Some Chicago-area municipalities have “gotcha” coming and going, charging real estate transfer taxes to you as a buyer moving in and an “exit fee” when you sell and move out of town.
But not all towns charge at both ends of the transaction, and some charge no transfer fee.
Does your town or village charge a real estate transfer tax at closing?
If so, who pays? Buyer? Seller?
And what’s the formula? It costs $8 per thousand of a home’s sale price for the privilege of leaving Oak Park, for example. Berwyn and Cicero will charge you $10 per thousand on your way out of town. And Buffalo Grove wants $3 per thousand.
And nobody slips away during the night.
Real estate transfer taxes are collected at closing — or you don’t close, period.
This morning, Craig Davis has closing papers spread out on his kitchen counter. The Rogers Park investor is selling a 13-unit North Side apartment building for $1.3 million. He takes a sip of herbal tea and points directly to the transfer tax notation.
“Right there,” he says. “In Chicago, buyers pay the real estate transfer tax. It’s $7.50 for each thousand of the sale price. My buyer had to come up with $9,750. Over here is what I paid [in transfer tax] when I purchased the building in 2001 for $750,000. I was on the hook for $5,625.
“The real estate transfer tax is a fact of life,” he continues. “I used to get upset. But why bother? What’s the use? If you want to own property here, you pay the real estate transfer tax and figure on making it back in appreciation when you sell.”
Lisa Schrader, spokeswoman for the City of Chicago’s Office of Budget and Management, explained that revenues generated by the transfer tax go directly into the corporate fund and are used for police and fire protection, other public safety and Streets and Sanitation services. The annual amount raised through the transfer taxes was $144 million for 2003 and $187 million in 2004, according to Schrader. The city projects $187 million for 2005 as well.
The city would like to see the tax increased, and that possibility was raised late last year. “The real estate transfer tax has not been raised since 1988 — and we’re not looking at an increase in 2005,” Schrader said, “but we have talked about going to Springfield to possibly seek an increase for 2006. And there has been conversation about shifting the real estate transfer tax from buyers to sellers. That is something we would explore before going to Springfield.”
Real estate transfer taxes are, as investor Davis pointed out, a fact of life in dozens of Chicago-area municipalities.
But, there is no standard, though a $3 per thousand tax is often the norm. Glen Ellyn charges sellers that amount, but Wheaton, which is next door, requires $2.50 per thousand — from buyers.
“If you sell a home in Glen Ellyn and move to Wheaton, you’re hit with a double-whammy,” says Haya Miller, a Re/Max Suburban agent in Glen Ellyn. “Do the reverse, though. Sell a home in Wheaton and move to Glen Ellyn, and you’re home free. No tax. This happens frequently. And in my opinion this is not fair. In my opinion, the buyer should pay the real estate transfer tax. The seller has been paying property taxes. Why should he pay yet another tax as he leaves the community?”
Real estate transfer taxes are relatively new in Illinois. Mike Scoby, coordinator of local government affairs for the Illinois Association of Realtors, traces them to 1970, when the state constitution was amended to create home rule, which grants communities of more than 25,000 residents the ability to collect revenue and incur debt. Municipalities, according to Scoby, were encouraged to be creative in beefing up revenue sources and not rely so much on the General Assembly. (Towns with fewer than 25,000 people can become home rule communities via referendum.)
For years real estate transfer taxes poked along at around 50 cents to $1 per thousand, creeping up to $3 by the late 1980s. Real estate transfer taxes were effectively capped in 1996, when the General Assembly voted to require votes by communities considering instituting a real estate transfer tax or raising one.
“About two-thirds of Chicago-area communities [with the real estate transfer tax] apply it to the home seller,” adds Scoby, “and there isn’t much awareness of the tax. Most sellers find out when they get the green sheet from their attorneys before closing. There’s a misconception this is a painless tax, because you’re not taking out a checkbook and writing a check. But it’s still money being taken from the individual. It’s a final `Gotcha!’ as you leave the community and need to pay one more time for programs and services you won’t use.”
Town administrators take a different view. Glen Ellyn Village Manager Gary Webster thinks his government has shown restraint where real estate transfer taxes are concerned.
“Glen Ellyn had the authority to collect a real estate transfer tax in 1996,” he says, “but the village held off collecting a real estate transfer tax until 2001. We wanted to have a long-range capital improvement plan approved and in place before collecting it. Our capital improvement plan, adopted in the middle of 2000, is $50 million over 20 years with a focus on streets and storm sewers. And that’s exactly where real estate transfer tax revenues go — into funding that capital plan.”
But why tax those moving away?
“It’s how most communities do it,” Webster says. “Glen Ellyn looked around and saw how others were approaching the real estate transfer tax issue and used that model. Glen Ellyn has 7,000 single-family homes and about 12 percent turnover every year. But the village isn’t collecting a real estate transfer tax on every sale. Families that move within the village are rebated [the tax]. Deed changes between family members are permitted without being taxed.”
Vernon Hills does not collect a real estate transfer tax from buyer or seller. Nor do Riverwoods, Deerfield and Northbrook and the latter two are home-rule municipalities. Larry Nakrin, director of finance and treasurer for Vernon Hills, seemed mystified anyone would ask why.
“Have you ever seen a non-home-rule community with a real estate transfer task?” Nakrin asks. “Vernon Hills had a population of 20,120 in the last census, which is below the 25,000 needed to qualify for home rule.
“Even if we were a home-rule community, we probably wouldn’t have a real estate transfer tax. We’ve never talked about that day coming. It would be low on our list of priorities. Vernon Hills also doesn’t have a property tax, and we’re trying our best to keep it that way. We’re fortunate more than 50 percent of our revenues come from the sales tax [generated by local businesses].”
Not every community is blessed as Vernon Hills is with a Hawthorne Centre mall as a source of tax revenue. For others, real estate transfer taxes are necessary. Phyllis Hollander, an agent/broker with Coldwell Banker Residential in Deerfield, isn’t so sure people are upset by such taxes.
“What’s more troubling is being surprised with a real estate transfer tax at closing,” she says. “I’ve found that people become most upset when they aren’t told about the tax upfront. Tell them upfront, and they’re ready. That’s why it’s important to work with an agent who knows the community where you’re interested in buying. Agents for the buyers and sellers, you need to be up on local requirements.
“Because the real estate transfer tax is one of those details that kind of slips by if you’re unaware.”
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Real estate transfer taxes
Home rule municipalities may levy a tax on the transfer of real estate. The State of Illinois charges 50 cents per $500 in sales value and all counties charge 25 cents per $500. Both are customarily paid by the seller. Here are the municipalities and their tax rates, according to the Illinois Association of Realtors.
%% Town Amount Payer
Addison (1,3) $2.50/$1,000 Buyer
Alsip (1) $3.50/$1,000 Seller
Aurora $3/$1,000 Seller
Bartlett $3/$1,000 Seller
Bedford Park (2) $50 flat fee Seller
Bellwood (1,2) $5/$1,000 Seller
Berwyn (2) $10/$1,000 Seller
Bolingbrook 1 $7.50/$1,000 Split
Buffalo Grove 1 $3/$1,000 Seller
Burbank $5/$1,000 Seller
Burnham $5/$1,000 Buyer
Calumet City (1,2) $8/$1,000 Split
Calumet Park (1,2) $5/$1,000 Buyer
Carol Stream (1) $3/$1,000 Seller
Channahon (1) $3/$1,000 Seller
Chicago (1) $3.75/$500 Buyer
Chicago Heights (1,2) $4/$1,000 Seller
Cicero (1,2) $10/$1,000 Seller
Country Club Hills (1,2) $5/$1,000 Seller
Countryside $50 flat fee Either
Des Plaines (1,4) $2/$1,000 Seller
Dolton (1,2) $10 per property Seller
East Hazel Crest (1) $25 flat fee Buyer
Elk Grove Village (1) $3/$1,000 Seller
Elmhurst (1,3) $1.50/$1,000 Seller
Elmwood Park (1,2) $5/$1,000 Seller
Evanston (1) $5/$1,000 Seller
Evergreen Park (1,2) $5/$1,000 Seller
Freeport $4/$1,000 Seller
Glendale Heights (1) $3/$1,000 Seller
Glen Ellyn $3/$1,000 Seller
Glenwood (1,2) $5/$1,000 Seller
Hanover Park (1) $3/$1000 Seller
Harvey (1,2) $4/$1,000 Split
Harwood Heights (1,2) $10/$1,000 Buyer
Hillside (3) $7.50/$1,000 Buyer
Highland Park $5/$1,000 Seller
Hoffman Estates (1) $3/$1,000 Seller
Joliet $3/$1,000 Seller
Lincolnshire (1) $3/$1,000 Buyer
Maywood (1,2) $4/$1,000 Seller
McCook (1) $5/$1,000 Seller
Mettawa $5/$1,000 Buyer
Morton Grove (1) $3/$1,000 Seller
Mt. Prospect (1) $3/$1,000 Buyer
Naperville $3/$1,000 Buyer
Niles (1,2) $3/$1,000 Buyer
North Chicago (1,2) $5/$1,000 Buyer
Oak Lawn $5/$1,000 Seller
Oak Park (1) $8/$1,000 Seller
Park Forest (1,2) $5/$1,000 Seller
Park Ridge (1,2) $2/$1,000 Seller
Peoria $2.50/$1,000 Seller
River Forest (1,2) $.50/$1,000 Seller
Robbins (1,2) $25 per property Seller
Rolling Meadows (1) $3/$1,000 Seller
Schaumburg (1) $1/$1,000 Seller
Skokie $3/$1,000 Seller
Stickney (1) $5/$1,000 Seller
Streamwood (1) $3/$1,000 Seller
Stone Park (1,2) $4/$1,000 Seller
University Park (1,2) $1/$1,000 Seller
Westchester (1,2) $25 flat fee Seller
Wheaton $2.50/$1,000 Buyer
Wilmette (1) $3/$1,000 Buyer
Woodridge (1) $2.50/$1,000 Seller
(1) Requires water bill to be paid before it will issue stamps.
(2) Requires home/building inspection before it will issue stamps.
(3) Requires sewer/sump pump inspection before it will issue stamps.
(4) Requires vehicle sticker payment
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