Chatham County Land Sales Expert Eric Andrews explains some of the expenses incurred by people selling land in North Carolina and beyond. Some of the expenses include:
- Prorated property taxes
- Deferred taxes
- Revenue stamps (register of deeds tax)
- Loan payoffs
- Deed preparation
Speaker 1: What are the expenses that the seller has when they’re selling land?
Speaker 2: Closing expenses for land? Well, the big one are usually the biggest one are commissions, and that can be anywhere from 5% to 10%, depending on the price of land and the transaction and what not. And those are all fully negotiable but, that’s usually the biggest expense is commissions. And, one of the reasons why land is higher is because it is a different area of expertise, and there’s a lot, there’s a lot of different marketing. That’s unique to land and land also on average has more days in the market. So there’s more marketing expense regarding that.
And sometimes signage is more expensive for, for land as well. And of course, often on our big tracks of land, we’re utilizing some mapping technology and we’re doing drone photography and so, extra expenses. So, the big one, commissions. The next one would be proration of property tax, so depending on what time of the year you buy it. So, if you buy it in the middle of the year, you’re going to own, you’re going to owe half the property taxes. And if you buy it at the end of the year, you have to pay the majority of the property taxes if you haven’t paid them already.
And that’s another thing that’s unique about land is that if you’re in timber management or farm use, they can go back several years on you, and you pay the deferred amount. So, if you had a $2,000 tax bill and you were in timber management and they knocked that down to 1000 a year, if you sell your property, they’re going to go back several years and you’re going to owe three or $4,000 on the back taxes based on your property tax.
Then can’t get around in North Carolina. You can’t get around revenue stamps. That’s $2 per 1000. So if you sell something for a $100,000 you’re going to pay $200 revenue stamps. That’s a register of deeds tax. And then, you might have a loan payoff that would be bigger than commissions usually if you have a loan payoff and then deed preparation, the attorney’s going to prepare a deed for you, so that the new buyer can take possession of the property. Those are running between like 150 and 300 bucks deed preparation. So overall, just to give you a ballpark, if you sold a $100,000 piece of land, it could be right around 10 or $12,000, as far as total expenses are concerned.