From pricing to interest rates, inventory to competition, this is a dynamic, frustrating and confusing market for many buyers AND sellers. Well, for many, it just got more of all of those things when the NY State Legislature and Governor Cuomo adopted and announced the Fiscal Year 2020 budget this week, establishing new rates for the mansion and transfer taxes in New York. We will sift through the numbers but one thing is very clear – June 30th is going to be one hell of a stressful day for many attorneys and mortgage professionals.
So for those of you in contract, looking, looking to look or hoping to someday look at looking, here is the good news:
- If you are buying or selling a home valued at $1,999,999 or less, this new budget does not change your tax structure as it pertains to Mansion Tax and Transfer Taxes. Buyers paying between $1,000,000 and $1,999,999 will still pay a 1% Mansion Tax and NY State Transfer Taxes of .4% (the NYC Transfer Tax on residential sales will still apply, which amounts to 1% at or below $500,000 and 1.425% on sales of $500,001 or more).
- If you have a fully executed contract on or before April 1, the new tax structure WILL NOT apply to your sale (even if you do not close before July 1).
- If you close before July 1st (the start of the new Fiscal Year), the changes WILL NOT apply to your sale (even if contracts were signed after April Fool’s Day.
- The proposed tax on “pied-a-terre” tax did not make it into the budget.
If you fall into the above categories, you are likely risking a back injury while doing a mediocre cartwheel right now. I, for one, hope you land it. All the rest are trading in their afternoon Venti Latte for a Tall, or swapping their dinner reservations for a Cup O’Noodles. But is it really that bad, you ask? The answer, it really depends how many Cup O’Noodles you need space for I guess…
The bad news:
Somewhere out there is a buyer/seller combo who just signed a contract on April 2nd, with an on-or-about date of July 1 and a contract price of $2,000,000.01. Those unfortunate individuals (as unfortunate as those individuals can be) just saw their NY State Transfer Taxes (Seller) and Mansion Tax (Buyer) each go up by .25%, or $5,000 in this example. Not the end of the world, that is true. But I have seen a closing nearly adjourn and head toward litigation over a non-functioning window blind on a $3,000,000 purchase! (true story).
So, maybe $5,000 at that price point isn’t a reason for buyers and sellers to kick and scream, but the impact on the “bottom line” or “all in” price (depending on your point of view) for buyers and sellers escalates as the contract price increases to the tune of tens of thousands of dollars as you get above $3,000,000.
Here is what it looks like from $0 to $25,000,000…
The Silver Lining:
The residential real estate transfer and mansion tax changes will help fund our region’s mass transit network – a system in much need of repair and upgrade. Whether this will curb the consistent increases in fares is yet to been seen. I can say this; for many sellers and buyers in NYC, hearing that the F train is running on a “Weekend Schedule” just got a little less annoying…relatively speaking.