Wealthy Los Angelenos embodied the spirit of Snake Plissken this week as they endeavored to “Escape from L.A.” with unheard-of incentives, including Lamborghinis and yachts, to avoid a new tax anticipated to do more harm than good.
In November, the ballot initiative Measure ULA succeeded by a margin of over 15 percent to enact a new sales tax on properties valued at over $5 million. As the March 31 deadline to beat the April 1 start date approached, Douglas Elliman broker Josh Altman told the New York Post, “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,” the realtor explained of the add-ins celebrities have tried to use to move their properties. “That’s what it’s come down to.”
The so-called “mansion tax” which went into effect Saturday, impacts all property sales valued between $5 million and $10 million with an added 4 percent tax. Anything over $10 million was hit with 5.5 percent.
As a result, many longtime residents listed their homes in an attempt to cut their losses. This included actor Jim Carrey’s effort to sell his 12,700 square-foot Brentwood home of three decades for $29 million. Others included entertainer Jennifer Lopez, comedian James Corden and actor Mark Wahlberg who ultimately settled for a 37 percent reduction on his $87.5 million 30,500 square-foot Beverly Park Estate selling the property for $55 million in February.
Altman, a regular on Bravo’s “Million Dollar Listing,” detailed that in the past 72 hours, he closed roughly 20 deals ahead of the tax going into effect. Compared to a typical month selling about $104 million, the month of March ended with $205 million worth of sales for his team.
“People need to get as creative as possible to motivate the buyer to close before this [tax goes into effect]. A lot of times it’s…a cut-you-losses type of approach,” he told the Post. “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.”
One deal reportedly included a $1 million bonus for the buyer’s agent on a nearly $28 million Bel Air mansion and Altman wasn’t alone in the ramped-up selling as Official broker Tyrone McKillen touted a personal record 48-hour close for $16 million on a property that had been listed for $20 million.
“There’s been a bit of a frenzy the last few weeks,” he explained and noted all five of his recent deals included “a term in the contract that the deal would either cancel or be increased by the 5.5% tax, should escrow get delayed beyond this week.”
However, as exorbitant promotions like a choice of vehicle from O’Gara Coach Co.’s luxury fleet of Aston Martins, McLarens and Bentleys expired, developers highlighted the looming negative of the transfer tax that was forecasted to bring in $900 million a year for “housing justice” projects.
Speaking with ABC7, David Kramer, president of Hilton & Hyland, expressed concern that developers would be disincentivized to work in Los Angeles and that they would take their business elsewhere.
“So you add another 5% onto the equation — a lot of times the margins are very thin. If they don’t have the incentive to build, and people aren’t going to build for a loss, we’re going to have less housing,” he said.
“It’s a strange irony to disincentivize home builders in order to combat a homeless crisis that is one of the worst in the nation,” McKillen added to the Post.
Others noted that, with property values continuing to go up, a $5 million home in Los Angeles was far from a mansion and it could take months for the market to adjust to the new tax.
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