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“Schools and local governments each would lose over $100 million in annual property taxes early on, growing to about $1 billion per year,” wrote the state’s nonpartisan legislative analyst in its report about the measure (Prop 5)
Exactly. There would be a significant loss to local governments in property tax revenue if Prop 5 passes.
This is significant in more ways than one, in my opinion.
If, for instance, Prop 5 passes, and then we end up with less school funding, etc., then I could see Prop 13 becoming in real jeopardy. And Prop 13 is a really good law.
But, trying to expand the original intent of Prop 13 through this new Prop 5, that isn't necessary - since there are already laws in place for seniors and disabled individuals to keep their tax base - AND - it results in significantly less property tax revenues that benefit local government, such as schools - ONLY to benefit real estate brokers/agents - is a disaster waiting to happen.
The special interests who wrote this bill, could inadvertently create a housing crash that will destroy any commissions they're hoping to reap, anyway.
Just always consider the source as far as who wrote a proposition. The only entities throwing money at this campaign are real estate agents and brokers. So, ask yourself why?
There is no money being thrown at it from civil rights groups for seniors, for instance. Think about that and, then, I suggest voting no.
“Schools and local governments each would lose over $100 million in annual property taxes early on, growing to about $1 billion per year,” wrote the state’s nonpartisan legislative analyst in its report about the measure (Prop 5)
That is a joke. A legislative analyst in California that is non partisan. Who do you think put them there?
Lose 100million? How can you lose something that you never had in the first place? These elderly home owners are paying based on the value of there homes when they purchased them. Transferring of the tax base does not eliminate the amount that they pay.
In fact when someone sells a home the sale price of the sold home becomes the new value. Have those fine "Non Partisan" Democratic analysts figured all the new revenue that the county someone moves from will receive?
The reality is more of these people will more than likely move from the state. Of the small percentage that decide to stay, many will downsize in their own county.
Why would anyone vote against something that helps our seniors? The Liberals continue to spout on about all the people that they want to help. We are not talking the wealthy here. We are talking regular working class people that have worked to build a life here in this liberal State.
Personally, I know a few single seniors that have considered moving to be close to kids but don't want to move in with kids and the kids have no intention of moving to Alameda or Santa Clara... so Grandma stays put.
At one time more counties opted in if memory serves... it was even courted to spur development
As to commissions... I must be one of the only people that has never paid a 6% commission? Commissions are fully negotiable and most of the time I am a For Sale By Owner... and often buy without brokerage...
The 6% commission gives me leverage as I can pay less and the seller nets more.
Some of my commercial friends offer full commission as an incentive for those to bird dog deals their way... they could easily claim half but don't... because the deal makes sense or it doesn't.
I do firmly believe lack of property tax is not a problem in California that also collects Sales and Income Tax plus hundreds of user fees and taxes down to city and county level...
There are several property measures in Oakland that would tax property... I am already at 1.7%... and enough is enough.
Lose 100million? How can you lose something that you never had in the first place?
They are referring to future revenue if Prop 5 does NOT pass, since those tax breaks would not be given.
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These elderly home owners are paying based on the value of there homes when they purchased them. Transferring of the tax base does not eliminate the amount that they pay.
But those "elderly homeowners" carry their property tax amount with them. We are not talking about what they left behind. This proposition is about the higher property taxes these people WOULD NOT PAY if this proposition were to pass.
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The reality is more of these people will more than likely move from the state. Of the small percentage that decide to stay, many will downsize in their own county.
AS they do now. ONCE. Not multiple times.
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Why would anyone vote against something that helps our seniors? The Liberals continue to spout on about ...
You are, again, misinformed. This has nothing to do with "liberals." Read the proposition and some of the discussions in your California Voter guide.
As to commissions... I must be one of the only people that has never paid a 6% commission? Commissions are fully negotiable and most of the time I am a For Sale By Owner... and often buy without brokerage...
You are a rare homeowner. And you own many properties in which you do not live, which has given you more experience. Most of us would be clueless--and completely taken advantage of--if we were to attempt to list our property as a FSBO.
When I was young I thought I knew everything or at least could figure it out...
That has stayed with me for long time but reality also sets in.
Still remember buying a home that was for sale by owner... I typed up the deed and recorded the transfer... I spent a couple of hours at the County Recorder's office researching the title checking for encumbrances and then went ahead...
Years later... when I also sold it with an ad in Craig's list as For Sale by Owner subject to a 1031 the buyer had a Title Company and the Escrow officer was shocked I bought without Escrow or Title Insurance... my simple reply was nothing they did that I couldn't do... plus I saved a bundle!
Now I have acquiesced and pay Title and Escrow fees or split them...
In my younger days I was a property junkie... self studied for the Real Estate Exam... passed with no problems even arriving very late as there was an accident on the Bay Bridge... never did send it back for my license... just didn't like Real Estate people holding it over me... so the next time I was told how much I needed their services... I said well I passed my exam too!...
That said... there are several Realtors that were instrumental to my success... one was very active in my area and she knew everything that happened or was about to happen and would let me know the minute a fixer or problem property was coming on the market... a true full time professional that always took care of business...
As to commissions... it is one thing to list and get list or better sales price and pay 6%... quite another when the seller is taking less.
Advised friends when the offers came in low that they should ask ALL the Brokers and Agents to "Participate" so far they always have be adjusting lower their commissions... even a 1/2 percent less for each office Broker and Agent saves 2%
Last edited by Ultrarunner; 10-17-2018 at 08:49 AM..
People seem to be overlooking the upward/downward adjustments built into Prop 5.
The assumption is that rich people get to transfer their property tax and keep paying the same rate when they buy a mansion. But any excess will be taxed fully.
Example:
Richie Rich never worked his whole life and inherited a property from his parents. Since they bought it in the 1960's, the tax basis is a low $80,000 and his house is now worth $3,000,000. He's paying $800 in property taxes. He sells the property and buys a Carmel beach property for $12,000,000. Under current law, the sale wouldn't qualify for any basis transfer and his new property tax would be $120,000. Under Prop 5, he can transfer the basis, but the new property tax wouldn't be $800. There's an upward calculation, and he'd pay full tax on the $9,000,000 excess. His new property tax would be $90,800 under Prop 5.
People seem to be overlooking the upward/downward adjustments built into Prop 5.
The assumption is that rich people get to transfer their property tax and keep paying the same rate when they buy a mansion. But any excess will be taxed fully.
Example:
Richie Rich never worked his whole life and inherited a property from his parents. Since they bought it in the 1960's, the tax basis is a low $80,000 and his house is now worth $3,000,000. He's paying $800 in property taxes. He sells the property and buys a Carmel beach property for $12,000,000. Under current law, the sale wouldn't qualify for any basis transfer and his new property tax would be $120,000. Under Prop 5, he can transfer the basis, but the new property tax wouldn't be $800. There's an upward calculation, and he'd pay full tax on the $9,000,000 excess. His new property tax would be $90,800 under Prop 5.
I believe that it's a little more complicated than that. The excess is taxed fully only on a specific amount. See below.
Proposition 5 would enhance Propositions 60 and 90 by allowing homeowners 55 years of age or older to transfer their Proposition 13 tax basis to a home of any price (proportionally), located anywhere in the state, any number of times. Let me provide a hypothetical example to explain by what I meant by proportionally. Say you purchased your home 21 years ago for $200,000, with a property tax basis of $2,000 and with compounding your property tax basis is now $3,000 and your home is now worth $900,000 and you want to purchase a home for $1,200,000. You sell the less expensive home and purchase the home that costs $300,000 more, your property tax basis from the original home would move with you for the first $900,000 in value and your property tax basic 1% levy would only increase by the difference in the full cash value. Your new property tax would be the $3,000 moved basis plus an additional $3,000 for the property tax on the increased value. Therefore, your property tax base would be $6,000 instead of $12,000 (see Figure 1)....
I believe that it's a little more complicated than that. The excess is taxed fully only on a specific amount. See below.
Proposition 5 would enhance Propositions 60 and 90 by allowing homeowners 55 years of age or older to transfer their Proposition 13 tax basis to a home of any price (proportionally), located anywhere in the state, any number of times. Let me provide a hypothetical example to explain by what I meant by proportionally. Say you purchased your home 21 years ago for $200,000, with a property tax basis of $2,000 and with compounding your property tax basis is now $3,000 and your home is now worth $900,000 and you want to purchase a home for $1,200,000. You sell the less expensive home and purchase the home that costs $300,000 more, your property tax basis from the original home would move with you for the first $900,000 in value and your property tax basic 1% levy would only increase by the difference in the full cash value. Your new property tax would be the $3,000 moved basis plus an additional $3,000 for the property tax on the increased value. Therefore, your property tax base would be $6,000 instead of $12,000 (see Figure 1)....
But your example is exactly the same as the Richie Rich example, just with different numbers.
The specific amount you're thinking about is the difference between sale price of old house and sale price of new house. That's what gets fully taxed.
I used extreme numbers primarily to show that the rich aren't necessarily being favored, and counties aren't necessarily being screwed out of property tax revenue.
In my case, the county would lose $30,000/year on Richie Rich's new property since he wouldn't be taxed on the full 12,000,000 purchase. But they'd gain $30,000/year on the sale of the old property, making it even.
In your case, the county would lose $6,000/year in property tax revenues on the new property. But if the old house sold for $900,000, the county would now get $9,000/year vs. the old $3,000/year, making it even as well.
Of course, this assumes that the old properties were purchased without someone transferring in their own old basis.
Ultimately, I think one's vote on Prop 5 comes down to what you think of Prop 13. Nobody thinks it's wonderful that your neighbors with the same type house two doors down only pay $600/yr in property tax while you're paying $5000. But fast forward 20-30 years and see what you think when your neighbors don't think your low rates are fair and want you to pay more!
I'm a no on this one. I did a ton of research and I learned that there are already laws in place for seniors over 55 and disabled, people in CA, to transfer their property benefits to another property in the same county or to 11 other counties in CA - which include the expensive counties such as Alameda, Orange, Santa Clara, etc. So, they aren't limited to the boondocks.
They can transfer their benefits to another property at the same or less value as their current home.
This is really all about Prop 13, which provided these benefits. The original reason was so that people who bought a home could live in it until they died, pay off their mortgage, and not be taxed out of it because of increased property values.
It wasn't designed for anyone to actually profit from it.
So, in my opinion, this new law, that was written by real estate brokers/agents, is all about trying to get more properties for sale that they can profit on.
This proposition was not written by any entity that is worried about seniors or disabled people in CA being somehow abused by the system.
So, as there are laws already in place that allow seniors/disabled people to transfer their Prop 13 benefits to other properties of equal or lesser value within 11 counties, that include L.A. and the SF Bay Area - i really don't see any reason for some new law that is designed to benefit the realtors who sell properties - and nobody else.
There's no reason to give seniors the ability to sell "up". That was never the intent of Prop 13, and it could jeopardize those who deserve the protections of Prop 13. This proposition would leave counties in trouble, financially. Which, could end up freaking out voters enough to vote to appeal Prop 13, which would be a serious travesty.
So, my opinion is, - be aware that there are already law in place that allow seniors and disable individuals to transfer their Prop 13 tax breaks to any property of equal or lesser value within 11 counties, including very desirable counties.
And consider who wrote this proposition - real estate salespeople who want to make more in commissions in sales. This was not written by some entity worried about non-existent senior or disabled benefits.
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