Featured image credit: Edward Stojakovic
Is now the right time for prospective buyers to purchase that luxury mansion they’ve been eyeing? Well, that depends. But if you’re in the market for Los Angeles luxury homes, you may be seeing a decent amount of them hitting the market in the coming weeks. That’s because Measure ULA, nicknamed the “mansion tax” despite the objection of our own Arthur Chalekian, has passed. And it’s scaring some owners of Los Angeles mansions into a hasty sale.
Preparing for the Passage of Measure ULA
Even prior to Measure ULA’s passage, some real estate agents were advising luxury mansion owners to prepare their properties for the market. Many felt the passage of Measure ULA was a foregone conclusion. And now, with November’s ballot a fading memory, we can safely say those agents were correct to be so confident. Measure ULA didn’t exactly win by a landslide. But with 58% of the vote in favor of the new tax, the question of “if” has turned to “when”. And we can conclusively confirm that “when” is April 1, 2023.
April Fool’s Day is No Joke for Those Selling Los Angeles Mansions
That’s right. Measure ULA is scheduled to go into effect on April Fool’s Day. But for many owners of Los Angeles mansions, April 1 is anything but a joke. It’s a looming deadline that they’re struggling to beat. Those owners of luxury homes who have actively immersed themselves in the selling process will have an easier time closing escrow before Measure ULA takes effect. Others who watched and waited until the measure’s passage may have more of a white-knuckle ride ahead of them.
Is It Too Late to Beat the Mansion Tax?
Normally, the real estate industry slips into a lull during the holidays. People are too busy traveling or distracted by seasonal events to give a serious transaction their undivided attention. But with Measure ULA looming, this has been a busier time than usual for agents working with Los Angeles mansions and luxury homes. With roughly 3 months to go before the measure becomes an inescapable reality, things are getting down to the wire. And some agents worry that the Los Angeles luxury homes that aren’t already well on their way into the selling process won’t stand a great chance of meeting the April deadline.
Looking for Loopholes for Los Angeles Mansions
Already, some owners of Los Angeles mansions are searching for ways to skirt the oncoming measure. One method they’re exploring is cutting up a whole transaction into piecemeal sub-transactions. These sub-transactions would keep the individual price tags beneath the $5 million threshold. For example, a luxury homeowner could list their property at $4 million but sell its furnishings separately for $2 million. However, the city of Los Angeles is expected to fight these strategies tooth and nail.
The Reasoning Behind Measure ULA
Measure ULA was promoted as an attempt to raise money to fight the city’s runaway homeless crisis. However, agents have pointed out certain imperfections in the tax. For example, despite earning the “mansion tax” nickname, it also applies to multi-unit commercial properties valued at $5 million and over. The tax rate is set at 4 percent for Los Angeles mansions and properties listed at over $5 million. That tax increases to 5.5 percent for properties listed at $10 million or over.
While we may see more luxury homes hitting the market in the leadup to Measure ULA, it doesn’t necessarily mean we’ll see an equal amount of interested buyers. But if Los Angeles mansions are in your budget, buying before April could be in your best interest. If you want to know what’s feasible for you, whether buying or selling, reach out to one of our expert agents today!
