If you sell a house in Michigan, the largest closing cost you did not choose is the transfer tax. It is set by statute, collected when the deed is recorded, and paid by the seller. Here is exactly how it works.
Two taxes, one line on the closing statement
Michigan levies a state real estate transfer tax under the State Real Estate Transfer Tax Act and a county transfer tax under a separate act. Both attach when a deed is recorded with the county register of deeds.
- State: $3.75 for each $500 or fraction of $500 of the total value transferred, per MCL 207.525. That is 0.75 percent.
- County: $0.55 for each $500, per MCL 207.505. That is 0.11 percent.
Together they come to $8.60 per $1,000 of sale price, or 0.86 percent. The title company calculates both, collects them from the seller's proceeds at closing, and pays the county treasurer when the deed is recorded. There is also a $30 recording fee per document, set by MCL 600.2567.
Who pays
MCL 207.523(2) states that "the person who is the seller or grantor of the property is liable for the tax." The county act follows the same rule in practice. The tax can be reallocated by contract, and you will occasionally see a builder or a distressed seller negotiate it onto the buyer, but in Macomb and Oakland County the standard purchase agreement leaves it with the seller.
Examples
| Sale price | State tax | County tax | Total |
|---|---|---|---|
| $200,000 | $1,500 | $220 | $1,720 |
| $300,000 | $2,250 | $330 | $2,580 |
| $350,000 | $2,625 | $385 | $3,010 |
| $450,000 | $3,375 | $495 | $3,870 |
| $600,000 | $4,500 | $660 | $5,160 |
The tax is calculated on each $500 "or fraction" of value, so a price of $350,250 is taxed as if it were $350,500.
The exemption that saved sellers after 2008
MCL 207.526 lists transfers exempt from the state tax. Subsection (u) covers the one that matters to ordinary homeowners: a sale of property that was your principal residence, where the state equalized value at the time of sale is equal to or lower than the SEV as of the first tax day after you acquired it (or after the certificate of occupancy for new construction), and the sale was at arm's length. In plain terms, if the assessor's value fell between the day you bought and the day you sold, the state portion is waived.
This exemption was widely used by sellers who bought at the 2005 to 2007 peak and sold at a loss years later. When values have risen since you bought, as they have in much of Metro Detroit in recent years, it does not apply. But if you bought recently at a high price and are selling in a softer pocket, ask your title agent to check the SEV history before closing.
If the tax was paid and you later find the exemption applied, Michigan Treasury Form 2796 requests a refund. It must be filed within four years and 15 days of the sale.
Other exemptions you might hit
The statute also exempts, among others: deeds between spouses that create or terminate a tenancy by the entirety, transfers to or from governmental entities, deeds correcting a prior deed, foreclosure-related conveyances to a lender, and transfers where the value is under $100. Each exemption has its own conditions and must be cited on the face of the deed. A title agent or real estate attorney should confirm it before recording; an unrecorded exemption is a tax you paid for nothing.
How it shows up at closing
On the seller's side of the closing statement you will see a line for "Transfer Tax, State" and "Transfer Tax, County," sometimes combined, plus the recording fee for the mortgage discharge. The title company remits it; you do not file anything. Keep the closing statement with your tax records. The transfer tax is part of your cost of sale when you calculate any capital gain on the home.
Where it fits in the whole picture
The transfer tax is the largest of the fixed seller costs but not the only one. The owner's title policy, settlement fees, and prorated property taxes add roughly another one percent, and commission, which is negotiable, comes on top. Raven also charges a $395 transaction fee, written in the listing agreement from the start. Your agent can show you every line on an estimated closing statement before you list.
To estimate your own numbers, start with what the home is likely to sell for: ask a Raven agent for a comparative market analysis.