For Immediate Release: April 7, 2022
If enacted, a new bipartisan bill would reduce the cost of buying and selling a home in Delaware by thousands of dollars.
Introduced a week ago, House Bill 358 would cut the realty transfer tax in Delaware by 25%.
“The realty transfer tax is levied on the purchase price of the home,” said State Rep. Kevin Hensley (R-Townsend, Odessa, Port Penn), who works in the real estate industry. “Right now, in most cases, Delaware has a functional realty transfer tax of 4%. Typically, this cost is spilt between buyer and seller. However, in the current competitive housing market, prospective buyers are often paying the entire tax to convince sellers to accept their offers.”
In 2017, Delaware’s realty transfer tax was effectively raised from 3% to the present level of 4%. The move was made as part of a revenue-generating package enacted by state lawmakers to bridge a major budget gap the state faced at the time.
State Rep. Mike Ramone (R-Pike Creek South), a member of the budget-writing Joint Finance Committee, is one of the sponsors of House Bill 358. “This realty transfer tax hike was supposed to expire two years after it was imposed, and that was three years ago,” he said.
The revenue from the 4% realty transfer tax is split between state and local governments. The state currently gets 62.5% of the proceeds, with the local presiding government collecting the remaining 37.5%. The new bipartisan bill would reverse the state’s 2017 tax hike, restoring the effective combined realty transfer tax to 3%. Under the measure, only the state’s share of the revenue would be impacted. The revenue flowing to local governments from home sales would be unchanged.
“Our high realty transfer tax is impacting two groups that can least afford it – millennials and seniors,” Rep. Ramone said. “If we can do something to both facilitate homeownership among young people while giving our older citizens a less costly opportunity to gracefully transition into their golden years, I think we have an obligation to do it.”
According to Long & Foster Real Estate, the median price of a home sold in Delaware as of February was $335,000. HB 358 would reduce the transaction cost for the sale of such a home by almost $3,400. Based on the latest estimates from the Delaware Economic and Financial Advisory Council (DEFAC), HB 358 would allow homebuyers and sellers to collectively retain more than $100 million annually.
Rep. Ramone stressed that he believes the tax cut is both responsible and sustainable. Delaware’s surplus revenue is expected to exceed $1 billion for the second consecutive year.
State Rep. William Bush (D-Dover) is the prime sponsor of the realty transfer tax reduction bill. Thus far, 13 Democrats and 15 Republicans are sponsoring or co-sponsoring the measure. The legislation is pending action in the House Administration Committee. If enacted, the tax cut would take effect July 1st.