An MSN article about the increase in closing perks — free plasma TVs, cars, upgrades and more — got me thinking about incompetent attorneys.
Huh? What’s the connection?
The connection is so simple that almost all attorneys miss it. Real estate taxes (transfer taxes and property taxes) are just that — a tax on real property. They don’t apply to price reductions (free assessments) and the value of personal property — plasma TV’s, cars, free assessments, that stainless steel refrigerator, etc. — included in the price of a home.
Transfer taxes in Chicago are $1 a thousand to the state, fifty cents a thousand to the county (both generally paid by the seller), and $7.50 a thousand to the city (typically paid by the buyer). Annual property taxes usually come in at 1.5 to 3% of the home’s value.
Look at this from the buyer’s side. If a $600,000 home includes $20,000 worth of personal property, the price on the transfer tax declarations should be $580K. Otherwise the buyer antes up an extra $150 to the city at closing, and may get socked with $300 to $600 in additional property taxes year after year.
Did your attorney get it right?