The biggest single closing cost in Delaware is usually the realty transfer tax. In most of the state it totals 4% of the property’s value, and buyer and seller typically split it equally, so each pays 2%. On top of that, buyers pay lender, title, and settlement costs, and sellers pay commission, mortgage payoff, and prorated taxes. Your purchase contract sets the final split.
This guide covers how the transfer tax is calculated, how the first-time buyer reduction works, what each side usually pays, and why a Delaware attorney handles your settlement.
Key takeaways
- Delaware’s realty transfer tax is usually 4%: 2.5% state plus 1.5% local.
- Buyer and seller typically split the tax equally, though the contract can change it.
- First-time buyers can save up to $2,000 on their share of the state tax.
- Read on for a worked example and a list of each side’s closing costs.
How the Delaware realty transfer tax works
The 4% combined rate
According to the Delaware Division of Revenue’s RTT-TAX instructions, the combined realty transfer tax rate is 4% of value. That breaks down as:
- 2.5% state realty transfer tax
- 1.5% county or municipal realty transfer tax
The state rate went from 1.5% to 2.5% in August 2017 in places that also charge a local transfer tax. Where no local transfer tax applies, the state rate is 3%, per the Division of Revenue’s first-time home buyer tax credit page.
What value the tax is based on
The tax applies to the greater of the price paid or the property’s highest assessed value for local tax purposes (RTT-TAX instructions, Line 4). When the price is higher than the assessed value, the tax is figured on the price.
Who pays the transfer tax in Delaware
The Division of Revenue says realty transfer taxes are “typically shared equally” by buyer and seller. With the standard 4% rate, that means 2% each. This is a custom, and buyers and sellers can negotiate a different split in the purchase contract.
The Delaware first-time home buyer transfer tax reduction
How much it saves
Delaware cuts the buyer’s state transfer tax rate by 0.5% for qualifying first-time buyers. For most buyers, that lowers their share of the state rate from 1.25% to 0.75%. The reduction applies to no more than the first $400,000 of value, so the most it can save is $2,000 (Division of Revenue; Form RTT-SCH).
Who qualifies
According to Form RTT-SCH, which cites 30 Del. C. § 5401(2), a first-time home buyer:
- Has never held any direct legal interest in residential real estate, in Delaware or anywhere else, and
- Plans to live in the home as a principal residence within 90 days of the transaction.
How to claim it
You claim the reduction at closing (Division of Revenue). If you think you qualify, tell your lender and settlement attorney early so it shows up on your closing figures.
Buyer vs. seller closing costs in Delaware
Here are the usual cost categories for each side. Amounts depend on your loan, your lender, your title and settlement providers, and your contract.
| Buyer closing costs | Seller closing costs |
|---|---|
| Half of realty transfer tax (customary) | Half of realty transfer tax (customary) |
| Lender origination fees or discount points | Real estate agent commission |
| Appraisal | Deed preparation |
| Credit report | Payoff of existing mortgage |
| Lender’s title insurance | Prorated property taxes |
| Owner’s title insurance (optional) | Any repair credits agreed to with the buyer |
| Title search | |
| Attorney settlement fee | |
| Recording fees | |
| Prepaid interest | |
| Escrow deposits for property taxes and homeowners insurance | |
| Home inspections |
For more on what the title side does, see what a title company does. If you’re buying with an agent, it also helps to know how a buyer agency agreement affects who pays what.
Worked example: transfer tax on a $350,000 Delaware home
This example is hypothetical and shown for illustration only.
Assumptions: $350,000 purchase price, assessed value below the price, standard 4% area, tax split 50/50.
Total transfer tax
- 4% × $350,000 = $14,000
- Buyer pays $7,000; seller pays $7,000
If the buyer qualifies as a first-time home buyer
- Credit: 0.5% × $350,000 (under the $400,000 limit) = $1,750
- Buyer’s share: $7,000 − $1,750 = $5,250
- The $2,000 maximum only applies at $400,000 of value and above.
Seller commission, for comparison
Commissions are negotiable and vary by brokerage. At a 1% listing fee, which is what Houwzer charges, the listing side on this $350,000 sale would cost $3,500.
Second check: $500,000 home, first-time buyer
- Buyer’s half of the 4% tax: $10,000
- Credit: 0.5% × $400,000 (the limit) = $2,000, which is the maximum
- Buyer’s share: $10,000 − $2,000 = $8,000
Why a Delaware attorney runs your settlement
In In re Mid-Atlantic Settlement Services (2000), the Delaware Supreme Court held that a Delaware-licensed attorney must conduct the closing on a sale of Delaware real property. The court also required a Delaware attorney to be involved, directly or in a supervisory role, in drafting or reviewing documents that transfer title (Delaware Office of Disciplinary Counsel digest).
What this means for your budget:
- Plan for an attorney settlement fee as part of your closing costs. Ask the settlement attorney for a quote early.
- The attorney’s office usually prepares the settlement figures, so it’s the place to ask how the transfer tax and any first-time buyer reduction are being applied.
How to plan for and reduce Delaware closing costs
Read your Loan Estimate and Closing Disclosure
Your lender’s Loan Estimate lists expected loan and closing costs. The Closing Disclosure shows the final numbers. Compare the two line by line and ask about anything that changed.
Negotiate the transfer tax split or seller concessions
The 50/50 transfer tax split is a custom and can be changed. Buyers can ask the seller to pay more of the tax or to give a credit toward closing costs. Sellers can weigh these requests against price and terms. Results depend on the market and the offer.
Shop lenders and title services where you can
Loan pricing varies by lender, and some title services may be open to shopping. Getting more than one quote helps you see the range before you commit.
Confirm first-time buyer status early
If you qualify, make sure your settlement attorney knows before closing day so the reduction is on your final figures.
Frequently asked questions
Who pays transfer tax in Delaware?
Buyer and seller typically split it equally, according to the Delaware Division of Revenue. With the standard 4% rate, each pays 2%. The purchase contract can set a different split.
How much is the Delaware transfer tax?
In most areas the combined rate is 4%: 2.5% state and 1.5% county or municipal (RTT-TAX instructions). Where no local transfer tax applies, the state rate is 3% (Division of Revenue). The tax is based on the greater of the sale price or the highest assessed value.
Is there a first-time home buyer transfer tax exemption in Delaware?
Delaware offers a reduction rather than a full exemption. Qualifying first-time buyers get 0.5% off their share of the state rate, applied to the first $400,000 of value, for a maximum savings of $2,000. It’s claimed at closing (Division of Revenue; Form RTT-SCH).
Do I need an attorney to close on a house in Delaware?
Yes. The Delaware Supreme Court’s 2000 Mid-Atlantic Settlement Services decision requires a Delaware-licensed attorney to conduct the closing on a sale of Delaware real property (Delaware Office of Disciplinary Counsel digest).
Are closing costs negotiable in Delaware?
Many are. The transfer tax split, seller credits, and agent commissions can all be negotiated, and lender pricing differs between lenders. Taxes and government fees are set by law, but who pays them can still be negotiated in the contract.
When are closing costs paid?
At settlement, which a Delaware-licensed attorney must conduct. The first-time buyer reduction is applied then too: the settlement attorney shows the reduced rate on the transfer tax form signed at closing (Division of Revenue).
Next steps
If you’re comparing nearby markets, see our guides to closing costs in Pennsylvania, New Jersey, and Maryland, or read how to choose among realtors in Delaware and see how Houwzer works in Delaware.
