Wow - The Looming New Los Angeles 'Mansion Tax' !
Wednesday Mar 29th, 2023
Sellers of luxury homes in Los Angeles are scrambling to offload their properties before a new “mansion tax” takes effect on April 1.
Agents are trying their best to entice buyers with extravagant freebies before 'Measure ULA', the new tax, takes effect. The measure imposes a 4% transfer tax on property sales over $5 million and a 5% tax on properties over $10 million.
Some of the biggest Hollywood stars are rushing to sell their ultra-luxury homes. While Jim Carrey put his 12,700 sf home up for sale in February for US $29 million, Britney Spears listed her 11,650 sf Calabasas property on the market for US $12 million. Meanwhile, Kylie Jenner has her Beverly Hills home for sale for more than US $33 million.
The tax must be paid by the seller which means those, with properties on the market, are doing everything they can to incentivize quick closes. Some sellers are even throwing in a free McLaren or a Bentley with a purchase.
While sellers are dropping prices dramatically, agents are finding clever ways to entice buyers to snatch up these pricey estates.
“We were trying to think outside of the box and we offered a $1 million bonus to any agent who brought the buyer to one of our listings if we closed before April 1,” said Josh Altman, CEO of Altman Brothers Real Estate and star of 'Million Dollar Listing Los Angeles'.
Altman explains the extravagant incentives are actually cost-saving measures as selling after the ULA tax kicks in could be costlier than just giving away some freebies.
“If you think about the money that you’ll be giving away, it might be less for you to give something to the agent or to the buyer than you’ll have to give away after you close the deal,” explains Altman.
Back in November, more than 57 percent of voters passed Measure ULA, known colloquially as the “mansion tax.”
Kerry Ann Sullivan, with Pardee Properties, believes the tax will cause a ripple effect from the seller and developers down to individual employees.
“They’re selling the house for $5 million, but it doesn’t mean they didn’t buy the land for $2 million, it doesn’t mean they didn’t carry it for two to three years,” said Sullivan. “Their margins are very slim on this.”
Funds collected from the tax will be put towards affordable housing projects and providing resources to tenants at risk of homelessness according to Los Angeles Agents. However, they do not agree with the new measure and believe there may be better solutions to fund low-income housing projects.
“There are more solutions than taxing people because there’s already money out there and programs out there,” said Sullivan. “Are they being run the right way? Are they being run in the most efficient way?”
Altman calls the tax unfair because he also believes there are other ways Californians can help tackle the homelessness crisis, like making the tax relative to all property sales and not just those over $5 million.
“It could have also been off a profit, so if you make a profit off a certain percent, if it’s four or five-and-a-half percent of your profit goes towards this measure, that would be an easier pill to swallow,” said Altman.
For now, Altman says interested buyers in the market would need to put in offers as soon as possible if they’re to reap any incentives before the tax takes effect on April 1.
So.... anyone in the market for a free Porsche or Bentley?
from: Vivian Chow & Pedro Rivera KTLA, Los Angeles
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