Buying or selling in Kensington and trying to decode the line items on your closing estimate? Transfer and recordation taxes can feel confusing, especially when you are budgeting for cash to close or net proceeds. You want clear, local guidance you can trust. In this guide, you will learn what each tax is, who typically pays what in Montgomery County, how to estimate the numbers before you write an offer, and what to ask your title company. Let’s dive in.
Transfer vs. recordation taxes
Transfer tax basics
- What it is: A tax on the transfer of title or an interest in real property.
- What it is based on: Usually the purchase price, often called the consideration.
- Who imposes it: The State of Maryland, plus Montgomery County may add its own county-level transfer tax.
- Where it shows up: As a line item on the deed side of your closing disclosure.
Recordation tax basics
- What it is: A tax charged when documents are recorded in the county land records, most commonly a mortgage or deed of trust.
- What it is based on: Usually the amount of the new loan being recorded. Some jurisdictions also apply recordation to deeds.
- Who imposes it: The State of Maryland, and Montgomery County may levy additional amounts.
- Where it shows up: Often on the lender side of the buyer’s closing disclosure.
How they work together at closing
Both taxes can be due at the same closing and they are separate charges with different rate schedules and exemptions. Because rates and rules can change, always verify the current figures with your title or settlement company and the county before you submit an offer.
Who typically pays what in Montgomery County
- Local custom in the DC metro area, including Montgomery County, is that the seller pays transfer taxes on the deed, and the buyer pays recordation taxes tied to the buyer’s mortgage.
- This is custom, not law. The purchase contract can allocate these costs any way the parties agree, subject to lender requirements.
- In competitive situations, buyers sometimes agree to cover some or all transfer taxes to strengthen an offer. If you choose that strategy, make sure the exact dollar amount is in your offer and in the lender’s cash‑to‑close estimate.
How to estimate your costs
Essential inputs
Ask your agent and title company to pull together:
- Sale price you plan to offer.
- Estimated new mortgage amount, if any.
- Any credits or exemptions that may apply.
- Confirmation of state and county rates, and whether any municipal or special district surcharges apply for Kensington.
Quick estimate workflow
- Confirm the current state and county transfer tax rates, and the recordation tax rate on the mortgage amount.
- Multiply the sale price by the state transfer rate for the state transfer tax.
- Multiply the sale price by the county transfer rate for the county transfer tax.
- Add those two figures for total transfer taxes.
- Multiply the new mortgage amount by the mortgage recordation rate for the buyer’s recordation tax estimate.
- Add up all applicable taxes to see the combined tax impact at closing, then apply your negotiated allocation.
- Add a small buffer, such as 200 to 500 dollars, for rounding and incidental recording or municipal fees.
Kensington examples (illustrative only, verify current rates)
Below are simple examples that show how the math works. The rates are placeholders for illustration. Your title company will confirm current rates and any exemptions.
Example A: Seller pays transfer taxes, buyer pays mortgage recordation
- Hypothetical rates: state transfer 0.50 percent, county transfer 1.00 percent, mortgage recordation 0.50 percent.
- Sale price 800,000 dollars; buyer mortgage 640,000 dollars.
- State transfer tax = 800,000 × 0.005 = 4,000 dollars.
- County transfer tax = 800,000 × 0.010 = 8,000 dollars.
- Total transfer taxes = 12,000 dollars (seller cost in this scenario).
- Mortgage recordation = 640,000 × 0.005 = 3,200 dollars (buyer cost).
- Combined taxes at closing = 15,200 dollars.
Example B: Buyer pays both transfer taxes and mortgage recordation
- Same rates and sale price as above.
- Transfer taxes = 12,000 dollars (buyer pays).
- Mortgage recordation = 3,200 dollars (buyer pays).
- Buyer’s added cash for taxes at closing = 15,200 dollars.
Example C: Condo‑price scenario common in Kensington
- Hypothetical rates as above.
- Sale price 450,000 dollars; buyer mortgage 360,000 dollars.
- State transfer tax = 2,250 dollars.
- County transfer tax = 4,500 dollars.
- Transfer taxes total = 6,750 dollars.
- Mortgage recordation = 1,800 dollars.
- Combined taxes = 8,550 dollars.
Exemptions and special cases
Exemptions exist and are fact specific. Common categories to check with your title company include:
- Transfers between spouses or incident to divorce.
- Transfers to or from certain non‑profit entities or government agencies.
- Estate administration or executor distributions with specific filing rules.
- Certain foreclosure or restructuring transactions that may qualify under statute.
Provide your full transaction details early so your title team can evaluate eligibility and tell you what documents are needed.
Smart contract tips for buyers and sellers
Use clear language so everyone understands who pays what. Examples you will often see in Montgomery County contracts:
- “Seller shall pay all state and county transfer taxes. Buyer shall pay all recordation taxes associated with the buyer’s mortgage.”
- “Buyer agrees to pay transfer taxes up to [a dollar cap]. Seller pays any amount above that.”
- “All transfer and recordation taxes to be paid in accordance with local custom unless otherwise allocated herein.”
If a buyer offers to pay transfer taxes, make sure that dollar amount appears in the offer and the lender’s cash‑to‑close. If a seller plans to credit the buyer toward closing costs, confirm the credit fits within lender rules on concessions.
What to ask your title company in Kensington
- Request an itemized preliminary closing worksheet that shows:
- State and county transfer tax estimates and typical local allocation.
- Mortgage recordation tax estimate based on your loan amount.
- Any municipal or special district surcharges that may apply for Kensington.
- Ask about any exemptions or credits and the documentation required.
- Confirm the timing of tax remittances to the county and state.
- Keep the estimate on file for your lender and update it when terms change.
The bottom line for Kensington
Transfer and recordation taxes are two separate costs that can affect your cash to close and your net proceeds. In Montgomery County, the seller usually pays transfer taxes and the buyer usually pays mortgage recordation, but you can negotiate the allocation in your contract. The best move is to verify current rates with your title company before you write an offer, then decide on an allocation strategy that supports your goals.
Ready to run the numbers for your Kensington move and craft a clear plan? Reach out to Patrick Thelwell for a calm, teach‑first walkthrough, current estimates from a trusted title partner, and a strategy that fits your timeline and budget.
FAQs
Who pays transfer and recordation taxes in Montgomery County?
- Local custom is that sellers pay transfer taxes on the deed and buyers pay recordation taxes tied to their mortgage, but the purchase contract can allocate these costs differently.
What information do I need to estimate these taxes before an offer?
- You need the sale price, your estimated mortgage amount, current state and county rates, and any credits or exemptions you may qualify for.
Do any Kensington municipal surcharges apply to my closing?
- Some municipalities add surcharges, so ask your title company to confirm whether any municipal or special district fees apply to your specific Kensington property.
Can a seller pay the buyer’s mortgage recordation tax?
- Yes, parties can negotiate this, but lenders may limit the size and type of seller concessions, so confirm with your lender first.
Are transfer or recordation taxes refundable if a sale falls through?
- These taxes are typically not paid until recording at closing; if a transaction does not close, the taxes are usually not collected, and any refund issues are handled by the title company with the county or state.
