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Home Transfer Tax - What Kind Of Tax Is That?

By
Real Estate Agent with Village Real Estate Services, Inc.

 I just received an email from C.A.R. (California Association of REALTORS®) urging me to call my local Senator and encourage him to VOTE NO on AB1574.

Apparently, a loophole in California law allows developers and others impose private "transfer taxes" on the sale of homes---every time the home is sold.  There's no limit on how long the taxes will be imposed, no regulation on the money collected and no oversight or accountability on what the funds are used for! 

There's a community here in Orange County where I've encountered this "tax"  When I questioned it, I was told it went toward community events like Fourth of July celebrations, etc. But according to this email from C.A.R. it sounds like this is strictly on an honor system as to how the monies will actually be spent.

According to C.A.R. AB 1574 is the builder-sponsored response to SB 670 which was created to prohibit these private transfer taxes.  Unfortunately SB 670 has been stalled in committee.  Meanwhile, AB 1574 has been amended an attempt to legitimize) to limit the tax to 99 years---still sounds like too long to me!  Sniff-smells like greed in the air.

What can we do about this?  C.A.R. is asking you to call your Senator and ask them to vote NO ON AB 1574Click here to locate your Senator's contact information.

Remember the Boston Tea Party?---It started over something exactly like this---Taxation without representation!

 

Lynda Eisenmann
Preferred Home Brokers - Brea, CA
Broker Associate ,CRS,GRI,SRES, Brea,CA, Orange Co
Marlene ~ Thanks for the great info on this! I loved your artwork, I sort of feel that way myself, usually  right around tax time.
Jul 02, 2007 01:57 PM
Ana Connell
G & C Properties - Burbank, CA
Burbank Real Estate Agent
Great information Marlene!  Thank you for sharing!
Jul 02, 2007 04:21 PM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate

Lynda - It's that "I owe how much?" kind of feeling.  I just hate to see us get taxed for something that doesn't benefit us.

 

Ana - Thanks for reading.  It's not a good thing!

Jul 02, 2007 05:24 PM
Joe Zapata
Keller Williams Realty Media World - Burbank, CA
Your Burbank Real Estate Expert

Marlene,

Great info to put out there.  We actually discussed this very issue in a office meeting a few weeks ago.  Very much an eye-opening discussion and one that needs to be addressed with the state.

Jul 02, 2007 06:25 PM
Ray Perry
CENTURY 21 The Neil Company Real Estate - Roseburg, OR
Realtor, CRS, GRI, e-PRO
I'll call my Senator tomorrow.  Thanks for the heads up.   By the way, there is no limit on how much this tax can impose.
Jul 02, 2007 06:35 PM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
Joe - Do you have any communities in your area that are collecting this tax?
Jul 03, 2007 01:54 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
Ray - Thanks for taking action on this!  And yes, you are right, there's no limit on how much or how long this tax can be.  Not a happy thought!
Jul 03, 2007 03:01 AM
Morgan Brown
Inman News - Laguna Beach, CA

Marlene -

I live in Ladera Ranch and we have this transfer tax every time a home is sold in Ladera.  Payable by the seller.  Most people don't know about it until it is too late. In Ladera the fee goes to LARCS the community association that puts on the events and such.  

A good listing agent in Ladera will always negotiate that the fee (.25 points) is split between buyer and seller.  It is one way to mitigate the extra expense of selling a home.

I agree builders shouldn't just get to charge willy-nilly on this as it adds up to a lot of money in the long run.       

Jul 05, 2007 04:25 PM
Linda Reynolds
Bradenton Real Estate - Linda Reynolds - Bradenton, FL
Bradenton Real Estate
You are right it doesn't sound good.  Best to get this stopped before it gets passed.  I don't live in CA but best of luck to you on this.
Jul 05, 2007 11:03 PM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
Hi Limda - Thanks for commenting.  Even though you don't liv in CA, if it passes here, it's just a matter of time until the rest of the country starts doing it, too.
Jul 06, 2007 03:13 AM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate

Morgan - The first home I sold in Ladera, the listing agent was not aware of the tax.  The seller didn't want to pay it.  No one was aware of the tax (Ladera was a new community then-even my broker was unaware of it and questioned if it was valid).  So we finally wound up soplitting with the listing agent, seller and me as buyer's agent all paying 1/3.  The house was $8790,000, so the transfer tas was $2,175. 

Morgan, as a homeowner, do you know where this money goes?

Jul 06, 2007 03:19 AM
Morgan Brown
Inman News - Laguna Beach, CA

Marlene -

I know that it goes to LARCS which is the Ladera community association responsible for events, the Ladera Life web site and that type of thing. I am a neighborhood representative for LARMAC the Ladera maintenance corporation so I might be a little more in tune than the average Ladera citizen.

LARCS is actually facing a tough challenge these days with budgeting for events, etc. The transfer fee was such a huge part of their budget that as home sales have slowed over the last year their budget has eroded significantly.  It will be interesting to see how it plays out.

I think its a bogus charge either way and there should be more knowledge and discussion about it! 

Jul 06, 2007 03:49 AM
Kaye Thomas
Real Estate West - Manhattan Beach, CA
e-PRO, Manhattan Beach CA
I do love how all these little taxes get pased on to sellers or buyers and not the developer who was supposed to pay them in the first place.. it will be interesting to see how this winds up being handled..
Jul 06, 2007 06:43 PM
Marlene Bridges
Village Real Estate Services, Inc. - Laguna Hills, CA
Laguna Homes|Laguna Condos|Laguna Real Estate
This is actually a new tax that the developer gets to control.  It's pretty unconscionable.
Jul 07, 2007 06:17 AM