How does a transfer tax function in a real estate deal?

A transfer tax is a fee imposed by the government on the transfer of property title from one owner to another. It is typically calculated based on the sale price of the property and is due at the time of the transaction when ownership is officially transferred, usually recorded in the public deed records. This tax is usually collected at closing and must be paid in order to complete the transfer of ownership.

The other options do not accurately describe the nature of a transfer tax. Options discussing services rendered during negotiations or payments at the submission of a loan application miss the specific timing and context of when a transfer tax applies. Additionally, limiting the tax's applicability to rental contracts ignores the broader scope of real estate transactions in which transfer taxes come into play.