How to Sell Land By Owner in Alabama

Unlike many states, Alabama does not have a mandatory seller disclosure form for vacant land. However, sellers are still legally obligated to disclose any known material defects that could affect the property's value or desirability.

What You Must Disclose:

• •Environmental hazards or contamination
• •Boundary disputes or easements
• •Zoning violations or non-permitted structures
• •Flood zone status (if known)
• •Any restrictions on land use
• •Utility access limitations

Pro Tip: Even though a formal disclosure form isn't required, it's wise to provide written documentation of your property's condition and any known issues. This protects you from future liability claims.

State Transfer Tax

Alabama charges a state transfer tax (also called documentary stamps) of $0.50 per $500 of the property's sale price. This breaks down to $1.00 per $1,000 of value.

Example: For a $50,000 land sale, the state transfer tax would be $50.

County Transfer Taxes

Some Alabama counties impose additional transfer taxes. These vary significantly by county, so check with your local probate court or county revenue office for exact rates.

Recording Fees

Deed recording fees are paid to the county probate court and typically include:

• •First page: $25-$50 (varies by county)
• •Additional pages: $5-$10 per page
• •Indexing fees may apply

To successfully complete a land sale in Alabama, you'll need to prepare the following documents:

• •Warranty Deed or Quitclaim Deed: The legal document transferring ownership. Most buyers prefer a warranty deed.
• •Purchase Agreement: Contract outlining sale terms, price, and conditions.
• •Title Report: Showing clear title and no liens or encumbrances.
• •Survey (if available): Property boundary survey, especially important for vacant land.
• •Closing Statement (HUD-1 or Alternative): Itemizing all costs and funds distribution.
• •Affidavit of Property Value: Required for transfer tax calculation.
• •Bill of Sale (if applicable): For any personal property included with the land.

Title Insurance

While Alabama law doesn't require title insurance, it's strongly recommended and expected by most buyers and all lenders. Title insurance protects against defects in the title that may not appear in public records.

Who Pays? In Alabama, it's customary for the seller to pay for the owner's title insurance policy, though this is negotiable. The buyer typically pays for the lender's policy if financing is involved.

Closing Process

Alabama closings can be handled by:

• •Title Companies: Most common for FSBO transactions
• •Real Estate Attorneys: Preferred for complex transactions
• •Escrow Companies: Less common but available

The typical timeline from accepted offer to closing is 30-45 days, though cash transactions can close faster.

Alabama does not legally require an attorney for real estate transactions. However, many sellers and buyers choose to hire one for:

• •Preparing or reviewing the purchase agreement
• •Conducting title searches
• •Resolving title issues or boundary disputes
• •Handling complex situations (estates, trusts, corporate owners)
• •Conducting the closing

For FSBO sellers: While not required, consulting with an attorney for contract review can protect you from costly mistakes. Many attorneys offer flat-fee services for simple land transactions ($500-$1,500).

Capital Gains Tax

Alabama does not have a separate state capital gains tax. However, capital gains from land sales are taxed as regular income on your Alabama state tax return at rates ranging from 2% to 5%.

You'll also owe federal capital gains tax:

• •Long-term (held over 1 year): 0%, 15%, or 20% depending on income
• •Short-term (held under 1 year): Taxed at ordinary income rates

Property Tax Considerations

Ensure all property taxes are current before closing. In Alabama, the tax year runs from October 1 to September 30. Property taxes are typically prorated at closing, with the seller responsible for taxes up to the closing date.

1099-S Reporting

The closing agent must file IRS Form 1099-S for most real estate transactions, reporting the gross proceeds to both you and the IRS. Make sure to report the sale on your federal and state tax returns.

Important: Consult with a tax professional familiar with Alabama law to understand your specific tax obligations and potential deductions.