As you know, in 2008 Arizona voters overwhelmingly supported Prop. 100, Protect Our Homes. The measure essentially prohibits the creation of a tax of any kind on the transfer of real property in the state.

Why was the Prop. 100 win so important to property owners as well as buyers? Here’s an example from Maryland which has not one but three different types of real estate transfer taxes. They include the recordation tax (sometimes called documentary stamps), the state transfer tax, and in most cases, a county transfer tax. It is customary for these taxes to be split 50/50 between the buyer and the seller of the property, but there is no set requirement that they be divided in that manner.

On a $400,000 house in Anne Arundel County, Maryland, the recordation tax is $7 for every $1,000 of sales price. That would be $7 times 400, or $2,800. If the contract calls for an even split, that means a $1,400 expense for the seller.

The next tax is the county transfer tax. In Anne Arundel County, it's 1 percent of the sales price, or $4,000 on a $400,000 house. Again, it's usually split with the buyer, in this case resulting in a $2,000 tax for each.

The third tax is the state transfer tax, which is 0.5 percent of the sales price - $2,000 on a $400,000 sales price; $1,000 each in a 50/50 split with the buyer and seller. But if the buyer happens to be a first-time homebuyer, the state of Maryland waives the buyer's half of the state transfer tax. The seller, however, will still be obligated to pay their $1,000 share.

So, all told, the state and county taxes on a $400,000 sales price in Anne Arundel County come to $8,800 or $4,400 each when split evenly between the buyer and seller.  

That means a buyer or seller would have to come up with a minimum of $4,400 in additional real estate transfer tax-related closing costs! These additional taxes prove to be quite a significant burden on both parties when it comes to the real estate transaction which is why the Prop. 100 win is so important for property owners and buyers across the state!