If you live in southern Delaware and are considering a home purchase, then you’ve likely heard about the recent goings on at the state legislature in Dover.
We do, however, have clients and prospective clients who don’t live in the area and may not be privy to the latest news. Additionally, there’s quite a bit of confusion about the new law that was enacted recently in regards to real estate transfer taxes.
We’re going to clear all of this up for you right now, and give you our view on how we feel things could shake out in the long run.
First, let us clearly state that the sky is definitely not falling on the home buying/selling process in southern Delaware. While it’s true that there will now be an additional tax on the sale of all properties, let’s keep things in perspective.
Many people move to our area because of the low taxes, and with good reason. Delaware has no sales tax and homeowners in Sussex County are still paying property taxes based on assessments that were performed during the Nixon administration.
So, now that these important facts are clear, let’s talk about what has in fact has happened.
The State of Delaware was facing a multi-million dollar shortfall for the 2018 fiscal year, which left legislators searching for ways of increasing revenue while decreasing spending.
This is never an easy process and many things were considered prior to the June 30 deadline (which was actually extended for a couple of days), including the elimination of the mortgage tax deduction and other items that would have had detrimental effects on homeowners.
Those items were eventually taken off the table, but what did become law was an increase in the state transfer tax. This is a cost that’s shared by both the buyer and the seller at the settlement table, and the revenue is divided amongst the state and the county where the sale takes place.
Effective Aug. 1, this tax was raised from 3 percent to 4 percent of the transaction price, which has some real estate professionals in Delaware speaking out about how this could impact the state’s economy.
We’re not economists so we can’t really speculate about what effect this may have in the short term, but over the long term we don’t feel the industry will be negatively effected in southern Delaware.
The beaches are still here and our taxes are still very low, and those are the two main reasons people move to coastal Delaware. The ocean certainly isn’t going anywhere and there’s been no talk in Sussex County Council chambers about doing any property reassessments, so there’s really no reason for the current growth trend to end anytime soon.
And let’s not forget – there are still several great programs for first-time homebuyers out there, interest rates are still low, supply is good and coastal Delaware has plenty to offer new residents.
Did we see a rash of transactions in the days leading up to Aug. 1? Yes we certainly did, as buyers and sellers alike were trying to beat that deadline and save a few dollars.
But now that the day has passed and the new law is in place, it’s time to settle in and remember why people buy property here in the first place. And that’s because of the award-winning beaches, the slower paced lifestyle and the many tax advantages that all southern Delawareans enjoy.
And let’s also remember that this is a one-time cost that’s only incurred during the sale of a property, not a recurring fee that is doled out year after year.
If you’d like to learn more about this new tax increase and how it might affect you and your home purchase and/or sale, please feel free to give us a ring at 302-260-2000.
Our highly qualified agents and staff would be more than happy to answer any further questions you have.
Have a great day at the Delaware beaches everyone!