Uptick for luxury home deals in race to beat ULA transfer tax
Price reductions and speedy escrows help sales close before April 1 deadline
Los Angeles’ luxury home sellers are in the final stretch to beat the April 1 deadline before the Measure ULA transfer tax takes effect.
While numbers for March home sales won’t be released until early April, luxury agents and their colleagues say that there has been a handful of lightning fast sales for luxury listings in the past month.
Gail Hershowitz, senior escrow officer and manager at Escrow of the West, said that she has closed more than 16 luxury deals since the beginning of March. These deals were motivated by the transfer tax.
“Everyone is scrambling,” Hershowitz said. “But I don’t think it’s a big spike.”
She forecast that some of these deals won’t make it because of the market for loans.
“Banks are not readily available for fast closing jumbo loans these days. It’s the environment of the whole world right now,” she added.
Anthony Marguleas, founder of Amalfi Estates in Pacific Palisades, also noted an uptick of luxury sales in West Los Angeles, where the transfer tax will be felt the most.
According to MLS data, there were 15 homes priced $5 million or more that sold on the Westside during the week of March 20. It’s a slight uptick compared to the same week in 2022. “It’s a 50 percent increase, which is significant when you consider all home transactions sold below $5 million in March is down 25 percent (in a year-over-year comparison),” he said.” I expect an even larger increase this week.”
When the year began, Marguleas expressed doubts that the decision-making required to close a deal could move fast enough to beat the transfer tax deadline. However, the veteran agent said he had worked on two 14-day escrows in the past two weeks. It’s double the two-week escrows he had worked on in his entire 30-year career.
Working fast helped one of his client’s avoid paying the tax. A Palisades home was initially priced at $4.9 million, just under the $5 million transfer tax threshold. A bidding war pushed the closing price to $5.3 million. The client would have been liable to pay $212,000 under the transfer tax,if it were not for a lightning fast escrow process, Marguleas said.
Some sellers wanted to wrap up deals before the tax deadline badly enough that they offered gifts such as performance cars or trips to luxury resorts to potential buyers. Sally Forster Jones of Compass said that luxury buyers were not interested in gifts. but did respond to offers of reductions in price if a deal was closed before the tax deadline.
“Offering better deals has been significant,” Forster Jones said. “We have put a couple of properties in escrow in the last week where the contract states that it closes prior to ULA implementation. If we don’t make the deadline, the deal is absolutely off,” she said.
Stephen Shapiro, co-founder of Westside Estate Agency, forecast that business would get back to usual after the tax. “We took a listing on Friday for a $14 million house. The seller asked, ‘How are you going to deal with ULA?’” Shapiro explained. “I said that it was going to be a function of the negotiation between the buyer and the seller. If you are happy with the price, you are going to pay the ULA tax.”
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