Transfer Taxes in Real Estate Transactions
August 4, 2010
Recently there have been some news articles about "private transfer fees". These fees have been in existence for some time, but have recently become the focus of a number of real estate organizations including the National Association of Realtors and the California Association of Realtors. The real estate organizations would like the federal government to ban these private transfer fees while the building industry organizations defend them as a way to spread the cost of public improvements that are necessary for any new tract development. These fees are usually 1% of the purchase price and are in effect for 99 years and "run with the land" meaning every time the property sells, these fees are a charge upon the home seller.
Counties in California have charge a "documentary transfer tax" for generations. Through out California this tax is $1.10 per thousand of sales price. Cities are also permitted to charge a transfer tax. The city of Los Angeles charges $4.50 per thousand in addition to the county tax of $1.10. The highest city transfer tax is charged in several of the Bay area cities; Berkeley, for instance charges $15.00 be thousand in addition to the county $1.10. I found no cities in San Bernardino county charging a transfer tax and only the city of Riverside in Riverside county. In recent months, however, a number of city councils have considered levying this transfer tax as a way to help balance their budgets.
While the city and county transfer taxes go to pay for the services provided to the citizens by their governments, the private transfer taxes go directly to the developer. Developers claim that the use of this tax to pay for the public improvements help lower the initial cost of the home since the developer did not include these costs. A question that might be asked is "Does the developer continue to collect the transfer fee even after the total cost of the public improvements have been recouped?"
Transfer taxes may become an interesting issue for debate.
Recently there have been some news articles about "private transfer fees". These fees have been in existence for some time, but have recently become the focus of a number of real estate organizations including the National Association of Realtors and the California Association of Realtors. The real estate organizations would like the federal government to ban these private transfer fees while the building industry organizations defend them as a way to spread the cost of public improvements that are necessary for any new tract development. These fees are usually 1% of the purchase price and are in effect for 99 years and "run with the land" meaning every time the property sells, these fees are a charge upon the home seller.
Counties in California have charge a "documentary transfer tax" for generations. Through out California this tax is $1.10 per thousand of sales price. Cities are also permitted to charge a transfer tax. The city of Los Angeles charges $4.50 per thousand in addition to the county tax of $1.10. The highest city transfer tax is charged in several of the Bay area cities; Berkeley, for instance charges $15.00 be thousand in addition to the county $1.10. I found no cities in San Bernardino county charging a transfer tax and only the city of Riverside in Riverside county. In recent months, however, a number of city councils have considered levying this transfer tax as a way to help balance their budgets.
While the city and county transfer taxes go to pay for the services provided to the citizens by their governments, the private transfer taxes go directly to the developer. Developers claim that the use of this tax to pay for the public improvements help lower the initial cost of the home since the developer did not include these costs. A question that might be asked is "Does the developer continue to collect the transfer fee even after the total cost of the public improvements have been recouped?"
Transfer taxes may become an interesting issue for debate.
posted by shirley harry at 8:31 AM
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