Buyer & Seller Closing Costs in San Francisco,
and SF Property & Transfer Taxes
and SF Property & Transfer Taxes
How buyers and sellers in San Francisco split the closing costs pertinent to the sale of real estate is ultimately decided in the purchase contract itself, but this list details how they are typically split in San Francisco County.
Very generally speaking, a buyer can expect that closing costs will run anywhere from 1% to 2% of the purchase price, the major variable being the loan points charged, if any, by their lender. Other than loan-related fees, the big costs for buyers are for escrow fees and title insurance, home inspections, the first year of hazard insurance and property tax pro-rations, if any.
For sellers, closing costs usually run in the range of 6% to 7% of the sales price, not including loan pay-off and any significant home preparation, staging or repair costs. Typically, the largest seller costs are brokerage commissions and transfer taxes.
Here is the standard clause governing closing costs in the SFAR purchase contract (Revise date 12/16). Again, buyer and seller can agree to change how these costs are divided. In many new project condo sales, the seller uses a custom purchase contract approved by the state instead of the SF Realtor contract usually used in the city. It is not uncommon in these custom contracts that it is specified that the buyer will pay the county transfer taxes instead of the seller (which is how this closing cost is typically paid). This is not an insignificant additional cost for the buyer, as can be seen in the transfer tax information further below.
PRORATIONS AND EXPENSES: The following shall be paid current and then prorated between Buyer and Seller as of COE: real property taxes (based upon the latest information available regarding the assessed value of the Property and the applicable taxrate); bonds and assessments; Homeowners' Association (“HOA”) dues and assessments; interest on any loan(s) secured by the Property assumed by Buyer; premiums for any insurance on the Property assumed by Buyer; rents; and operating expenses. Buyer shall pay the escrow fee, title insurance premiums, any community enhancement fee, and any HOA transfer, certification and move-in fees. Seller shall pay the City and County transfer tax, any HOA move-out fee, and any prepayment penalty or other fees or charges imposed by lenders for loans being paid off through escrow. Unless specified in this Contract, all other prorations and expenses shall be paid by either Buyer or Seller in accordance with local custom. Buyer and Seller understand that the Property will be reassessed upon change of ownership. Supplemental tax bills will be sent to Buyer which will reflect a change in property taxes based on the Purchase Price becoming the new assessed value. Any tax bills issued after COE, for periods of time before COE, shall be paid by Seller.
This chart is a a useful reference in making the decision of how to hold title to your new home, but it is strongly advised that you discuss the specific implications of this important decision with your accountant and/or attorney: Ways to Hold Title in California
Under State law (Proposition 13), real property is reappraised only when a change-in-ownership occurs, or upon completion of new construction. Except for these two instances, property assessments cannot be increased by more than 2% annually, based on the California Consumer Price Index. The property tax rate is 1% plus any bonds, fees, or special charges.
The Tax Year
Property taxes are charged on a fiscal year beginning July 1st and ending June 30th; hence tax years are referred to as 2004/2005, 2005/2006. Taxes are billed in two equal installments: first installment covers July 1st through December 31st, second installment covers January 1st through June 30th. Tax bills are sent to homeowners in the last week of October. Tax payments are due November 1st and February 1st; tax payments are delinquent on December 10th and April 10th.
How to Calculate Property Taxes
In most cases, the assessed valuation in your first year of ownership will be the same as the purchase price. It may be increased by up to 2% per year for each year you own the property. If you own and occupy a dwelling on March 1st as your principal place of residence, you are eligible to receive a reduction of up to $7,000 of the dwelling’s taxable value. To receive this exemption, you must file a claim with the Assessor. Once you receive the exemption, it is not necessary to file each year as long as you own and occupy the residence.
Mello-Roos Community Facility Districts
Mello-Roos districts are designated areas which have issued bonds for community facilities, for example, earthquake retrofitting of schools, and for which annual tax levies are collected as part of the property tax billing. There are two districts in San Francisco. One encompasses the entire City and the other is a small area South of Market. The cost for the Mello- Roos Community Facility Bonds in most parts of San Francisco is $32.10 for a single family residence.
Supplemental Taxes
Upon change of ownership, the Assessor’s Office will reappraise the property and will bill the new owners for any difference in taxes resulting from a higher assessed value. The Assessor will issue you a supplemental assessment bill which is prorated based on the number of months remaining in the fiscal year ending June 30th.
Can You Disagree with the Amount?
You may apply to the Assessor to see if that office will change the valuation. This is typically called an Informal Review. Additionally, Appeals Boards have been established for the purpose of resolving valuation problems. Appeals on regular assessments may be filed between July 2nd and September 15th. Appeals on corrected assessments, escaped assessments (those that did not take place when they should have), or supplemental assessments must be filed no later than 60 days from the mailing date of the revised tax bill. If you choose to appeal, pay your tax installments in full by the deadlines or you may incur penalties. If the appeal is granted, a refund will be issued to you.
Did You Recently Purchase A Property?
Escrow prorates taxes, but the actual taxes may not have been paid and you are responsible for any unpaid taxes at escrow closing. Read your escrow papers to determine if any portion of annual taxes were paid by the previous owner prior to closing. The Tax Collector will not send a bill for the remainder of the year in which you acquired the property unless requested. If any taxes remain unpaid, call the Tax Collector and request a bill; have the Assessor’s Identification Number before calling.
If you have any questions regarding anything pertinent to property taxes, you should contact the local Assessor’s Office. An excellent first step is to visit their website.
San Francisco Assessor’s Office FAQ Sheets
In San Francisco, transfer taxes upon change of ownership are typically paid by the Seller, though it can be otherwise agreed to in the purchase contract.
If entire value or consideration is X, then the Tax rate for entire value or consideration is Y:
More than $100 but less than or equal to $250,000: $2.50 for each $500 or portion thereof
More than $250,000 but less than $1,000,000: $3.40 for each $500 or portion thereof
$1,000,000 or more but less than $5,000,000: $3.75 for each $500 or portion thereof
$5,000,000 or more but less than $10,000,000: $11.25 for each $500 or portion thereof
$10,000,000 or more but less than $25,000,000: $13.75 for each $500 or portion thereof
$25,000,000 or more: $15.00 for each $500 or portion thereof
Additionally, leaseholds with a term of 35 years or more are subject to transfer tax. The authority to collect transfer taxes and list of documentary transfer tax exemptions are codified in Article 12C of the San Francisco Business and Tax Regulations Code.
Exemptions will only be made if the recording party falls under one of the documentary transfer tax exemptions. If a transfer tax exemption is claimed, written documentation proving the exemption must be submitted at the time of recording, otherwise transfer taxes are due. Written documentation includes, but is not limited to, copies of trust and formation documents of legal entity (i.e. LLC operating agreement, Corporate By Laws/Minutes/Register, partnership agreement.)
A Transfer Tax Affidavit must accompany all documents submitted for recordation in which transfer tax is due, or an exemption is claimed.
Do These Common Types of Transfers Cause a Transfer Tax?
Between a married couple? No
Between domestic partners? No
Gifts? No
Inheritance? No
Add or remove co-signor or co-owner for refinancing purposes? Yes
Between parent(s) and child(ren)? Yes
Individual(s) to/from his/her own trust? No
Individual(s) to his/her own Limited Liability Company or Limited Partnership or Corporation? No
San Francisco Assessor’s Office FAQ Sheets