COMING TO FIRST-TIME DC HOMEBUYERS
Effective October 1, 2017, the District of Columbia will afford “first-time District homebuyer(s)” a reduced recordation tax when they purchase “eligible property”. The effective recordation tax will be reduced from 1.1% or 1.45%, as the case may be, to 0.725%. This should have the effect of a significant savings for many buyers and is a great step by DC Council to helping first-time buyers get into the DC market.
The appropriations issues surrounding this reduction have resulted in limitations on eligibility for both buyers and properties. For example, the reduction will not apply to properties purchased for over $625,000. Further, in order to allow for an effective audit of the program and eligibility requirements, the District will require purchasers to complete an application in order to be approved for the reduced tax. The process for how applications are to be reviewed and when they should be submitted is currently set to occur at the time of the recording of the deed. Unfortunately, this will result in “our” not knowing at the time of closing if buyers will be given the reduced rate. The net effect is that escrows for the difference between the normal recordation tax and the reduced rate will need to be held at closing and then returned (in full or in part based upon the approved reduction in rate) to buyers.
There are many misunderstandings about eligibility and process (including the misconception that ALL owners cannot have owned property in DC). The title and real estate communities are actively working with the Office and Tax and Revenue and DC Council in an effort to clear up some of the confusion and accomplish a pre-certification process. The Counselor will provide updates and clarification as it becomes available.