Property transfer Tax – Who Pays What in Silver Lake?

Hi, Silver Lake! Buyers and Sellers of Silver Lake homes are always asking me, “who pays the transfer taxes when we sell, do the buyers or do we pay?” In today’s blog post we’ll take a look at Los Angeles County transfer taxes. Closing costs and transfer taxes can be very confusing because they vary by location. Silver Lake CA real estate transactions can be complex, as is other areas in Los Angeles. The county is increasingly zealous in their efforts to collect transfer taxes, as they have become a major source of revenue for good’ol Los Angeles’ wallet. Counties and cities in our great nation have unique regulations and practices which are not readily ascertainable and to add to the confusion, many have enacted their own transfer tax ordinances. In California, it’s common for both a county and city to impose transfer taxes on real estate sales. Don’t shoot the messenger! I’m only here to guide you and help mitigate the risk of a painful Silver Lake real estate transaction experience. So yes, Los Angeles is a “handful” when it comes to rising real estate prices, and taxes, but you don’t need me to tell you that. I daydream somedays Googling home prices in rural areas of Texas where you can buy a 15,000 SF spread with an indoor swimming pool and theatre room for the price of a two-bedroom Silver Lake bungalow, no kiddy! However, when it comes to things to do and people to see, it’s hard to beat Los Angeles. Los Angeles is booming with over 10.4M residents and more than one quarter of total California residents live right here with us, if you believe them apples. Los Angeles County is the most populous county in the U.S. and home to many internationally known attractions, L.A. County has everything fun under the sun, including Hollywood, baby, which is the film and entertainment capital of the world! We also have the legendary Sunset Strip, Beverly Hills, world class hotels, and over 25 miles of beautiful beaches along the 75-mile mainland coast. So all this luxury and wonder comes with hefty home price tags, surging rents, and an ridiculously high cost of living. We all complain about the high costs of living here, including me, but I don’t see anyone of us running for rural Texas… Do you? As a Realtor and Silver Lake real estate specialist I can tell you that tight housing inventory translates into high home prices, multiple offers, and in most cases, bidding wars … We’re experiencing all of the characteristics of a seller’s market right now. If you’re a homeowner, it’s a great time to sell  – you’ll not only get top dollar for your home, but you may be able to negotiate favorable terms, like having the buyer pay transfer tax or even find an all cash offer above asking price with a short escrow period, or if you need more time some buyers are bending over backwards right now to get the deal completed.

What is Transfer Tax?

So what exactly is a real estate transfer tax? A transfer tax is a tax imposed by states, counties, and cities on the transfer of the title of real property from one person (or entity) to another within the jurisdiction or area the property is located. It is based on the property’s sale price and is paid by the buyer, seller, or both parties upon transfer of real property. That’s it!

Who Pays?

The party transferring or conveying title to the property is generally responsible for the payment of the tax – meaning the Seller is the one typically paying the transfer tax in Silver Lake and other parts of Los Angeles. It’s impotent to remember that some jurisdictions dictate who pays the tax, but for the most part, there is no mandate and it’s up to the Buyer and Seller to negotiate who pays the tax man. Depending on our Silver Lake real estate market conditions, transfer taxes can become a negotiating point during closing. For instance, now we’re in a strong seller’s market, I may encourage my seller, if we have multiple offers on the table, to counter specific offers and request the Buyers to pay the transfer tax. When the Silver Lake real estate market turns into a buyer’s market, and one day it will again… It’s more likely the seller will end up paying the tax mostly all the time.

Exemptions

Some states specify exemptions, such as a sale resulting from a divorce or death, a transfer from parent to child, gifts, and transfers between partners. If you claim an exemption, you must submit written documentation before the recording date proving the exemption.

Calculations – Let’s Do the Math

Transfer tax can be assessed as a percentage of the property’s final sale price or a simple flat fee. To calculate the amount of transfer tax you may owe, simply use the below formula:

Los Angeles County Transfer Tax

Here’s a chart detailing transfer tax levied by Los Angeles County and its cities [Note: Prices are subject to change, so for more information, please visit www.lacounty.gov]:

Do Homework

Since cities, including Los Angeles, increasingly view transfer tax as a revenue source, you should make sure a new tax rule or ordinance has not been adopted prior to closing. Consult with an experienced real estate agent, financial advisor, and/or tax counsel to see if you qualify for any exemptions and can reduce or eliminate your transfer tax. I am not a tax expert and always encourage my Silver Lake real estate clients to consult their CPA, financial advisor and/or attorney before we place their property on the MLS for sale. I hope you found what you’re looking for by reading Property Transfer Tax – Who Pays What In Silver Lake?. Feel free to contact me here with any other real estate related questions you cannot find outlined on the blog. Happy house sales or hunting!

Property transfer Tax – Who Pays What in Silver Lake?

I’m a local real estate agent with The Shelhamer Real Estate Group, and It would be my pleasure to help you find the perfect property to call home in Downtown Los Angeles, or if you’re thinking about selling a house, condo, or multi-family building in, Los Feliz, Silver Lake, Atwater Village, Glassell Park, Mount Washington, or Downtown Los Angeles, it would be a privilege to help you get top dollar for the sale of your property. Let’s chat sometime. 310-913-9477 or contact me