Most people, when they pay for something, realize that they’re not actually going to end up handing over the exact price listed on the label. That ice cream cone isn’t really 99 cents. That brand new couch isn’t really $1500. Your cell phone bill may be “locked in” at some affordable rate, but your actual monthly payment is going to end up looking quite a bit higher.
Have you ever heard the term “sticker shock?” Merriam-Webster describes it as “astonishment and dismay experienced on being informed of a product’s unexpectedly high price.” Others may think of it as that awkward moment when you remember that in addition to paying the listed price for something, you’re also paying taxes, assorted fees, and so on.
The same is true for real estate transactions – and whether you’re a buyer or a seller, it helps to be prepared!
Transfer Taxes and Fees
When you transfer real property, there are all sorts of different costs and fees to be aware of. For instance, there are closing costs that need to be addressed by buyers and sellers (more on those here and here). Some of these costs and fees will need to be paid directly, while others will be deducted from the sales price of the home. Some of these rates are standardized; others will be totally unique and variable from transaction to transaction.
One thing to keep in mind? Just like that ice cream cone, that sofa, or that phone bill, when you transfer property, there are taxes involved. On the one hand, there’s the proration of property taxes, which is generally a credit associated with a sale’s closing costs.
Another key thing to keep in mind is that there are transfer taxes involved with selling real estate from one party to another. Sometimes also called conveyance fees or transfer stamps, transfer taxes are imposed by the city, county, and state. And they’re a cost that many first timers tend to overlook – until that “sticker shock” moment sets in.
Broadly speaking, buyers and sellers tend to split the cost of transfer taxes, depending on the category. As we’ve already suggested, transfer taxes will look a little bit different in every county and city in Illinois, depending on local rates for the area. For a comprehensive list, the Illinois REALTORS trade association has a run-down on transfer taxes by city, available here (current as of 2018).
In Chicago, for example, here’s a general estimate of what transfer taxes might look like:
- State: $1.00/$1000 of price, customarily paid by seller
- Cook County: $.50/$1000, customarily paid by seller
- City of Chicago: $7.50/$1000 for city portion, $3.00/$1000 for CTA portion (a supplemental tax). Typically, buyers pay $7.50/$1000 and sellers pay $3.00/$1000
For more information on the city’s real property transfer taxes, there is some useful information available here.
Finding the Right Real Estate Attorneys
The bottom line? Transfer taxes and costs are just a small piece of the many moving parts that make up any real estate transaction in Chicago. The process isn’t always as cut-and-dry as many people expect – and it helps to surround yourself with a real estate team that knows what it takes to get the t’s crossed and the i’s dotted.
In particular, a real estate attorney is a vital partner to have by your side as you seek to buy or sell in Chicagoland. From the simplest home or condo sale to the most complex development deal, experienced real estate attorneys will be able to handle paperwork, coordinate schedules, lead contract negotiations, and so much more.
At the Gunderson Firm, our legal team can help handle all sorts of real estate matters, including:
- Residential and commercial purchase & sale agreements
- Mortgage conveyancing
- Property tax appeals
- Landlord/tenant disputes
- Pre-marketing planning consultation
- Leases, including title examinations and advice on insurance and financing
Have any questions? You know where to find us! Drop us a line by email or phone to get the conversation started.