.5 percent
- County transfer tax: 0.5 percent
- Recordation tax on mortgage: 0.5 percent of mortgage amount
- Recording fees: estimated flat amounts
Seller net sheet (example)
- Sale price: 400,000 dollars
- Less broker commissions (example 5 percent): 20,000 dollars
- Less combined transfer tax (1.0 percent of 400,000 dollars): 4,000 dollars
- Less payoff of existing mortgage (example): 200,000 dollars
- Less seller closing costs and prorations (estimate): 1,500 dollars
- Less owner’s title policy (example): 1,200 dollars
- Estimated net to seller: 173,300 dollars
Buyer closing costs (example)
- Down payment (20 percent): 80,000 dollars
- Recordation tax on new mortgage (0.5 percent of 320,000 dollars): 1,600 dollars
- Recording fees for deed and mortgage (estimate): 200 dollars
- Lender title policy and settlement fees (example): 1,500 dollars
- Prepaids and escrows for taxes and insurance (example): 2,000 dollars
- Estimated total cash to close: 85,300 dollars
These numbers are placeholders. Your title company will provide exact transfer tax rates, recordation tax calculations, and recording fees for Frederick County.
Principal residence vs. other cases
- Primary residence: Simply using the home as your primary residence does not, by itself, create a general exemption from transfer taxes in Maryland. Some narrow exemptions apply in specific situations, such as certain family or court-ordered transfers. Confirm current statutes with your settlement agent.
- Investments and second homes: The same taxes usually apply. Talk to your tax advisor about any income or capital gains considerations. Those are separate from transfer and recordation taxes.
- Refinances and assumptions: Refinances can trigger recordation tax on the new mortgage amount, and some jurisdictions offer reduced rates for refinances. Mortgage assumptions and modifications can change whether and how recordation tax applies. Always verify with your title company.
Checklist to get accurate numbers
Ask your title or settlement company for:
- Current Maryland and Frederick County transfer tax rates and how they apply to your contract price
- Recordation tax rate and formula for your loan amount or deed
- Exact recording fees for the deed, deed of trust, and any satisfactions
- Title insurance premiums for owner’s and lender’s policies
- Estimated payoff for any seller mortgage, including per diem interest
- Property tax, HOA, and utility prorations based on your closing date
- Any local surcharges or required affidavits unique to Frederick County
Ask your agent or attorney:
- What is customary in Frederick County for who pays which items
- Whether your contract includes seller credits or concessions that change the allocation
Step-by-step: estimate your closing costs
- Confirm current transfer and recordation rates with your title company.
- Plug those rates into the formulas for the sale price and loan amount.
- Add recording fees for the deed and mortgage.
- Layer in title insurance, lender fees, and settlement charges.
- Include prorations for property taxes, HOA dues, and utilities based on the closing date.
- Run a second scenario showing alternative allocations if you plan to negotiate closing cost help.
Common pitfalls to avoid
- Assuming the other party always pays. The contract can change customary allocations.
- Forgetting recordation tax on the mortgage. This can be a meaningful line item for buyers using financing.
- Overlooking recording fees. They are smaller but still need to be in your estimate.
- Ignoring prorations and payoffs. These can shift your bottom line by thousands of dollars.
- Not requesting a written net sheet early. Small changes add up, so ask the title company for updated estimates as details evolve.
Getting your numbers right early makes for a calmer, smoother closing. If you want help building a Frederick-specific net sheet and understanding which items are negotiable in today’s market, reach out. Get a free home valuation or call Jim to discuss your neighborhood. Connect with Unknown Company to get started.
FAQs
Who pays Maryland state transfer tax in Frederick County?
- Customarily the seller pays transfer taxes tied to conveying title, but it is negotiable and the purchase contract controls the final allocation.
Who pays recordation tax on a buyer’s new mortgage in Frederick?
- Buyers typically pay the recordation tax on a new mortgage and the recording fees for their loan documents, unless the parties agree otherwise in the contract.
Are primary residences exempt from Maryland transfer taxes?
- Being a primary residence alone does not create a general exemption; only narrow, specific exemptions may apply, so confirm with your title company or attorney.
Do refinances in Frederick County trigger recordation taxes?
- Refinances can trigger recordation tax on the new mortgage amount and recording fees, and some jurisdictions offer reduced rates for refinances; verify the current local rules.
How can Frederick sellers avoid surprises at closing?
- Ask your agent and title company for a preliminary net sheet early, use conservative estimates for taxes and prorations, and confirm seller-paid items in the contract.
