First-Time Maryland Homebuyer Rules: The Clarification You Need to Know

05 Mar, 2019

In Maryland, the closing costs are some of the highest in the nation. Because the government wanted to encourage home ownership, Maryland enacted a First-Time Homebuyer Exemption to the buyer’s portion of the State Transfer Tax. It is commonly misunderstood, and some real estate agents and lenders believe—and erroneously advise clients—that a buyer is eligible for the exemption to the State Transfer Tax if they have not resided in a purchased primary home in more than three years. To be eligible a buyer must sign an Addendum to the Contract and an Affidavit that both state the following:

To be eligible as a First-Time Homebuyer the law states, "first-time Maryland home buyer" means an individual who has never owned in the State residential real property that has been the individual's principal residence. See Maryland Tax Property Article Section 13-207. Requires Affidavit to be under oath subject to penalty of perjury.

Be Aware of the Requirement

This language is clear and states that the individual has “never owned in the State.” It is important for the real estate professional and lender professional to be aware of this requirement and to be cautious in advising a buyer to sign this Affidavit if indeed they have ever owned a home in Maryland before. The impact to the buyer who falsely states on an Affidavit that they are eligible as a Maryland First-Time Homebuyer is serious. It is a crime to misrepresent this status on an Affidavit which is submitted to the Clerk of the Court in order that a buyer will receive an exemption of the State Transfer Tax. Any real estate professional or lender professional could also be liable and likely face regulatory sanctions for erroneously advising their clients to sign the Affidavit if they have indeed ever owned a home in Maryland before.

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There is an exception that seems to be the bases of the confusion on the three-year period where agents and/or lenders believe their clients may be eligible. That exception is transactions under the Maryland Mortgage Program. When a buyer is purchasing a property under the Maryland Mortgage Program, they are considered First-Time Maryland Homebuyers if they have not owned residential property for three years or more. This provision states as follows:

“Someone who has not owned residential property for three years or more is considered a “First-Time Homebuyer.” First-Time Homebuyers who meet household income limits (see next section) can use the Maryland Mortgage Program to purchase a home anywhere in Maryland. Homebuyers who are not First-Time Homebuyers, and who meet household income limits, may use the Maryland Mortgage Program, but can only purchase properties that are located within Targeted Areas.”

It is easy to see where real estate agents and loan officers may get confused on this and believe that any of their clients may be entitled to claim First-Time Maryland Homebuyer status if they have not owned residential property for three or more years. Don’t fall into to this misunderstanding of the law because you may lead your client into committing perjury which can be prosecuted as a crime in Maryland.

Maryland Association of Realtors Contracts

Another topic of interest right now is the Maryland Association of Realtors Contracts, Paragraph 51, Section 1445. Did you know this could be a huge pitfall for your buyers this year? Here’s a video of G. Russell Donaldson, Esq. describing why.

To register for a seminar on either of the topics discussed above, please click here.

About G. Russell Donaldson, Esq.:

As Co-Founder of Velocity Title Company, and Principal at the Law Offices of G. Russell Donaldson, Esq., Mr. Donaldson is responsible for leading one of the most forward-thinking title companies in the industry. With over three decades of experience as an attorney, Real Estate Broker and title expert, Mr. Donaldson understands the industry like no other. As Co-Founder of Velocity, he is responsible for enhancing growth while ensuring the culture of customer service and integrity is met. He remains very active with day-to-day operations—working directly with realtors, loan officers, and home buyers and sellers to “move them forward” as securely and efficiently as possible.


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