VOL. 36 | NO. 33 | Friday, August 17, 2012
Don’t believe rumors about ‘transfer tax’
Realtors across the area are being bombarded by e-mails and phone calls about the transfer tax for real estate sales that is supposedly included in the national health care bill, also known as Obamacare. There is no transfer tax in the bill.
The most recent e-mail cites the National Association of Realtors (NAR) as the source, and states the NAR is upset about the bill. The misinformation has been so widely misreported that NAR has included the factual account on its website.
“The 3.8% Tax is NOT a Tax on Real Estate Sales,” the NAR states. “The 3.8% tax is imposed ONLY on those with more than $200,000 Adjusted Gross Income (AGI) ($250,000 on a joint return).”
The erroneous information states any person selling a house for $100,000 would pay a tax of $3,800. NOT true.
The NAR site includes an example: If John and Mary sold their house and realized a gain of $525,000 – a gain, or profit, of $525,000 – and they had an adjusted gross income of $325,000, they would pay a $950 tax.
To clarify, if John and Mary bought a house for $1,000,000 and sold it for $1,650,000 and had $125,000 in closing costs, they would net $525,000 profit on the transaction. According to NAR, if they had an AGI of over $250,000, they would be taxed $950.
To recap, the sellers must have AGIs of over $200,000 for single persons or $250,000 if they file jointly for the tax to apply to them. If that income is not met, there is no tax. There must be profit made on the house. If there is no profit, there is no tax. The profit is taxed, not the sales price. Now you know the facts. Do with them as you may.
Residential real estate sales continued their torrid pace through July as units sold eclipsed sales for July 2011 by 27.4 percent. Of significance is that 2011 marked the first time in four years that the area had experienced increased sales compared to the prior year.
For the year, there have been 14,568 closings for an increase of 25 percent over 2011. And in 2010, there were only 20,250 for the entire year. With 2,648 pending sales in 2012, the prospects are promising that this trend will continue.
Last year there were 1,997 pending sales in July, indicating August sales might reflect increases of more than 30 percent.
And prices are climbing, with the median price for a single-family residence hitting $181,250, compared to $179,900 a year ago. To add perspective, the median price in 2006 – when real estate hit record highs – was $180,000.
While real estate is trending up on the national level, there are few, if any, markets that have rebounded as well as the Nashville area.
Sales of the Week
Two of those August pending sales closed last week in Lockeland Springs in East Nashville, both selling for more than $400,000.
The first sale is a property listed by Cindy Evans, the queen of East Nashville real estate, and located at 1305 Ordway Place. This residence has 2601 square feet and fetched a sales price of $419,900 on its first day on the market. The buyer paid the list price, but received $6,500 in closing costs from the seller. The price reflects a price per square foot of $160.13.
The house had been renovated four years ago and has 12 foot ceilings, a gourmet kitchen, two fireplaces, and according Ms. Evans, “decorative mullions.” A nice mullion will bring a high price. The house was originally built in 1900 and includes a music room and pocket doors.
Mindy Hill of Crye-Leike Real Estate listed 1618 Russell Street, and Tyler Allen Rygmyr represented the buyer, who paid $159.50 per square foot for this 3,086-square-foot home built in 1915. One improvement made by the seller was the installation of a $17,000 storm cellar. While the term “storm cellar” has become a synonym for a basement, this storm cellar is to be taken quite literally.
Homebuyers apparently are more concerned than ever with tornados, resulting in more houses with true storm cellars. In listings of $1 million or more, these are known as lower-level safe rooms.
So Lockeland Springs is safe, houses are selling and there is no transfer tax. Times are good.
Richard Courtney is a real estate broker with French, Christianson, Patterson, and Associates and the co-author of Come Together: The Business Wisdom of the Beatles. He can be reached at Richard@ricahrdcourtney.com.