The real estate market might be cooling nationally, but among the multimillionaire set in Los Angeles, it has been red hot — so much so that some sellers are getting burned.
Sellers have been throwing in brand new Bentleys and McLarens and drastically slashing prices in order to incentivize a quick close.
That’s because a so-called “mansion tax” goes into effect Saturday in Los Angeles, adding a 4% tax for sellers on homes that sell for between $5 million and $10 million and 5.5% on amounts $10 million and above.
The change will add hundreds of thousands — if not millions — of dollars in additional new transfer taxes for sellers, which will go to support a homeless housing measure Angelenos passed last November.
Celebrities like Jim Carrey and Mark Wahlberg, not to mention a slew of lesser known multimillionaires, have all rushed to dump their homes in the last few months.
After 30 years in his 12,700 square-foot home in Brentwood, Carrey made the big decision to list it in February for $29 million.
So far, there are no takers.
Same with Jennifer Lopez, who put her Bel Air place up for sale in February.
James Corden is willing to slash and burn the price of his Brentwood Park house, recently cutting it from $22 million to $17.95 million.
But that’s nothing compared to Mark Wahlberg.
The “Ted” actor had put his 30,500 square-foot estate on the market months prior to the measure’s passage, at an eye-watering $87.5 million.
But he ended up selling the Beverly Park property for $55 million — a 37% price drop — in February.
“It’s crazy out there right now,” said Josh Altman, a luxury broker with Douglas Elliman in Los Angeles who regularly appears on Bravo’s “Million Dollar Listing.”
Multiple brokers told The Post they felt Wahlberg could have done better, if not for the looming deadline of that multimillion dollar tax bill he would have faced starting this April Fool’s Day.
“I’ve literally become not only a real estate agent, which I signed up for, but I’m now a yacht salesman, a car broker and a wholesale furniture salesman,” Altman said of the enticements sellers are offering to lure buyers. “That’s what it’s come down to.”
Altman said that after two decades in the real estate business, he’s had the record month of his career, despite otherwise lackluster home sales numbers across the nation.
In the past 72 hours alone, Altman said he closed roughly 20 deals.
In March he sold $205 million — nearly doubling the typical sales of $104 million a month his team hits as the top sellers in the country.
“People need to get as creative as possible to motivate the buyer to close before this [tax goes into effect],” Altman said. “A lot of times it’s … a cut-your-losses type of approach. Maybe [throwing in] a Lamborghini that costs $350,000 … is going to save you from paying $600,000 in taxes, so you might as well do it.”
Altman even offered a $1 million bonus for a buyer’s agent on top of the regular commission to try and unload a seven-bedroom Bel Air mansion listed for $27,995,000.
While it went into counter offers, the home isn’t going to close in time to meet the deadline, he said.
Still, Altman considers offering the incentive a win because lots of agents showed up to check out the place and potential deals are progressing.
Tyrone McKillen, a broker with the luxury agency Official, said he completed a whirlwind 48-hour close Wednesday, the fastest he’s ever done.
It was for a six-bedroom, 11,000-square-foot home in Windsor Square that was restored by designer Jake Arnold.
It dates back to 1917 and boasts its own Prohibition-era speakeasy bar.
The selling price?
$16 million — down from the initially listed ask of $19,995,000.
“There’s been a bit of a frenzy the last few weeks,” McKillen said, noting that he even just sold his own home.
He’s done an impressive five deals on pricey homes in the last few weeks.
All five, he added, were closed “with a term in the contract that the deal would either cancel or be increased by the 5.5% tax, should escrow get delayed beyond this week.”
The “mansion tax” has led to quite a few “Hail Mary” marketing approaches, said Tatiana Derovanessian, a luxury agent with Keller Williams in Beverly Hills.
Take the developers selling a five-bedroom, eight-bath Mulholland Drive mansion in the coveted 90210 zip.
For $16.5 million, you can get the “the luxury home and the luxury vehicle of your choice, within the fleet that we have through O’Gara Coach Co., a Beverly Hills luxury car dealer.”
The deal includes vehicles priced up to roughly $400,000, including an Aston Martin Vantage, Aston Martin DBX 707, McLaren GT or Bentley Bentayga EWB.
“The strategy was to create an offering to a buyer in this range that loves a luxury vehicle, luxury home, that has maybe luxury watches, luxury yachts,” Derovanessian said.
She noted that the home itself is “a car home” with a 1,300-square-foot subterranean “auto gallery.”
The home has attracted international interest with buyers reaching out from Germany and Mexico, and some flying in from Hong Kong to view the home, but hasn’t sold yet.
Come Saturday? That deal is off the table.
But, Derovanessian jumps in to quickly note, “everything is negotiable.”
She said her sellers are resigned to paying the tax at this point.
“We’re probably going to have to pay it, because it’s very hard to squeeze in a purchase before April 1,” Derovanessian said.
“What seems so unfair is our property is in Beverly Hills 90210, [but is] considered [the neighborhood of] Beverly Hills Post Office. It technically sits in the city of LA that gets that tax, but two miles down from us they don’t get taxed. They’re the city of Beverly Hills.”
There is plenty of grumbling among sellers and their agents, who believe the tax will scare developers away, trickle down and impact workers in the local economy, and ultimately lead to less development.
“It’s a strange irony to disincentivize home builders in order to combat a homeless crisis that is one of the worst in the nation,” McKillen said.
He and other brokers note that a $5 million home in Los Angeles is hardly a mansion given the rise in property values through the pandemic, and that many homes will hit that $5 million “mansion” mark in the years to come.
“What you’re going to see is a lack of inventory, because sellers aren’t going to want to take the hit because of the tax. They might not want to sell because they are in at a lower interest rates and interest rates are too high,” said Kerry Ann Sullivan, a listing agent with Pardee Properties.
Sullivan believes that demand will continue to creep up and that it will eventually help even out the cost of the new tax, but that it will take roughly four to six months.
Meanwhile, “the next eight weeks will be very telling,” Altman predicted.
“But just off the deals I have been doing and negotiating and closing, these are deals I never would have thought would have closed for as low a price as they are now.”
The sale ends at 11:59 p.m. Friday, PST.
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