Prince George's County's plan to increase home buyers' closing costs could devastate an already reeling housing market that has been struggling to recover, real estate professionals said.
County Executive Rushern Baker proposed raising the recordation tax, a fee applied to home sales, by 50 cents -- to $3.00 per $500 of assessed property value -- to cover a budget deficit. The increase would generate about $4.7 million a year.
If approved by the County Council, it would be the second time in four years that the recordation tax rose. Officials raised the fee by 30 cents in 2008 to its current rate of $2.50.
Adding to the cost of home sales could be detrimental in a housing market that was hit harder than any other in Maryland during the national mortgage crisis, real estate professionals said.
"We don't think this is the right message for real estate in Prince George's," said Joanne Darling, past president of the Prince George's County Realtor's Association. "Fees are already driving people away."
Thomas Himler, the county's deputy chief administrative officer, said the tax increase is needed to help close a $126 million budget deficit.
About 77 percent of county revenue sources, including income and property taxes, are capped, Himler said, leaving the recordation tax as the only source that could be increased to raise additional revenue.
Himler said the additional tax burden would have a minimal impact, adding about $160 to the price of buying a $159,500 home, the median sales price in the county, according to Long & Foster Real Estate Inc.
"We don't think that's going to impact the housing market one way or another," Himler said. "If that's a make or break at closing, especially at that small of an amount, maybe that's a sign that you may not want to buy the house."
The recordation tax hike as proposed in Baker's budget would expire after the 2015 fiscal year.
County officials said that without the tax increase, they would have to cut funding to schools and police. But real estate representatives said undercutting a recovering housing market is short-sighted.
"If housing gets well," Darling said, "there won't be a deficit."
