Buyer closing expenses vary depending on property value and other factors. To get a clear handle on your closing costs, conferring with your land use attorney, realtor, lender, and your tax accountant are advisable, especially if planning a 1031 exchange.

Here's a thumbnail sketch of common buyer closing costs:

• Deposit Monies.
• Down payment.
• Private Mortgage Insurance (PMI) if putting less than 20% down.
• Loan discount points & origination fees.
• Loan underwriting & processing fees.
• Prepaid interest.
• Credit report & tax service fees.
• Flood certification fee.
• Document preparation.
• Property inspection.
• Appraisal.
• Property Transfer Tax, Vermont's property sales tax Increased August 1st, 2024 for non-homestead Properties as follows:

For certain residential properties that will not serve as the principal residence of the buyer, the property transfer tax rate has been significantly increased. The previous rate of 1.45% has now been elevated to 3.4%. Additionally, these transactions are subject to an increased clean water surcharge, bringing the total tax rate to 3.62%. This change applies to the entire purchase price of residential property that is fit for habitation on a year-round basis, will not be used as the principal residence of the purchaser and will not be a rental property requiring the purchaser to provide a landlord certificate.The landlord certificate is the certificate that must be filed with the Vermont Department of Taxes in order for a tenant to claim the Renter's Rebate on their taxes. Landlords are required to file a certificate if they rent the property for a period of 30 consecutive days or more. 

The increased rate of 3.62% does NOT apply to all non-primary residence properties. Notably, purchases of unimproved land, seasonal camps, commercial properties, and, most notably, long-term residential rental properties, will be taxed at a rate of 1.47%.

For properties intended to be used as the buyer’s principal residence, there are notable benefits:

The transfer tax will be imposed at a reduced rate of 0.5% on the first $200,000 of the property’s value, up from the previous $100,000 threshold.

For values exceeding $200,000, the tax rate will be 1.47%. This rate includes the increased clean water surcharge.

Moreover, if the purchaser secures a purchase money mortgage partially funded by a homeland grant through the Vermont Housing and Conservation Trust Fund, or if financing is obtained through the Vermont Housing and Finance Agency (VHFA) or the U.S. Department of Agriculture and Rural Development, the first $250,000 of the property’s value will be exempt from the transfer tax. Beyond this amount, the rate of 1.47% applies.

• 3.    Clean Water Surcharge:

The clean water surcharge, previously set at 0.2%, has been increased to 0.22%. This surcharge applies to the value of the property exceeding the new $200,000 principal residence thresholds mentioned above. However, principal residences benefiting from the aforementioned financing options will be exempt from this surcharge up to the initial $250,000 value.

Understanding the Implications

Buyers of Non-Homestead Residential Properties: The significant increase in the transfer tax rate makes it essential to factor in these additional costs when planning your purchase. The increased tax can have a substantial impact on your overall investment.

Buyers of Principal Residences: The raised threshold for lower tax rates and exemptions offers substantial savings, particularly for those utilizing specific financing options.

While the exact transfer taxes vary, on a principal residence, a 0.5% (0.005) transfer tax must be paid on the first $100,000 of value, with a 1.25% (0.0125) transfer tax and a 0.2% (0.0022) clean water surcharge to be paid on the balance of the property’s value.

Various transfer tax amounts apply for properties financed by mortgages obtained through the Vermont Housing Finance Agency, the Vermont Housing and Conservation Trust Fund, or the U.S. Department of Agriculture’s Rural Development, with the first $110,000 exempt from transfer taxes.

Lands enrolled in state use value appraisal programs vary, depending on when the property was transferred.

Certain exemptions exist. View the Vermont Property Transfer Tax Return.

• Land Use Attorney fees.
• Local tax, utility & other prorations.
• Title & Homeowners Insurance.
• Recording fees for documents filed at the town office.

For more information about buyer closing costs in Vermont, contact Maple Sweet Real Estate today!