Builders, Realtors at odds over transfer fee


first_imgThis time, more like hot oil and water. There’s going to be some splattering going on. The fuel for this spat comes from state Sen. Lou Correa, D-Anaheim, in the form of SB 670. It would stop what some say is becoming a common part of a house sale – the private transfer tax. It adds to the selling price. And it doesn’t go away. Buy a new house and you can pay the fee. Sell it sometime down the road, that buyer pays it. Usually, they are on the same side of an issue. The California Building Industry Association lobbies on behalf of individuals and companies that build homes. The California Association of Realtors lobbies on behalf of individuals and companies that sell them. These two are like peanut butter and jelly. The Realtors group doesn’t like this one bit, even though it is legal, said Alex Creel, the association’s senior vice president of governmental affairs. “Builders are putting restrictions in the deed so that every time a property transfers, a percent of the sales price goes back to the builder or whoever the builder has designated,” Creel said. “What they are doing is financing these things on the backs of future homebuyers.” The Realtors association signed on as a sponsor of Correa’s bill. The association says that this is an alarming trend. The tax can vary from company to company. And not all builders impose it. But the association said a tax of 1.75 percent on a $500,000 home would be $8,750. That takes down affordability, too. The association estimates that every $10,000 increase removes 200,000 potential buyers from the market. There is a lot of haze clouding this issue, too. Neither the CAR or the CBIA knows how many builders are imposing the tax. Nor do they know how long it’s been going on. They do know they disagree with each other, though. “We are absolutely opposed to the Correa bill as written. We are sensitive to some of the issues raised in this debate,” said Kimberley Dellinger, a legislative advocate at the CBIA. The CBIA doesn’t call it a transfer tax, either. This association says it’s a reconveyance financing mechanism. That’s pretty creative branding. She said it’s simply a finance tool that builders can use to ease their cost of doing business, which like housing prices, seems to be constantly rising. “Generally, the few examples we know about have been used for open space acquisition, environmental enhancements as well as for affordable housing,” Dellinger said. Typically the fees are put in a trust and designated for use by nonprofits. Whatever the fee is, in some cases it’s being used in place of Mello-Roos funding, special tax districts that pay for things like roads and sewer pipes. Mello-Roos fees are paid every year and can make it difficult for buyers to qualify for a loan. The transfer fees can be used for about anything. And there is some common ground in this spat. Both associations think the fees should not be a surprise at closing time. “The most important thing is to make sure everyone is aware this fee is in place and where the money goes. We will be introducing language ourselves to be much more detailed,” Dellinger said. (818) 713-3743160Want local news?Sign up for the Localist and stay informed Something went wrong. Please try again.subscribeCongratulations! You’re all set!last_img

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