What Does LA’s Mansion Tax Mean For Luxury Real Estate?

Mansion Zen type

Voters who live in the City of Los Angeles passed Measure ULA, often called the “Mansion Tax,” and it took effect April 1, 2023. Measure ULA applies a transfer tax to all real estate sales within the city of $100 or more.

The base tax on real estate sales in the City of Los Angeles is .45%, which is the amount the City will assess on sales up to $5 million. Between $5 million and $10 million, the City adds another 4% for a total of 4.45%. Over $10 million, the rate goes up to $5.95%.

Mansion Tax amounts are significant

A mansion that sells for $5 million would pay $222,500 in a transfer tax to the City, with the proceeds intended to pay for more affordable housing. A $10 million property would pay $595,000.

The “Mansion Tax” has affected luxury residential real estate in the City of Los Angeles. In the first quarter of 2023, several celebrities sold mansions for over $50 million. When the tax took effect on April 1, listings for ultra-high-value residential properties dropped.

Who pays the Mansion Tax?

Measure ULA specifies that property sellers are responsible to pay the Mansion Tax. This is a contrast to similar taxes in other big cities like New York, where buyers pay the transfer tax. Because some sellers with high-priced properties may not have a lot of liquid cash, a number of area realtors and low-tax advocates say that the tax disproportionately harms older people who may be downsizing or otherwise need to move.

Alternatives to the Mansion Tax

Other cities in Los Angeles County aren’t subject to the Mansion Tax, including Beverly Hills and Malibu. Los Angeles County has a transfer tax rate of .11%, much less than the City of Los Angeles.

If you’re considering a high-priced property in the city of Los Angeles, you may have more limited choices because of Measure ULA. However, other cities within the county aren’t affected. Most of the publicity surrounding the Mansion Tax focuses on high-end luxury real estate, but the measure also affects all commercial and multifamily property sales.

There are likely to be ramifications of Measure ULA continuing for years. California Platinum Realty and California Platinum Loans are on top of real estate trends in the LA/Orange County area and can steer you toward the deals and properties that are optimal for your finances and your future.

Sources:

City of Los Angeles. “Real Property Transfer Tax and Measure ULA FAQ,” url: https://finance.lacity.gov/faq/real-property-transfer-tax-and-measure-ula-faq

Eltorai, Omar and Sandi Prendergast. “What are real estate transfer taxes?” Altus Group, 2 March 2023, url: https://www.altusgroup.com/insights/us-real-estate-transfer-taxes-understanding-the-impact/

Meares, Hadley. “The Mansion Tax Effect: Luxury Home Sales Stall in Los Angeles,” The Hollywood Reporter, 15 July 2023, url: https://www.hollywoodreporter.com/lifestyle/real-estate/mansion-tax-luxury-home-sales-los-angeles-1235535477/

California Platinum Loans

  https://californiaplatinumloans.com

Discover the First-Time Homebuyer Program in LA: Your Guide to Los Angeles Homeownership Today

Time_Homebuyer

Does Los Angeles have a first-time homebuyer program? Yes, and there are two of them. The City of Los Angeles Housing and Community Investment Department (HCIDLA) offers a program to help first-time home buyers, and so does the County of Los Angeles through the Los Angeles County Development Authority (LACDA).

One important thing to remember about most first-time homebuyer programs: it’s not always the case that an applicant has never bought or owned a home before. You must not have owned a home during the last three years to qualify for the programs. And you need to live in the house that you buy.

What Do the Different LA First-Time Home Buyer Programs Provide?

The City of Los Angeles provides the LIPA (Low Income Purchase Assistance) program, which can provide up to $140,000 for purchase assistance. LIPA funding can cover down payments and closing costs. The program can help with single-family home purchase prices up to $973,750 and condo or townhome purchases of $593,750. The LIPA program is available for home purchases within the incorporated City of Los Angeles. 

The County of Los Angeles Home Ownership Program (HOP) is a second mortgage loan for first-time homebuyers that can provide up to $85,000 or 20% of the home purchase price, whichever is less. It is a zero-interest loan with deferred payment.

Who Is Eligible For First-Time Homebuyer Programs?

The first-time homebuyer programs are intended to assist low- to moderate-income home buyers. Los Angeles County’s program eligibility limits are 80% of the County median income, which is $95,300 for a family of four. The City of Los Angeles LIPA program is also capped at 80% of the County’s median income. Still, the City also has a moderate-income first-time homebuyer program which will go up to 150% of the median income.

You can’t own any other real estate to be eligible for these programs. The programs are intended for people who are buying a home to live in.

You must also meet minimum credit score requirements, with a FICO score of at least 660.

Using a First-Time Homebuyer Program to Buy a Home in LA County or the City of Los Angeles

California Platinum Loans is an experienced, caring, and responsive mortgage broker who can assist you in accessing first-time homebuyer programs to help you buy the home you need and want. You can combine first-time homebuyer programs with a home loan that fits your needs. Contact California Platinum Loans today to get started making your home ownership dreams a reality.

California Platinum Loans

  https://californiaplatinumloans.com

Urgent Homebuyers Alert: Take Control of Your Los Angeles Home Search Today, with This Comprehensive Guide to Mortgage Pre-Approval

Homebuyers

If you’re looking to buy a home in Los Angeles, there are several steps you can take to be prepared and be able to buy the home you absolutely desire. One of the most critical steps is getting pre-approved for a mortgage.

The Difference Between Pre-Approval and Pre-Qualification

You may hear different terms regarding the steps you can take before you make an offer on a home or receive a mortgage loan. 

Pre-qualification isn’t as in-depth a process as pre-approval. If you are pre-qualified for a mortgage loan, lenders will do a “soft pull” of your credit score to see where you fit in the credit spectrum. With your financial data, lenders can usually give you a rough idea of the loan size you can qualify for and offer a pre-qualification letter. 

Mortgage pre-approval is a more in-depth process. You need to provide documentation of your income and other financial information. The mortgage lender will formally request your credit score, also known as a “hard inquiry.” They will respond with a pre-approval letter containing much more detailed information and a more accurate idea of the amount of home loan you can obtain.

What Do You Need To Get Pre-Approved For a Mortgage?

You should collect the following documents to provide to your mortgage lender:

  • Proof of income, which can include paystubs, self-employment documentation, and tax returns.
  • Proof of assets can include bank statements and other financial or property account documentation.
  • Credit score and credit history.
  • Verification of employment.
  • Valid government-issued identification

The mortgage lender will also look at your debt-to-income ratio. If you already have other debts, these will be factored into your pre-approval.

A mortgage pre-approval letter will help you to know how much home you can afford. It places you in a much stronger position when looking for a home to buy in Los Angeles. California Platinum Loans works with numerous lenders, including banks, non-banks, other institutional lenders, private money lenders, hedge funds, private equity, and some hard money lenders. California Platinum Loans can help you get the right type of mortgage pre-approval when the time is right.

California Platinum Loans

  https://californiaplatinumloans.com