Selling Your Mid-Michigan Home? What You'll Pay in Transfer Taxes, and the Refund Many Sellers Miss

When I walk a seller through an estimated net sheet, there's one line that surprises people almost every time: transfer tax. It's a real number, and most sellers have never heard of it until they see it on paper.

There's also a little-known rule that lets some sellers skip the state portion, or get it back years later. With fall listings going up across Genesee, Livingston, and Oakland counties, here's what you should know before you sign anything.

Michigan Has Two Transfer Taxes

When your deed is recorded, Michigan collects two separate taxes on the sale:

• State Real Estate Transfer Tax: $3.75 for every $500 of value, or fraction of $500 (MCL 207.525). That works out to $7.50 per $1,000.
• County transfer tax: 55 cents per $500 in any county with fewer than 2 million people (MCL 207.504), or $1.10 per $1,000.

Those are the rates listed by the Genesee County Register of Deeds, the Livingston County Register of Deeds, and the Oakland County Register of Deeds. Together, that's $8.60 per $1,000 of sale price. Livingston County notes that the price is rounded up to the next $500 for the math.

So on a $300,000 sale in Grand Blanc, Hartland, or Holly, transfer taxes come to $2,580: $2,250 to the state and $330 to the county.

Who Pays It?

In Michigan, this one is clear. The law puts both taxes on the seller (MCL 207.523 and MCL 207.502). The Michigan Department of Treasury says some buyers and sellers agree that the buyer will pay on the seller's behalf (Michigan Treasury), but unless your purchase agreement says otherwise, plan on it coming out of your proceeds.

The tax is paid through the county when the deed is recorded, and the law gives 15 days after the deed is delivered to pay it (MCL 207.523). In practice, it's handled as part of your closing.

The Exemption Many Sellers Miss

Here's the part I wish more homeowners knew. Michigan exempts some sales of a principal residence from the state transfer tax. Under MCL 207.526(u), you may qualify if all three of these are true:

• You claimed the principal residence exemption (often called the homestead exemption) on the home.
• The home's State Equalized Value (SEV) in the year you sell is equal to or less than its SEV when you bought it. For a newly built home, it's the SEV on the first tax day after the certificate of occupancy was issued, whichever date is later.
• The sale was an arm's-length deal at a price a willing buyer and willing seller would agree on.

A quick note, because this gets mixed up a lot: the test compares your SEV now to your SEV when you bought. It isn't about whether your sale price is above or below the SEV. SEV is meant to be about half of market value, and you'll find it on the Notice of Assessment your city or township mails each year (Treasury Form 4093).

If your SEV has gone up since you bought, you won't qualify. This tends to help owners who bought when values were high and whose assessments have since leveled off or dropped. Either way, it only takes a few minutes to check.

One more detail: the exemption covers the state tax only. The county tax has no matching exemption, and Livingston County's Register of Deeds points out that a deed can be exempt from the state tax alone, but never from only the county tax (Livingston County Register of Deeds).

You Have About Four Years to Ask for a Refund

If you qualified but paid anyway, you can still get the state tax back. Treasury's Form 2796 is the refund application, and it has to be filed within four years and 15 days of the sale (Michigan Treasury). Only the person who actually paid the tax can claim it, whether that's the seller or a buyer who paid on the seller's behalf (Treasury notice).

Form 2796 asks for:

• Proof the tax was paid, such as your recorded deed with the transfer tax stamp
• Your final signed settlement statement or Closing Disclosure showing you paid it
• Proof of the date you bought the home
• Your SEV for the year you bought and the year you sold

Treasury asks you to allow 6 to 8 weeks before calling to check on a refund (Michigan Treasury). If you sold a home anywhere in Michigan in the last four years, it's worth pulling out your closing papers this fall.

Other Costs to Plan For

Transfer tax isn't the only line on a seller's settlement statement. A few others to expect:

• Owner's title insurance. Michigan's insurance regulator says either the buyer or the seller can pay for the buyer's owner's policy, and that there's usually a local custom (Michigan DIFS). Your purchase agreement spells out who pays.
• Recording fees. Genesee and Livingston counties each charge a flat $30 per recorded document, such as a discharge of your mortgage (Genesee County fee schedule, Livingston County).
• Your mortgage payoff, property tax prorations, and commission, which depend on your loan, your tax bills, and your listing agreement.

I'd much rather you see every one of these on a net sheet before you list than find out at the closing table.

Let's Run Your Numbers

If you're thinking about selling this fall or next spring, anywhere from Flushing and Davison to Linden, Fenton, and Hartland, I'll put together an estimated net sheet for your home and help you look up your SEV history so you know whether the exemption might apply. Give me a call at (810) 962-4908.

This post is general information, not legal or tax advice. For questions about your specific situation, talk with a Michigan real estate attorney or tax professional.