Voters in the cities of Los Angeles and Santa Monica approved measures to add hefty real estate transfer taxes to high value properties, including both residential and commercial use properties. If you are thinking about selling soon, the clock is ticking to close your sale before the taxes kick in.
Santa Monica property owners selling property over $8 million will see their transfer tax raise to 5.71% from the current rate of .71%, starting March 1, 2023. As an example, a sale with a gross value of $8 million without lien encumbrances, will pay an additional $400,000 in transfer taxes.
Beginning April 1, 2023, Los Angeles will tack on a 4% tax on the sale of properties when the consideration of value exceeds $5 million, but less than $10 million. Over $10 million, the additional transfer tax is 5.5%. Santa Monica neighboring communities that will be affected by the city of Los Angeles transfer tax hike include Brentwood, Bel Air, Century City, Pacific Palisades, Venice, Westwood and West L.A.
There are some limitations and exemptions expected on both cities’ transfer taxes, including governmental and tax exempt organizations. Clarifications will certainly be made prior to implementation, but the path to exemptions will be very tight.
Both cities added the additional transfer taxes to raise funds for affordable housing projects and homeless prevention measures.
Beyond the transfer tax implementations, there are additional reasons why now might be a good time to sell your home. The upward trend of interest rates has been putting brakes on home shoppers. And, even more interest rate increases are expected.
Santa Monica single family home sales in November plummeted 64%, compared to November of 2021. The unusual tick seen across the area is that the average dollar per square foot is 12% up during that same time period due to limited inventory.
In November, inventory was up nearly 8% just about ensuring that this anomaly of fewer home sales with increasing dollar per square footage will not continue. As in other market shifts, it is expected that inventory will continue to grow, as will days that it takes to sell a home and prices will slip.
If you are considering selling, moving quickly could save you many thousands of dollars in equity.
By Richard Lombari
Richard is a 30+ year real estate veteran, author, coach, speaker, and broker in California and Florida. He can be reached at 310-903-6509, or visit www.LombariRealEstateWealthAdvisors.com