Sticker shock at closing often comes from one line: transfer tax. If you are buying or selling in Malvern, you will see a combined 2.5% transfer tax tied to your sale price. That number can move thousands of dollars on your Closing Disclosure, so it pays to understand it early. In this guide, you will learn what the 2.5% covers, who typically pays, how it is shown at closing, and how to budget and negotiate with confidence. Let’s dive in.
What the 2.5% covers
Malvern’s 2.5% is the combined transfer tax typically collected on residential sales in the borough.
State, county, borough shares
- Pennsylvania’s statewide realty transfer tax is 1.00% of the sale price.
- The remaining 1.5% reflects local levies that are commonly split between Chester County and Malvern Borough. A common structure in many Pennsylvania towns is 0.5% county and 1.0% municipal, which totals 2.5% with the state portion.
- Exact local splits can change. Always confirm the current breakdown with your title company or the county and borough offices before you sign a contract.
Who collects and remits
- Your settlement agent or title company typically collects transfer taxes at closing.
- Taxes are remitted when the deed is recorded with the appropriate state and local offices.
How to calculate your tax
The transfer tax is straightforward: sale price multiplied by 2.5%.
At a glance examples
- Example A: $400,000 sale price at 2.5% equals $10,000 total transfer tax.
- Example B: $275,000 sale price at 2.5% equals $6,875 total transfer tax.
These amounts are in addition to recording fees, notary fees, and other closing costs, which appear as separate line items.
Where it appears on closing forms
On the Closing Disclosure or settlement statement, you will see transfer tax shown as line items:
- Seller: transfer tax debit if the seller pays some or all of the tax.
- Buyer: transfer tax debit if the buyer pays some or all of the tax.
- If the tax is split, the statement shows each side’s share or uses a seller credit to the buyer for the buyer portion. The accounting can vary, but the economics are the same.
Who pays in Malvern
Contract controls
In Pennsylvania, who pays transfer tax is negotiable. The purchase agreement should state the allocation clearly. If the contract is silent, local custom may guide negotiations, but the agreement rules.
Common splits in our area
Customs vary. In many Southeastern Pennsylvania markets, sellers often pay at least a portion of the combined tax, though this is not universal. You will often see offers that either split the tax 50-50 or specify that one party pays the local portions while the other pays the state portion. Spell out the split in writing to avoid confusion.
Financing and concessions
If you are financing, tell your lender how transfer taxes are allocated. Some loan programs treat seller-paid transfer taxes or seller credits as concessions, which may be limited. Your lender can confirm whether a seller credit for transfer tax is acceptable under your program.
Plan your budget and net
For buyers
- Ask your lender and title company for early estimates that include transfer tax.
- If the seller will credit you for some or all of the tax, confirm that the credit fits within your loan’s seller-concession limits.
- Keep a cushion for recording fees, title charges, and other closing costs that are separate from transfer tax.
For sellers
- Include transfer tax in your net proceeds estimate from the start. At 2.5%, a $450,000 sale would reserve $11,250 for transfer tax if you are paying the full amount.
- If you plan to offer a credit instead of paying the tax directly, put the terms in the contract so your title company can reflect it correctly on the settlement statement.
Exemptions and special cases
Certain transfers may be exempt from transfer tax, but local rules vary and documentation is required. Common examples include:
- Transfers between spouses or as part of divorce settlements.
- Transfers to or from certain government entities or qualifying nonprofits.
- Some transactions tied to foreclosure, sheriff’s sale, or tax sale.
- Corrective deeds for legal descriptions or boundary adjustments, which may have limited exemptions.
Two important notes:
- A 1031 exchange may defer capital gains tax, but transfer tax can still apply because it is assessed on the deed transfer. Confirm treatment with your title company.
- Commercial deals generally follow similar rules, though certain entity transfers or rates may differ. Confirm locally for nonresidential property.
How to verify your rate
Because county and municipal rates are set locally and can change, confirm details before you negotiate:
- Ask your title company or settlement attorney to verify the current combined rate for Malvern, and to outline the state, county, and borough shares.
- You can also contact the Chester County Recorder of Deeds or tax office, and Malvern Borough’s finance office, to confirm any local adjustments or required forms.
Avoid last-minute surprises
Use these practical steps to keep your closing smooth:
- Be explicit in the contract: name who pays which portion or specify an equal split of the combined taxes.
- If using a seller credit for the buyer’s portion, state the dollar amount or formula in the agreement.
- Share the allocation with your lender early so the Closing Disclosure is accurate and any concession limits are observed.
- Ask your title company for an early draft of settlement figures that includes transfer tax on both sides.
- If you think an exemption applies, provide documentation to your title company as soon as possible. Exemption review can slow recording if raised late.
Next steps
Transfer tax is predictable once you know the combined rate and your allocation. By confirming the current split, putting clear terms in your contract, and coordinating with your lender and title company, you can avoid surprises and protect your bottom line. If you want tailored guidance for a Malvern purchase or sale, reach out to the local experts who manage these details every day. The Houder Nuñez-Strid Team can help you model costs, negotiate the right allocation, and navigate closing with confidence.
FAQs
Who typically pays the transfer tax in Malvern?
- It is negotiable in Pennsylvania. Local custom may influence offers, but your purchase agreement should clearly state who pays or whether you split it.
How is the 2.5% transfer tax calculated at closing?
- Multiply the final sale price by 2.5%. If the price changes before recording, the tax amount changes and your Closing Disclosure will be updated.
Can I roll transfer tax into my mortgage?
- Lenders typically do not allow transfer tax to be financed into the loan on purchase transactions. It is due at settlement as a closing cost.
Is transfer tax the same as property tax or recording fees?
- No. Transfer tax is a one-time tax on the deed transfer. Property taxes are ongoing based on assessed value. Recording and notary fees are separate closing costs.
Who pays the tax to the government?
- Your title company or settlement agent collects the amount at closing and remits it when the deed is recorded with the state and local offices.
