The high price of closing costs

March 09, 1995

How often must it be stated before reality sets in? Maryland's sky-high real estate closing costs are killers. People pick Virginia or Pennsylvania rather than fork over an extra $6,500 or $8,400 at settlement time. Corporations pick other states to avoid huge extra expenses connected to exorbitant Maryland housing fees.

Closing costs in this state are among the worst in the nation: They are 73 percent above the national average. It's a big disincentive in trying to lure firms and families to Maryland. United Parcel Service relocated its corporate headquarters to Atlanta rather than Baltimore in part because of the extra expenses these high fees would have meant to its 1,800 employees.

Finally, it appears that leaders in Annapolis are prepared to bring down the high price of closing costs. Gov. Parris Glendening is supporting one proposal that would have a major impact. It would require counties to offer homeowners the option of paying initial property taxes in two installments. That could save well over $1,000 at settlement.

Another proposal proving popular in the General Assembly exempts first-time homeowners from the state's transfer tax. That would save $225 on a $150,000 home. And Baltimore County executive C.A. Dutch Ruppersberger III wants to go a step further by giving first-time home-buyers a break at settlement of roughly $350 million in lower Baltimore County transfer taxes.

These are solid, positive steps. It will make it easier to encourage corporations to look at Maryland as a relocation site. It also will make it easier for young couples to scrape together enough money to pay the steep settlement expenses that are becoming a deterrence to home-buying.

But much more must be done. State, county and municipal officials have to come up with other methods for reducing Maryland's real estate fees. That might mean some sacrifice on the part of local governments, or delaying some fee income until the homeowner is settled. Or it might mean a bigger financial commitment from the state to reduce settlement fees. Creative methods might be explored, for instance, to shift the funding of the state's successful Program Open Space from transfer tax receipts to another dedicated fee.

Governor Glendening has already signaled a strong desire to lTC improve Maryland's business climate. Lowering closing costs is a sure-fire winner in that direction. Such a move is also a strong signal to the housing industry that government is eager to stimulate homeownership, not kill it through over-taxation at closing time.

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