Title and settlement in Annapolis, MD

City of Annapolis, or just an Annapolis address?

Before anything else on an Annapolis purchase, find out whether the house is actually in the City of Annapolis. The post office uses “Annapolis” for a far larger area than the city. Only two places in Anne Arundel County are incorporated, Annapolis and Highland Beach, so a large share of the homes in the 21401, 21403, 21405 and 21409 ZIP codes sit in the unincorporated county. Cape St. Claire, Bay Ridge and Sherwood Forest, for example, have Annapolis mailing addresses but are outside the city and governed by the county. Our Anne Arundel County page covers the county’s settlement taxes in full.

Which side of the line a house is on affects three things.

• The yearly property tax bill. A city home is taxed three times over, per $100 of assessed value: $0.738 to the city, $0.577 to the county and $0.112 to the state. A home outside the city pays the county rate of $0.968 per $100 plus the state’s $0.112 per $100. City owners get a lower county rate, but the city tax more than makes up the difference, so the combined rate is higher inside the city.
• How quickly that bill can grow. For an owner’s main home, Maryland’s Homestead Tax Credit caps how much the taxable assessment can rise each year, and local governments may set a lower cap. Anne Arundel County’s cap for its own tax is 2%, and it also covers the county share of a city owner’s bill. The City of Annapolis set 10% for its city tax. So when assessments jump, the assessment the city taxes can rise by up to 10% a year while the one the county taxes rises by no more than 2%, before any change in rates. A home outside the city has no city tax at all.
• Who approves changes to the property. Inside the city, permits, the Historic District and the critical area rules for the Chesapeake Bay shoreline are handled by the City of Annapolis. Outside it, Anne Arundel County handles them.

To check a particular house, search it on the state’s Real Property Data Search, which names the town a property is in, if any, and see whether the seller’s county tax bill has a City of Annapolis line (the county bills the city tax with its own). We confirm it again during the title work.

Budget from the full assessment, not from the seller’s last bill. The homestead cap belongs to the owner, not the house, so years of capped increases on the seller’s bill can disappear when you buy. The credit does not carry over to a buyer. SDAT mails an application to new owners after the deed is recorded, and the settlement agent must give the buyer a copy of the Homestead application at settlement.

Settlement taxes and who pays them

The state and Anne Arundel County charge three taxes on the price when the deed is recorded, at the same rates whether or not the home is inside the city:

• State transfer tax: 0.5% of the price
• County transfer tax: 1.0% of the price up to $999,999.99; 1.5% of the whole price when the price is $1,000,000 or more
• Recordation tax: $3.50 per $500 ($7.00 per $1,000), about 0.70%; rounded up to the next $500

At the county’s median sale price of $509,990, those three come to $11,219.85, which is $5,609.92 for each side if they are split equally. The calculator on our Anne Arundel County page shows the working and will run your own price. Higher-priced homes pay more than the extra price alone would suggest, because the county rate steps up: County transfer tax rises from 1.0% to 1.5% of the whole price when the price is $1,000,000 or more. On a $1,200,000 sale, the three taxes total $32,400.

Your signed contract sets the split; where it is silent, state law treats the taxes as shared half and half. First-time Maryland homebuyers who will occupy the home are the main exception. The state transfer tax on their purchase is cut to 0.25% of the price, paid entirely by the seller, and the seller also carries the county transfer and recordation taxes unless the contract expressly moves them to the buyer. Every buyer on the deed must qualify, or be a co-signer or guarantor of the loan who will not live there, and each signs a sworn statement. No recordation tax is due on the buyer’s purchase-money loan (the mortgage or deed of trust given as part of the same purchase to pay for the home).

Title insurance, the settlement fee, loan costs, recording charges and the property tax and HOA adjustments come on top of these taxes, and our instant quote brings them together in one number. Mortgage lenders normally require a lender’s title policy. An owner’s title policy is optional in Maryland; if you choose one, its premium is paid once, at settlement.

Property tax at settlement. Anne Arundel County issues each year’s bill in July, for a tax year that starts July 1 and ends June 30. Where the seller has paid ahead, the buyer normally reimburses the seller for the part of the year after the settlement date, and special district charges are usually adjusted in the same way. The contract governs.

Buying in the Historic District

The city’s Historic District takes in much of the old downtown, including the streets around the State House and City Dock. If you buy there, the district rules follow you after settlement. Under the City Code, changes to the outside of a building in the district, such as new windows, doors, porches or fences, need a certificate of approval from the Historic Preservation Commission. The city’s permit rules say this applies to all exterior projects in the district, even ones that need no building permit. The city can tell you whether a particular address is in the district.

Before you sign, ask the seller what has been done to the outside of the house and whether the commission approved it. If earlier work was done without approval, the city can require it to be corrected, and after settlement that can fall to you as the new owner. If you plan changes, speak to the city’s preservation staff early and allow time for review.

A smaller number of historic properties also carry a preservation easement held by a group such as Historic Annapolis, and some of those need the easement holder’s approval for changes as well. A recorded easement should turn up in the title search, and a title policy normally lists it as an exception, which means the policy does not cover it. Ask us about anything the search finds that you do not understand.

Waterfront homes, the critical area and community districts

The Annapolis area sits between the Severn and South rivers, and many homes are on or close to the water. Maryland sales contracts must include a notice that the property may be in the Chesapeake Bay critical area. Outside the city, the county’s program applies: The critical area is the land within 1,000 feet of mean high tide or tidal wetlands. A minimum 100-foot buffer applies; in Limited Development and Resource Conservation Areas impervious surface is limited to 15%-31% of the site; Resource Conservation Areas allow one dwelling per 20 acres. The county program was first approved in 1988. Inside the city, the City of Annapolis runs its own critical area program, with its own maps and lot coverage rules. Either way, ask whether piers, bulkheads, decks and additions were permitted, because unpermitted work stays with the property.

Many neighborhoods with Annapolis addresses outside the city also pay a yearly special community benefit district charge on the county tax bill, which funds community projects. Annapolis-area waterfront districts include Sherwood Forest SCBD ($5,985 per improved lot), Cape St. Claire SCBD ($300 per account) and Bay Ridge SCBD ($859.06 per account) for FY2027. The charges vary widely, so read the tax bill for the house you are buying. Homes in a FEMA special flood hazard area need flood insurance if the loan comes from a federally regulated or insured lender, so check the flood zone before you lock in a loan.

Other things that can hold up an Annapolis settlement

• HOA and condominium documents. Homes in a homeowners’ or condominium association come with a resale package the seller must deliver, and Maryland law gives the buyer a short time after receiving it to cancel the contract. Order the package the day the contract is ratified.
• Sales by heirs. When a home is being sold from an estate, the person signing the deed needs the authority to do it, usually as the court-appointed personal representative, and the estate paperwork has to be in place before settlement. Our deeds and family transfers page covers deeds for inherited property.
• Older lot lines. In long-established neighborhoods, fences, driveways and old alleys do not always match the recorded lot lines. A current survey shows where they differ.
• Wells, septic and deferred county charges. Homes away from public water and sewer may have a private well or septic system, and some lenders ask for a test. Where the home is on public water and sewer, ask the seller whether any county water, sewer or front foot benefit charges are unpaid or deferred, since they may need to be paid at settlement.
• A seller who lives out of state. Part of a nonresident seller’s proceeds is held back at settlement and sent to the Comptroller. For a person it is 8.75% of the total payment to the seller, meaning the net proceeds actually paid to the seller (nonresident individuals); for a company or other entity it is 8.25% of the total payment (nonresident entities). Nothing is withheld if each seller certifies under oath that the home is their principal residence, and a certificate from the Comptroller can remove or reduce the amount. Let us know early so the forms are ready.

How Maryland First Title helps

Maryland First Title has provided title and escrow services through its attorneys since 1994. If you are buying or selling in Annapolis, we can bring the settlement to your home or office at no extra cost, or you can sign at 306 Crain Hwy N, Glen Burnie; after-hours and weekend appointments are available. We handle the title search, title insurance, escrow, the deed and its recording, and we work with your agent and lender to keep the settlement on schedule. Read about our residential settlements, or, if you are selling or buying without an agent, our for sale by owner and buying without an agent services.