Selling a Home in Chicago? Transfer Stamps, the Water Certificate and the Zoning Certificate, Explained

Most people think of closing day as signatures and keys. In the city of Chicago, there's a little more going on behind the scenes. Before the deed can be recorded, someone has to pay transfer taxes, and the city won't hand over its tax stamp until two other pieces of paperwork are in place. After 25 years in real estate, I can tell you these items rarely kill a deal, but they absolutely can delay one when nobody starts them early.

Here's the plain-English version for Chicago sellers and buyers.

Transfer taxes: three layers, and who usually pays

When a property changes hands in Chicago, transfer tax is charged at the state, county and city level.

• State of Illinois: 50 cents for each $500 of value (or fraction of $500). (35 ILCS 200/31-10)
• Cook County: 25 cents for each $500 of value. (55 ILCS 5/5-1031) The Cook County Clerk lists the seller as the party liable for both the state and county amounts. (Cook County Clerk: Transfer Fees)
• City of Chicago: $5.25 for each $500 of the transfer price. The city says that in general the buyer is responsible for $3.75 of that (the "City portion") and the seller for $1.50 (the "CTA portion," which supports the Chicago Transit Authority). (City of Chicago: Real Property Transfer Tax)

That last one surprises a lot of first-time buyers. In most places the seller covers transfer tax, but in Chicago the buyer pays the larger share of the city's tax, and it's cash due at closing.

A quick example with round numbers

To make the math concrete, here's a hypothetical $400,000 Chicago sale. That's 800 units of $500.

So in this example the seller's stamps come to $1,800 and the buyer's come to $3,000. Your attorney and title company will confirm the exact figures on your settlement statement, but this is a good way to budget ahead.

Outside Chicago, the state and county amounts still apply, and Illinois lets home rule municipalities add their own transfer tax. (Illinois Department of Revenue) The rules and amounts vary town by town, so if you're selling in the suburbs, check the Cook County Clerk's list of municipalities and their transfer fees, or the village itself.

The water certificate (Full Payment Certificate)

Here's the piece that trips people up. To buy the City of Chicago transfer stamps, you first need a Full Payment Certificate, or FPC, from the city's Department of Finance. It shows that the water and sewer charges on the account are paid in full (or aren't transferable to the next owner), and the application also moves the water service into the buyer's name. Without it, the city says, the parties can't get the transfer stamps needed to record the deed. (City of Chicago: Full Payment Certificates)

A few details worth knowing:

• The fee is $50 per account, waived if the transfer is exempt from the city transfer tax. (FPC application)
• For condos where the association pays the water bill, the city may ask for a "Paid Assessment Letter" if the association's water account shows a past-due balance. (Same application.)
• If a required FPC isn't obtained, the city says both the seller and the buyer can be held liable for any unpaid water and sewer charges. (City of Chicago FPC guide)
• Certificates expire, so the Cook County Clerk reminds closers to check the FPC's expiration date before getting the city stamp. (Cook County Clerk MyDec guide)

My advice to sellers: pay your final water bill promptly and have your attorney order the FPC as soon as you're under contract.

The Certificate of Zoning Compliance (houses and 2-5 unit buildings)

If you're selling a single-family home or a building with five or fewer units in Chicago, you also need a Certificate of Zoning Compliance before the city issues tax stamps. Condos, co-ops and a brand-new home sold to its first occupant are excluded. (Chicago Municipal Code 3-33-045)

The certificate confirms how many dwelling units are legal at the property. The filing fee is $120, and the Department of Planning and Development makes an initial decision within five business days. If city records can't confirm the unit count, the city inspects the property. (City of Chicago: Certificate of Zoning Compliance)

This is where an unpermitted garden unit or an extra kitchen can come to light, because the city counts a separate set of cooking facilities as a separate dwelling unit unless it's clearly accessory. If you own a two-flat or three-flat and you're not sure what the city has on record, find out before you list, not the week of closing.

The bottom line

None of this is complicated, but it's all on a clock. Transfer stamps can't be bought without the water certificate, and most houses and small buildings also need the zoning certificate. Starting both early keeps your closing date where it belongs.

This is exactly the kind of detail I handle for my clients. I offer full service at a 1% total commission, compared with a typical 2.5% to 3% listing commission, and I keep the paperwork moving so you're not chasing a water bill the day before closing. Thinking about selling or buying in Chicago? Call or text me at 312.882.9797.

This article is general information, not legal or tax advice. Confirm the figures for your sale with your real estate attorney and title company.