Most sellers don’t think about whether their buyer has owned a home before. In Maryland, it can change your settlement statement by thousands of dollars. When the buyer is a first-time Maryland homebuyer who will live in the house, state law moves most or all of the deed taxes onto the seller. For first-time buyer tax rules in Parkville or Carney, see selling a house fast in Parkville.
I’m Evan Weissman. I buy houses in Maryland, and I’ve watched sellers get surprised by this line on their closing statement. Here’s how the two statutes work, with numbers, so you can plan for it before you accept an offer.
Who counts as a first-time Maryland homebuyer
Both Real Property Section 14-104 and Tax-Property Section 13-203 use the same definition: an individual who has never owned residential real property in Maryland that was their principal residence.
A few details follow from that wording:
- Someone who owned a home in Pennsylvania or Virginia, but never in Maryland, can still qualify.
- Someone who owned a Maryland rental they never lived in may still qualify, because the test is about a principal residence.
- The buyer must plan to live in the house as their principal residence.
- If there are two or more buyers, each one generally has to qualify, unless the extra person is only a co-signer or guarantor on the purchase loan who won’t live there.
The buyer, or their agent, signs a statement under oath at settlement confirming they qualify. That’s how the title company knows which rules apply.
The normal split vs. the first-time buyer rule
Under RP 14-104(b), Maryland presumes that recordation tax and state and local transfer taxes are split equally between buyer and seller, unless the contract or the law says otherwise.
Subsection (c) changes that for a sale of improved residential property to a qualifying first-time buyer who will occupy it:
- State transfer tax. The rate drops from 0.5% to 0.25% under TP 13-203(b), and the seller pays all of it. RP 14-104 doesn’t leave room to shift this by contract.
- County transfer tax and recordation tax. The seller pays all of it, unless the buyer and seller expressly agree in the contract that the seller won’t pay it all.
The rule doesn’t apply to tax sales under the Tax-Property Article.
Example: a $250,000 Baltimore County sale
Baltimore County’s rates in the Department of Legislative Services table are 1.5% for county transfer tax and $2.50 per $500 for recordation. Here’s how the seller’s share compares, before any local exemptions:
| Tax | Regular buyer, split equally | First-time buyer, seller pays |
|---|---|---|
| State transfer tax | $625 (half of $1,250) | $625 (all of 0.25%) |
| County transfer tax | $1,875 (half of $3,750) | $3,750 |
| Recordation tax | $625 (half of $1,250) | $1,250 |
| Seller’s total | $3,125 | $5,625 |
In this example the seller pays $2,500 more when the buyer is a first-time Maryland homebuyer, unless the contract shifts the county taxes. The buyer, on the other hand, saves the full amount.
The gap depends heavily on the county. In Carroll or Frederick, with no county transfer tax, the difference comes mostly from recordation tax. In Baltimore City, with a 1.5% transfer tax and $5.00 per $500 recordation, the difference is larger. My transfer and recordation tax explainer has more county rates.
Local breaks for first-time buyers
Some counties offer their own first-time buyer reductions or exemptions on local taxes. Those rules are set county by county and can change, so ask your title company to apply the current rules when it prepares your estimate. Don’t assume the example above matches your county to the dollar.
Negotiating the local taxes
Because the county transfer and recordation taxes can be shifted by an express agreement, some sellers negotiate. A seller might accept a slightly higher price and leave the default in place, or keep the price and ask the buyer to pay half the local taxes. The state transfer tax stays on the seller either way.
This only works when it’s spelled out clearly in the contract. Vague language invites a fight at the closing table. If you’re listing, ask your agent to walk you through the line in the contract that addresses it.
Planning before you accept an offer
When you compare two offers, look past the price:
- Is the buyer a first-time Maryland homebuyer who will live there?
- Does the contract say anything about who pays county transfer and recordation taxes?
- Is the buyer also asking for a seller credit toward closing costs?
- How does each offer’s net compare once the tax shift is included?
A slightly lower offer from a buyer who isn’t a first-time homebuyer can net about the same as a higher one from a buyer who is. A net sheet comparison helps here.
Cash buyers and investors
Investors and companies aren’t first-time Maryland homebuyers under the definition, because the rule is limited to individuals who will occupy the home. So in a typical cash sale to an investor, the default equal split applies unless the contract says something different. Some cash buyers agree to cover more of the closing costs, so read that section of any offer closely. My article on who pays closing costs covers the rest of the settlement charges.
Does the seller pay transfer tax for a first-time buyer in Maryland?
Yes. For a qualifying first-time Maryland homebuyer who will occupy the home, the seller pays the entire state transfer tax at the reduced 0.25% rate.
Can the contract make a first-time buyer pay part of the county taxes?
Yes, for county transfer tax and recordation tax. RP 14-104 allows an express agreement that the seller won’t pay all of those. The state transfer tax stays with the seller.
How does the title company know the buyer is a first-time buyer?
Each buyer, or their agent, signs a statement under oath that they’ve never owned a Maryland principal residence and will live in this one.
Does the rule apply if only one of two buyers is first-time?
Generally no. Each buyer must qualify, unless the other person is only a loan co-signer or guarantor who won’t live in the house.
Does the first-time buyer rule apply to a cash investor?
No. It applies to individuals buying a home they’ll occupy as their principal residence, so investors and companies don’t qualify.
Talk through your situation
If you’re weighing offers and want to see how the first-time buyer rule changes your net, call or text me at (410) 498-7473. I’m glad to run the numbers with you.