Tennessee collects a realty transfer tax of $0.37 per $100 of the purchase price and a mortgage tax of $0.115 per $100 of indebtedness, with the first $2,000 of the debt exempt, when the documents are recorded. The rates are published by the Tennessee Department of Revenue on its recordation tax due-date and tax-rate page.

Who actually writes the check is often set in the purchase contract, so it is worth confirming before you treat either tax as the other party's automatic cost.

How the two taxes are calculated

The realty transfer tax applies when a deed or other instrument transferring an interest in realty is recorded. The Department of Revenue states the rate as $0.37 per $100 of the purchase price for the realty transfer. On a $400,000 sale, that is 4,000 times $0.37, or $1,480, if the taxable base is the $400,000 purchase price. If your closing statement uses a different base, ask the closing attorney or register of deeds which figure the Department requires and why.

The mortgage tax, sometimes called the indebtedness or deed-of-trust recordation tax, is $0.115 per $100 of indebtedness. The first $2,000 of the debt is exempt from taxation. On a $320,000 loan, the taxable indebtedness is $318,000, which is 3,180 times $0.115, or $365.70. Refinances, assumptions, and further advances can raise their own recordation questions. Do not assume a refinance is tax-free. Ask the closing attorney or the register of deeds how the mortgage tax applies to the new instrument.

These are state taxes collected in connection with local recording. The Department's due-date page also notes that recordation taxes are filed monthly on the 15th day of the month following the period covered by the return. That filing schedule is for the officials who remit the tax, not a deadline you use to time a closing. Your practical deadline is the recording of the deed and, if you are borrowing, the deed of trust.

Local offices may also collect recording fees, copy fees, and, in some places, other local charges that are separate from these two state rates. A closing disclosure or settlement statement should list the realty transfer tax, the mortgage tax, and the register's fees on separate lines. If they are combined, ask for a breakdown.

Who pays, and what to watch at closing

The Department of Revenue's rate page states the rates. It does not, on that page, assign the realty transfer tax or the mortgage tax to the buyer or the seller as a matter of law. In practice, responsibility is often allocated in the purchase and sale agreement, in a local custom that the parties are free to change, or in lender instructions for the mortgage tax. Read the contract. If the form is silent, negotiate the allocation in writing before you go to closing.

A few points come up often:

• A "seller pays closing costs" clause may or may not include the realty transfer tax. Name the tax if you intend someone else to pay it.
• The mortgage tax is tied to the loan. A cash buyer does not incur that tax on a deed of trust that is never recorded, but a buyer who finances will see it unless an exemption applies.
• If the consideration stated on the deed is lower than the actual purchase price, do not invent a lower tax base. The closing attorney and the register of deeds work from the figures the law requires.
• A gift, a transfer between spouses, a transfer into a trust, or a foreclosure-related deed can have a different tax result. Those are fact-specific. Get an answer from the closing attorney or the Department, not from a rule of thumb.

Ask the closing attorney or title company for a draft settlement statement several days before closing, and check the recordation-tax lines against the contract and against the Department's published rates. If a number looks wrong, it is easier to fix before the deed is recorded than after.

Counties record documents through the register of deeds. The Department of Revenue administers the tax. If you need a written confirmation of the current rate, use the Department's due-date and tax-rate page, and ask the register or the closing attorney how that rate applies to your instrument.

FAQ

What is Tennessee's realty transfer tax rate?

The Department of Revenue publishes a realty transfer tax of $0.37 per $100 of the purchase price for the realty transfer.

What is the mortgage recordation tax?

The mortgage tax is $0.115 per $100 of indebtedness, and the first $2,000 of the debt is exempt, according to the same Department of Revenue page.

Who pays these taxes, the buyer or the seller?

The official rate page states the rates, not a mandatory allocation. Responsibility is often set in the purchase contract or by agreement at closing. Confirm it in writing.

Are recording fees the same as recordation taxes?

No. Recording fees are charged by the office that records the documents. The realty transfer tax and the mortgage tax are separate state taxes calculated at the published rates.

Next step

Ask your closing attorney or a licensed local real estate agent to show the realty transfer tax and the mortgage tax on a draft settlement statement, using the Department of Revenue's $0.37 and $0.115 rates, and to confirm who is paying each item under your contract.

Sources: Tennessee Department of Revenue, Recordation Taxes Due Date and Tax Rates.

In a covered Tennessee residential sale, the owner must furnish a property disclosure statement or a purchaser-waived disclaimer before the purchase contract is accepted. Failure to provide that form does not, by itself, give the buyer a right to cancel the contract.

The rules are in Tenn. Code Ann. §§ 66-5-201 through 66-5-208, and they differ from states that give a short rescission window after delivery.

What has to be delivered, and when?

Tenn. Code Ann. § 66-5-201 applies to transfers by sale, exchange, installment land sales contract, or lease with option to buy of residential real property with one to four dwelling units, including site-built and nonsite-built homes. It applies whether or not a licensed broker or salesperson is involved. The disclosure statement is not a warranty, and it is not a substitute for inspections by the purchaser or by a professional home inspector. The disclosure is for the potential buyers in that transfer and may not be relied on by purchasers in later transfers from the original buyer.

Under § 66-5-202, the owner must furnish one of two documents. The first is a residential property disclosure statement, in the form provided in the statute, about the condition of the property, including any material defects known to the owner. The form has to include all items listed in the statutory form, a notice that the parties may wish to obtain professional advice or inspections, and a notice that the information is the owner's representation, not the licensee's. The owner is not required to undertake an independent investigation or inspection in order to make the disclosures.

The second option is a residential property disclaimer statement. It states that the owner makes no representations or warranties as to the condition of the property or its improvements, and that the purchaser will receive the property "as is," with all defects that may exist, except as otherwise provided in the purchase contract. A disclaimer is permitted only where the purchaser waives the required disclosure. If the purchaser does not waive it, the disclosure statement must be provided.

Timing is strict and early. Section 66-5-203 says the owner shall deliver the written disclosure or disclaimer, if agreed upon by the purchaser, before acceptance of a real estate purchase contract. "Acceptance" means full execution of the contract by all parties. The statement may be included in the contract, in an addendum, or in a separate document. Delivery after everyone has already signed is late under this statute.

What if the statement is missing, incomplete, or wrong?

Failure to provide the disclosure or disclaimer does not permit a purchaser to terminate the purchase contract, § 66-5-203(b) says. The purchaser is not restricted from bringing other actions at law or in equity that are otherwise permitted. Section 66-5-208(b) adds that no cause of action may be instituted against an owner solely for failure to provide the statement, but the owner can still face other claims for misrepresentation or for failure to disclose material facts.

If the owner does provide a disclosure statement and it contains a misrepresentation, the purchaser's remedies under § 66-5-208(a) are:

• An action for actual damages suffered because of defects that existed as of the date the contract was executed, that the purchaser was not aware of at the earlier of closing or occupancy (or occupancy, in a lease with option to purchase). That action must be commenced within one year from the date the purchaser received the disclosure statement or the date of closing or occupancy, whichever occurs first.
• Termination of the contract prior to closing, subject to § 66-5-204, in the event of a misrepresentation in the statement.
• Other remedies at law or equity that are available against an owner for intentional or willful misrepresentation of the condition of the property.

A disclaimer or an "as is" clause does not give a seller a free pass to hide a known defect in an intentional way. The statute preserves claims for misrepresentation and for failure to disclose material facts. Buyers still benefit from a home inspection, a termite or wood-destroying-insect report, and, where relevant, a flood-zone or sewer review, because the disclosure is not a warranty.

Real estate licensees also have separate disclosure duties under other sections of Tennessee law. Section 66-5-208 limits certain claims against a licensee for information in expert reports the licensee did not sign, but it does not excuse the disclosures required by §§ 62-13-403, 62-13-405, or 66-5-206.

If you are selling, complete the statutory form carefully, deliver it before anyone treats the contract as fully executed, and update the buyer in writing if you learn of a material change. If you are buying, do not treat a missing form as an automatic exit right, and do not skip inspections because a disclaimer was signed.

FAQ

When must the Tennessee disclosure or disclaimer be delivered?

Before acceptance of the real estate purchase contract, which the statute defines as full execution by all parties. It may be in the contract, in an addendum, or in a separate document.

Can a buyer cancel solely because the seller never provided the form?

No. Section 66-5-203 says failure to provide the statement does not permit the purchaser to terminate the contract, though other actions at law or in equity may still be available.

Is an "as is" disclaimer always allowed?

Only if the purchaser waives the required disclosure. If the purchaser does not waive it, the disclosure statement must be provided.

How long does a buyer have to sue for a misrepresentation on the disclosure?

An action for actual damages under § 66-5-208(a)(1) must be commenced within one year from the date the purchaser received the disclosure statement or the date of closing or occupancy, whichever occurs first.

Next step

Ask a licensed local real estate agent or a Tennessee real estate attorney to review the disclosure or disclaimer, the delivery date relative to contract acceptance, and any inspection objections before you finalize the contract or close.

Sources: Tenn. Code Ann. § 66-5-201; Tenn. Code Ann. § 66-5-202; Tenn. Code Ann. § 66-5-203; Tenn. Code Ann. § 66-5-208.