For neighborhoods under the control of the City of LA such as Sherman Oaks, Studio City and Encino, selling a home is about to get much more expensive. A proposal currently under review by the council will drastically raise the taxes charged to homeowners when they sell their home.
When a home sells the current “city transfer tax” is $4.40 per $1,000 of sale price, or about $2,200 on a $500,000 home sale. This is in addition to the $1.10 per $1,000 the county charges. Under the new proposal that amount will rise to $9.00 per $1,000. or $4,500 on a half million dollar house.
The housing market is just in the beggining stages of a recovery and this drastic increase in this cost will definately be a deterant for many people who are doing the math of selling. In most normal sales it is the seller who bears this cost. But in todays market where an estimated 40-60% of sales are “distressed” sales (short sales or foreclosures) the banks are shifting this burden to the buyers. Buyers loan costs have skyrocketed over the past 5 years in the form of higher downpayments, prepaid accounts, reserves, fees, points etc.
The city sees this as an easy tax increase because it only affects a certain portion of the tax paying consituents. And most of those constituents do not realize what this tax is. During the often chaotic closing process few people have the time or wherewithall to scrutinze the actual costs involved. So this is not a very vocal group of people.
Because of the size of this tax, the city will be raking in a hundred million dollars every year. But this tax has absolutely no relation to the cost incurred by the city for a property transfer. There are individual fees already in place to compensate for most of that in the form of recording fees etc. It is merely an easy target.
This cost is completely born by property owners, primarily homeowners. By and large this money will come from the up and coming families as they have the ability and need for larger homes or those who are downsizing. THE MIDDLE CLASS!
This increase will put landowners in the City of LA at an even more serious disadvantage to other cities such as Burbank, Glendale, West Hollywood and even Beverly Hills where they typically charge a mere 55 cents per thousand,(notice cents not dollars). No argument could possibly be made that justifies this extreme difference between belagured LA and the standout cities such as Beverly Hills or West Hollywood.
The media has been surprisingly quiet on this topic. Everybody realizes that the city needs more money. And this is a quiet way to get it. But this is such a drastic increase that it should raise the ire of any homeowner as a dispoportionate burden to one group of people. And the city should realize that this increase will surely slow the number of sales and not bring the type of revenue they are predicting.
Please contact your council person and let them know that this increase is ill advised, ill timed, and drastically unfair to a certain group of the city.
For More information about what you can do visit http://www.stopunfairtaxes.com/ .