Consideration

Consideration is the value given in return for a conveyance of real property. Minn. Stat. 287.20 subdivision 2 defines it for tax purposes, and in Minnesota it drives two separate obligations at recording.

What it determines#

Deed tax, calculated on net consideration at 0.0033, with an additional 0.0001 in Hennepin and Ramsey counties.

The eCRV requirement, triggered where consideration exceeds $3,000.

Both are assessed at the moment the document is presented for recording, which is why the figure has to be settled before the closing rather than after.

Net consideration#

The refinement that catches people.

Net consideration is the consideration less the value of any lien or encumbrance remaining on the property prior to the sale that is not released or satisfied as a result of the sale.

The clearest example is a buyer assuming the seller's existing mortgage. The debt stays on the property, the buyer takes it over, and its value comes out of the consideration for deed tax purposes.

Where the mortgage is paid off at closing — the ordinary case — nothing is deducted, because the lien was released as a result of the sale.

Personal property comes out too#

Where personal property transfers with the real estate, its items and value must be listed and deducted from the sale price on the eCRV.

One exception worth knowing: on one- to three-unit residential property, the value of personal property conveyed with the real property is subject to deed tax, as are seller-paid costs.

So a house selling for $200,000 including $10,000 of personal property and $5,000 of seller-paid costs is taxed on the full amount rather than on the building alone.

The recital on the deed#

Deeds frequently recite nominal consideration — "one dollar and other good and valuable consideration" — rather than the actual price.

That is not evasion. The recital supports the conveyance; the real figure is disclosed on the eCRV, which is where the state actually gets it.

Gifts and nominal transfers#

A gratuitous transfer has little or no consideration, and where consideration is $3,000 or less, Minnesota's minimum deed tax applies — $1.65, or $1.70 in Hennepin and Ramsey.

Gratuitous transfers are also among the transactions excluded from the general seller's disclosure obligation, though the non-waivable disclosures such as the well disclosure still apply.

Why the accuracy matters beyond the tax#

The consideration reported on the eCRV becomes the sale price in the state's records.

Those records feed sales ratio studies, assessment reviews and every comparable sales analysis run in Minnesota — including ours. A price misreported at closing distorts the valuation of every neighbouring property that later uses it as a comparable.