A Prince George’s County proposal to raise transfer fees on real estate purchases is raising the hackles of the housing industry.
More than 50 members of the industry attended a County Council hearing Monday to oppose a proposal in County Executive Rushern L. Baker III’s (D) fiscal 2013 budget plan that would increase recordation fees by 20 percent. That would tack on $1 per $1,000 of a home’s sale price to its closing costs, or $300 more on a $300,000 home, according to the Prince George’s County Association of Realtors.
“Upfront buyer closing costs including recordation fees, transfer taxes, property taxes, down payments and lender fees are the largest impediment to homeownership,” said Alease R. Bowles, president of the trade group.
The average home sale price in Prince George’s was $173,584 in March, with a $158,008 median, according to Metropolitan Regional Information Systems and Coastal Association of Realtors. That means the average increase in closing costs would be $174.
Brenda J. Wheeler, an agent with Keller Williams in Upper Marlboro, said the increase would affect anyone who does business with someone trying to purchase, sell or rent a house.
She and about 40 other Keller Williams employees poured into the hearing room, brandishing “Stop Recordation Tax Increases” stickers on their clothes.
Raising the fee is as unpopular as Gov. Martin O’Malley’s (D) proposal this winter to cap mortgage interest deductions, said Michael F. Cerrito, chairman of the trade group’s legislative-political affairs committee. Industry representatives came out in full force against that plan during the legislative session in Annapolis.
Bowles said the proposed fee increase comes when Prince George’s already has the highest closing costs in the Greater Washington, D.C., region. Closing costs are 3 percent less in Anne Arundel and Montgomery counties and almost 15 percent less in Calvert County, she said. Prince George’s also has the third-highest closing costs in the state and tops the state in transfer tax burden.
Prince George’s also has the highest property taxes in the state by as much as 32 percent, when using a $162,000 home as a base point, Bowles said. The tax on that home would be $2,137, compared with $1,484 in Montgomery and Anne Arundel, Bowles said.
“With all these challenges on Prince George’s, the county should be supporting the industry. This is hindering it,” said Kayren Jan’ice Benjamin, an associate broker with Keller Williams.
Baker is pitching the fee increase to help reduce a $5 million gap that remains in the fiscal ’13 budget after previous cuts, said Thomas Himler, Prince George’s deputy chief administrative officer for budget, finance and adminstration.
“We couldn’t make further reductions without impacting our core priorities,” he said, referring to items such as public safety and education. “We concluded this increase would be minimal at best.”
He added that county officials had consulted with real estate agents both before and after the increase was proposed and determined the county’s priorities outweighed the “minimal impact” to the housing industry.
But industry representatives disagree.
“This is simply not the time to raise the fee,” said F. Hamer Campbell Jr., director of government affairs for the Maryland-National Capital Building Industry Association.
The industry already is anticipating the impact of a new slew of environmental regulations and still faces the potential return of O’Malley’s plan to cap mortgage interest deductions, Campbell said.
“Until foreclosures and short sales are flushed out of the system, it will be hard for new homes to make headway,” he said. “Anything the county can do to hold the line is helpful for us and our members.”
Anthony Williams, president-elect of the county real estate group, said anything that deters homebuyers ripples through the county’s economy.
“Furthermore, they’re not shopping at our retail stores,” Williams said, adding that the average deferred purchase translates into $5,331 per family not being spent on new furnishings and appliances, according to the National Association of Realtors.
“They’re not frequenting our restaurants and night spots. ... They’re not using our doctors and lawyers and other professional services,” Williams said. “Overall, when they buy a home elsewhere, they’re not contributing at all to our local economy.”
The council also heard from Hyattsville resident Brenda Frazier, who said Charles County’s lower closing costs led to her purchase a home there.
A District Heights resident, John Body, said the fee increase would come just when he’s ready to close on a new home.
“I’m afraid if you pass this tax increase, it probably won’t happen,” he said.
A council vote on the budget is planned for May 24.