City Transfer Tax Stalls Local Economy and Penalizes Wrong Side

By
Real Estate Broker/Owner with The Gramata Realty Group @properties Available upon request

The City of Chicago has passed the increase of the transfer tax buyers pay on a property transfer. The rate has been raised from $7.50 per $1000 purcahsed to $10.50/1000.

This money as you probably know has been approved to pay the budget deficit for the CTA budget woes.

An average Lakeview condo sells for $380K. The buyers transfer tax would have been $2850 paid to the city coffers.

Starting April 1, the tax (sorry "transfer stamps") due from the buyer on that same average condo will be $3990!

The politicians are working on getting a stimulus package to jump start the economy by issuing the petty refunds they've granted, however, our local politicians are actually PENALIZING the buyers and reducing the buyers position to move into this already shaky and slowing market.

It's MIND BOGGLING. Why not spread the transfer tax to the SELLER SIDE. That is usually where the money would be available due to capital gains from appreciation. Makes sense to me. Tax the sellers and raise their petty $1.50/1000. Raising the funds from this side would amount to $4.50/1000. On that same $380K condo the seller would be required to pay $1,750 on that sale up from only paltry $570 which will now be due from the same transaction.

Almost $4000 from the buyer and only $570 from the seller AFTER the close. What's wrong with this stimulus package?

At least the buses will be running as the housing industry continues to slide. Experience tells me the housing industry trumps the transit industry as a stimulation of the local, state and national (not to mention global) economy.

Where are our political leaders with vision?

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Tags:
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lincoln park
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Rainer
29,441
Linda Sanderson
Coldwell Banker Solano Pacific - Benicia, CA
Wow, that's a pretty hefty transfer tax.  Hang in there.
Feb 16, 2008 01:49 PM #1
Rainmaker
46,093
Sarah Nopp
South Sound, WA

That is huge. Here in Washington Sate, the Legislators are always looking at increaing the REET (Real Estate Excise Tax) that is due at sale from the Seller: 1.78% of the sales price in my area. On a $380k property, that equals $6,764. Our locals and State Associations have fought it off and won, and are currently fighting the expansion of its use... But we also have successfully fought off a Buyers Excise Tax- except in a specific area where the voting public chose to adopt it for water quality improvements fundung.

Anyway, I guess my point is you and your local/state REALTORS have the power to make changes if that is what is needed.

Question- can that tax be financed? Or is it cash out of pocket for the Buyer?

Feb 16, 2008 01:58 PM #2
Ambassador
896,290
Larry Bettag
Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL
Vice-President of National Production
I'm not only a lender, but a real estate attorney.  I quit practicing in Chicago about 5 years ago.  Chicago is so wierd and they don't do anything to promote confidence with their economic decisions.  Taxing buyers was always the bad move.  It shouldhave been the sellers.  This is one more example of stupidness.
Feb 16, 2008 02:16 PM #3
Anonymous
Wisconsin consumer

Voice your objections at the ballot box. February 5, 2008 was super Tuesday in Illinois.

Feb 17, 2008 01:19 AM #4
Rainmaker
32,770
Jim Gramata
The Gramata Realty Group @properties - Chicago, IL
GREEN sales brokerage and construction guru

The damage was already done prior to the elections from the state level. The local council only had to meet to determine if the amount was agreeable. This was a done deal.

CAR (Chicago Assoc of Realtors) did issue a campaign but to no avail which tells you how rubbery this rubber stamp was even before voters/lobbyists had a chance to 'rock the vote'.

The bad part is it is a percentage of closed volume and as the economy picks up steam again the transfer tax will add significantly more to the state and local coffers.

Wow , Sarah 1.78% is a brutal tax but at least it is on the seller side (where hopefully capital appreciation gains are used to offset that huge fee).

In our local case, the lawmakers are missing out on the dis-incentive this is giving to prospective buyers in the metro region. The last thing our local regional and national economy needs is a disincentive to buy.

I posted this back in August:

Fight the Transfer Tax Proposal

The Illinois legislature is still preparing to vote on an increase to the transfer tax to pay for mass transit. For the average police officer, firefighter, health care worker and teacher this increase would be over $900 on the average priced home. This will delay some in purchasing a home and will contribute to slowing down the market.. This bill would also authorize the Chicago City Council to increase its real estate transfer tax (currently $7.50 per $1,000 paid by the buyer) WITHOUT A REFERENDUM but merely by passage of an ordinance. The ordinance for the "supplemental" real estate transfer tax increase of up to $3 per $1,000 would be for the sole purpose of providing financial assistance to the CTA for funds for debt service for the pension bond. The city would have to enter into an intergovernmental agreement with the CTA-the term of the intergovernmental agreement is to be "for a term expiring no earlier than the final maturity of bonds or notes that it proposes to issue" for pension bonds - stated to be the year 2039! An increase of $3 per $1,000 represents a whopping 40% TAX INCREASE in the City's real estate transfer tax imposed on the city's property owners. Chicago REALTORS® have long understood the linkage between transportation policy and housing. Chicago REALTORS® want to build Chicago and make it stronger. Chicago REALTORS® work to encourage people to live, work and play in Chicago. We oppose all Real Estate Transfer Tax increases that inhibit this City's growth. CONTACT MAYOR DALEY TODAY AND ASK HIM TO OPPOSE THE PROPOSED INCREASE IN THE CHICAGO REAL ESTATE TRANSFER TAX AT 312-744-3300 CALL YOUR ALDERMAN AT THEIR LOCAL WARD OFFICE TODAY AND TELL THEM NO INCREASE IN THE CHICAGO REAL ESTATE TRANSFER TAX FOR TRANSIT!

Feb 17, 2008 03:05 AM #5
Rainmaker
52,501
Roy Paeth
Keller Williams Inspire - Geneva, IL
Just a regular guy helping real people!

Jim it is just amazing how much the "Get into Chicago Tax" costs the buyer. I like you am dumbfounded why this is a cost the buyer has to absorb. I feel for those that go to work for the City and have to move into the city.

Mar 03, 2011 04:46 PM #6
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Rainmaker
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Jim Gramata

GREEN sales brokerage and construction guru
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