Paying transfer tax twice on a fire damaged house I have no intention of repairing

Under contract at 189k on a house with a kitchen fire in the back half, structure is fine, the smoke is not. Builder buyer at 231k, cash, wants it in ten days. I'm not touching this one, my scope creep instincts are screaming and the margin is in moving it, not fixing it.

The part I've been chewing on all week is the tax. In my state there's a deed transfer tax that gets collected on each conveyance, so I pay it on 189k coming in and my buyer pays on 231k going out, and my purchase agreement with the seller puts it on the buyer, which is me. Between that, two title policies, two sets of settlement fees and the funding, I've got about 8,900 of pure friction against a 42k spread.

An assignment would kill most of that. My hesitation is that the fee would be a 42k line item on the addendum in front of a builder who does this for a living and knows what the house cost me anyway, since our county publishes prices. So the privacy reason for double closing is basically zero here, and what's left is the licensing question, which my attorney has opinions about and I'm following.

What I'm actually unsure of: is 8,900 the right price for structural cover I might not need on this particular deal, or am I paying it out of habit because that's how I've done the last four. Nothing about the fire damage is the hard part here.

Answer

2jordan_ellis2ActivePRO6

One thing I'd want nailed down before deciding: does your state's transfer tax have any exemption or reduced rate for a resale within a short window? Some jurisdictions do have something on the books for that and some absolutely do not, and it's the kind of thing a title officer in your county will know in one phone call. If there's relief on the second leg your 8,900 shrinks and the question gets easier.

Also, if the builder already knows your basis, ask him directly what he'd do. Some end buyers genuinely do not care about the spread as long as the number works for them, and some walk on principle. You'd learn that in five minutes.

2 replies

2jessreyes12AU1APRO8

Something I still want to get straight: does the seller ever get hit twice, or is the second transfer entirely between you and your buyer? I think it's the latter, and if so the seller has no reason to care which route you take, which means the whole 8,900 is a decision you're making for yourself.

One more thing from arbor's point in the other thread. Oklahoma is the state I've seen named as requiring the profit to be disclosed even on a double close, so if you were there the privacy would already be gone. Sounds like your county publishes prices so you're in the same place for a different reason.