California real estate private transfer taxes

There is currently a loophole in California law that lets developers and other non-government entities impose “private transfer taxes” on homes every time the property is sold – with NO oversight, NO accountability and NO limit on the number of separate private transfer taxes that can be piled onto a home. While this loophole has existed for a long while, some developers are now imposing them on their developments in order to avoid potential lawsuits by environmental organizations or to pre-empt local government objections to the project. There is nothing in current law that prevents the imposition of these taxes for undeserved private gain.

The California Association of Realtors (C.A.R.) is sponsoring legislation, SB 670 (Correa), to prohibit these “private transfer taxes.”

WHY C.A.R. IS SPONSORING SB 670

-This is REAL money! If you impose a 1.75% private transfer tax – the highest rate that’s come to light so far –  on the state’s median priced home of $567,690, that’s a tax of almost $10,000, due and payable EVERY TIME the property is sold!

-The taxes are imposed on buyers EACH TIME the property sells.  Private transfer taxes can go on and on and on. These taxes are collected as long as mandated by the deed, which can be indefinitely.

-Private transfer taxes increase the already substantial cost of buying a home.  A recent C.A.R. study shows that every time the cost of a home increases by $10,000, another 200,000 purchasers can’t afford to buy a home.

-These schemes increase the price of housing without adding any value to the property.  Buyers are forced to pay inflated prices to cover the cost of the private transfer tax.

-Despite what some developers claim, these aren’t “mitigation fees” – they’re taxes. They don’t benefit the assessed homeowners but are an ongoing revenue source for those who impose them.

-These taxes will hurt the housing market. Home buyers will either avoid homes that require paying a private transfer tax or seek to offset the cost of the tax.

-There are no controls over how the collected revenue is spent. Whoever is levying the tax is free to decide how the money is spent – with absolutely NO controls. The proceeds may even be used for personal benefit![tags]California real estate,CA real estate sales,California Association of Realtors[/tags] California real estate broker

-Only government should have the power to tax. Unfortunately, anyone selling a home is free to add a “private transfer tax” that has to be paid at the time of every subsequent sale. The highest rate C.A.R. is aware of is currently 1.75% of the home’s value – but there’s no limit.