Ultra-Wealthy Get Gimmicky to Sell Houses Before April 1 Mansion Tax

Everyone loves a gimmick, even the über rich. The controversial Measure ULA ­— which was opposed (futilely) by top real estate agents — is set to go into effect April 1. Known as “the mansion tax,” the L.A. City measure will require sellers of properties of more than $5 million to pay a 4 percent transfer tax, while sales of more than $10 million will pay a 5.5 percent tax. All funds raised will be used to fund sorely needed public housing.

Now, just under the gun, blue chip sellers are using the looming deadline to try to goose sales. The undeveloped 260-acre Senderos Canyon in Bel Air is being auctioned off by Paramount Realty USA. In an attempt to woo buyers quickly, owner Giro Properties has announced a $2 million discount if the deal is closed before April 1.

Botched star Paul Nassif has listed his Bel Air mansion at 1035 Stradella Road for $27.995 million with a similar twist. The plastic surgeon is offering a $1 million closing bonus to a buyer’s agent who will close on the property before April 1. Nassif came up with the idea because “he would have to pay 5.5 percent more if he sells after April 1,” says Coldwell Banker’s Jade Mills, who holds the listing along with Josh and Matt Altman, Mauricio Umansky and Tomer Fridman.

Across the board, brokers have seen buyers scurrying to avoid the steep tax. Many people, says Mills, “are rushing to close escrow before April 1, so they can purchase the properties for 5.5 percent less.” As for Nassif’s listing, Mills says the bonus offer has brought massive online interest. “We have received more views in the past month for 1035 Stradella than I have ever seen on any of my other listings,” Mills says. “There have been more than 35,000 views.” Adds Douglas Elliman agent Lisa Optican, “There is incentive upon sellers to try to initiate a deal and close a sale before the April 1 deadline. At this point, it’s becoming a total numbers game.”

Ahead of the measure going into effect, some agents say they predict it will negatively affect luxury home sales and sellers in L.A.

Says Emil Hartoonian of The Agency, Calabasas, Sherman Oaks and Studio City, “The mansion tax going into effect will clearly create a barrier for sellers looking to unload their homes later this year. Luckily, some areas will remain unaffected, such as Calabasas, Malibu and Hidden Hills. These cities are incorporated cities that have their own governing entities and therefore have not adopted the measure. But, in general, unincorporated Los Angeles County areas, the transfer tax will surely burden an already impacted real estate market by imposing a heavy tab for homes above $5 and $10 million. There will surely be further distress around this price point as a result of this tax, as sellers will likely forever discount their pricing steeply, to help offset this transfer tax. This will of course hurt comparable sales data, showing significant loss of value as a result.”

Optican adds that while it’s hard to predict ultimately what the repercussions of the tax will be, she knows of some deals that have already been scuttled because of the looming tax. “I am not sure anyone has complete clarity on what specifically this tax will do to real estate moving forward, but I certainly think it is giving great pause to builders, developers and investors who are running their financials, and now having to factor in a potentially significant tax that will complicate their return/profit margin going forward,” she says. “There have been a few deals that have fallen apart because after analyzing the cost of construction, materials, permits, financing, typical closing costs and now the ULA tax, it just becomes too risky.”

A version of this story first appeared in the March 8 issue of The Hollywood Reporter magazine. Click here to subscribe.