Coming Soon: More Luxury Homes on the Market?
By Teke Wiggin
Some well-heeled homeowners are reportedly scrambling to offload luxury properties by the end of the year or else risk having a serious bite taken out of their bottom lines. That's because if the Bush-era capital-gains tax cuts expire in January, as they are expected to, those homeowners would be shelling out a lot more on sales.
Patty Lance, a Realtor at Coldwell Banker Previews International who handles listings in Newport Beach, Calif., said there's such a rush to sell among silver spooners that she's decided to target them by hosting webinars on the tax hike's effect on home sales.
"Sophisticated investors are looking at this, saying, 'Maybe we need to focus on this right now and time it with the market heating up,'" she said in explaining the reason for her Web seminars. "They are starting to feel that they need to do something in the third quarter, fourth quarter [of 2012] and jump on this."
And it seems that homeowners in the high-end market might already be doing that. Average sales of homes priced at $1 million or more are up 23% from a year ago, according to online listing service RealtyTrac. Also, the company said that the average sales price in the million-plus category -- at $2,067,157 in May -- had dropped 12% from last year. That could be a sign that sellers are becoming more willing to accept lower offers. Meanwhile, median home prices increased year-over-year by two percent in May 2012 compared to the same period last year, CoreLogic reported. 'We're Telling Them to Take the Profits Right Now' Currently, an individual who makes a profit of $250,000 or more on the sale of his or her primary residence ($500,000 or more for a married couple) must pay a 15% tax on that profit (minus deductions including renovation costs and closing costs).
But if the Bush-era capital-gains tax cuts expire, the tax rate on such proceeds will jump to 20%. Plus, starting in 2013, individuals who make at least $200,000 in income (or married couples making at least $250,000) will have to pay an additional 3.8% health-care tax on capital gains. The legislation is set to go into effect in 2013.
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