The Mansion Tax Kicked In Yesterday
Yesterday, I spoke with a mortgage broker friend of mine who told me that an L.A. celebratie is buying a $15 million vacation home on a mountain top in Northern California— 52 acres with a 360 degree view and a 1,000 square foot guest house (or servants’ quarters); yes, and of course it includes a vineyard permit. He’s had it with L.A. and that awful tax on multimillionaires and billionaires!
See, last November, L.A. voters approved Proposition ULA, the mansion tax by a vote of 512,808 (57.8%) to 374,934 (42.2%). As of yesterday, the measure adds a 4% tax on properties sold for more than $5 million and a 5.5% tax on properties sold for more than $10 million, while establishing the House LA Fund to allocate revenue to projects that address housing availability at certain income thresholds and homelessness prevention. Conservatives backed by the real estate industry are challenging the law in court.
Most of the coverage is from the perspective of the poor, put-upon super-rich and those who service them and how they were scrambling to get out of Dodge before the hated tax kicked in. Tami Yang, reporting for the NY Post, wrote that the high end real estate market is red hot and that sellers are throwing in incentives to unload their mansions fast— like high commissions to realtors and brand new Bentleys and McLarens, as well as drastically slashed prices, to buyers. “Celebrities like Jim Carrey and Mark Wahlberg, not to mention a slew of lesser known multimillionaires, have all rushed to dump their homes in the last few months. After 30 years in his 12,700 square-foot home in Brentwood, Carrey made the big decision to list it in February for $29 million. So far, there are no takers. Same with Jennifer Lopez, who put her Bel Air place up for sale in February. James Corden is willing to slash and burn the price of his Brentwood Park house, recently cutting it from $22 million to $17.95 million. But that’s nothing compared to Mark Wahlberg. The Ted actor had put his 30,500 square-foot estate on the market months prior to the measure’s passage, at an eye-watering $87.5 million. But he ended up selling the Beverly Park property for $55 million— a 37% price drop— in February.”
My heart is breaking for poor Marky Mark/Dirk Diggler (52 in June), a high school dropout, underwear model and former criminal, who was once busted for chasing 3 black children while yelling "Kill the nigger, kill the nigger" and throwing rocks at them two days in a row. Don’t worry, though, his racist criminal behavior was also directed at Asians, one so serious that he was charged with attempted murder. Anyway, now his net worth is $400 million and the poor guy had to sell his $87 million mansion for a pitiful $55 million.
Yang quoted Million Dollar Listing star Josh Altman, a realtor at Douglas Ellman: “It’s crazy out there right now. I’ve literally become not only a real estate agent, which I signed up for, but I’m now a yacht salesman, a car broker and a wholesale furniture salesman. That’s what it’s come down to.”
Altman said that after two decades in the real estate business, he’s had the record month of his career, despite otherwise lackluster home sales numbers across the nation.
In the past 72 hours alone, Altman said he closed roughly 20 deals.
In March he sold $205 million— nearly doubling the typical sales of $104 million a month his team hits as the top sellers in the country.
“People need to get as creative as possible to motivate the buyer to close before this [tax goes into effect],” Altman said. “A lot of times it’s… a cut-your-losses type of approach. Maybe [throwing in] a Lamborghini that costs $350,000… is going to save you from paying $600,000 in taxes, so you might as well do it.”
Altman even offered a $1 million bonus for a buyer’s agent on top of the regular commission to try and unload a seven-bedroom Bel Air mansion listed for $27,995,000.
While it went into counter offers, the home isn’t going to close in time to meet the deadline, he said.
Still, Altman considers offering the incentive a win because lots of agents showed up to check out the place and potential deals are progressing.
…The “mansion tax” has led to quite a few “Hail Mary” marketing approaches, said Tatiana Derovanessian, a luxury agent with Keller Williams in Beverly Hills.
Take the developers selling a five-bedroom, eight-bath Mulholland Drive mansion in the coveted 90210 zip.
For $16.5 million, you can get the “the luxury home and the luxury vehicle of your choice, within the fleet that we have through O’Gara Coach Co., a Beverly Hills luxury car dealer.”
The deal includes vehicles priced up to roughly $400,000, including an Aston Martin Vantage, Aston Martin DBX 707, McLaren GT or Bentley Bentayga EWB.
“The strategy was to create an offering to a buyer in this range that loves a luxury vehicle, luxury home, that has maybe luxury watches, luxury yachts,” Derovanessian said.
She noted that the home itself is “a car home” with a 1,300-square-foot subterranean “auto gallery.”
The home has attracted international interest with buyers reaching out from Germany and Mexico, and some flying in from Hong Kong to view the home, but hasn’t sold yet.
Come Saturday? That deal is off the table.
But, Derovanessian jumps in to quickly note, “everything is negotiable.”
She said her sellers are resigned to paying the tax at this point.
“We’re probably going to have to pay it, because it’s very hard to squeeze in a purchase before April 1,” Derovanessian said.
“What seems so unfair is our property is in Beverly Hills 90210, [but is] considered [the neighborhood of] Beverly Hills Post Office. It technically sits in the city of LA that gets that tax, but two miles down from us they don’t get taxed. They’re the city of Beverly Hills.”
There is plenty of grumbling among sellers and their agents, who believe the tax will scare developers away, trickle down and impact workers in the local economy, and ultimately lead to less development.
[B]rokers note that a $5 million home in Los Angeles is hardly a mansion given the rise in property values through the pandemic, and that many homes will hit that $5 million “mansion” mark in the years to come.
“What you’re going to see is a lack of inventory, because sellers aren’t going to want to take the hit because of the tax. They might not want to sell because they are in at a lower interest rates and interest rates are too high,” said Kerry Ann Sullivan, a listing agent with Pardee Properties.
Sullivan believes that demand will continue to creep up and that it will eventually help even out the cost of the new tax, but that it will take roughly four to six months.
Meanwhile, “the next eight weeks will be very telling,” Altman predicted.
“But just off the deals I have been doing and negotiating and closing, these are deals I never would have thought would have closed for as low a price as they are now.”
The sale ends at 11:59 p.m. Friday, PST.
