When it comes to real estate transactions, there are many taxes and fees involved. One of these is the Pennsylvania Realty Transfer Tax, which is applied to the transfer of real estate property within the state. In this article, we will focus on the assignment of agreement of sale and how it affects the realty transfer tax.
What is an Assignment of Agreement of Sale?
An assignment of agreement of sale is a legal document that allows one party to transfer their rights and obligations under a real estate contract to another party. In other words, it is a way for the original buyer to sell their interest in the property to someone else before the transaction is completed.
This is often done when the original buyer is no longer able or willing to complete the purchase, but still wants to recoup their investment. The assignor can sell their interest in the property to an assignee who is willing to take over the contract and complete the purchase.
How does it affect the Realty Transfer Tax?
When an assignment of agreement of sale occurs, the Pennsylvania Realty Transfer Tax will still be applicable. However, the tax will be based on the sales price of the original agreement of sale, not the sales price of the assignment.
For example, if the original agreement of sale was for $200,000 but the assignor sold their interest for $250,000, the transfer tax would still be based on the original $200,000. This is because the transfer tax is based on the consideration paid for the property, which is the sales price listed in the original agreement of sale.
It is important to note that if the assignee later decides to sell the property for a higher price, they will have to pay transfer tax on the difference between the original sales price and the new sales price.
Also, it is important to ensure that the assignment of agreement of sale is properly recorded with the county recorder of deeds. This is needed to ensure that the assignee has clear rights to the property and to avoid any future disputes or legal issues.
In conclusion, the assignment of agreement of sale is a legal document that allows the original buyer to transfer their interest in the property to another party. The Pennsylvania Realty Transfer Tax still applies to the transaction, but it is based on the sales price listed in the original agreement of sale. It is important to properly record the assignment with the county recorder of deeds to avoid any future legal issues.