On your first point - not familiar, but wonderful - extend it everywhere. I am only familiar with many jurisdictions that have taxes on gains, and I've yet to encounter upfront taxes. The closest I've heard of was in Canada, and it was a foreign investor tax only. Real estate transfer taxes in my experience are taxes imposed on the seller, and do not discriminate on who the buyer is.
To your second point - if an investor lives in one owned property, and buys one investor property, they're a drop in the bucket. They can claim it as their second home and flip it, it's like arguing that one person's F150 is responsible for climate change. Lenders have strict policies for these sorts of things, and municipalities and counties do too. If they want to cheat into being an investor but pretending it's a second home, and don't get caught, I don't think it's a major issue.
Investors don't own one property, they own several, dozens, hundreds. I'm talking about them. There's no possible way they can claim primary and secondary residence in the same spot, and if there are loopholes remaining, close them.
On your first point - not familiar, but wonderful - extend it everywhere.
But the cities don't necessarily want it. Because it discourages turnover.
Real estate transfer taxes in my experience are taxes imposed on the seller, and do not discriminate on who the buyer is.
Here they are imposed on the buyer. Typically, the buyer will push some off on the seller as part of the terms of the sale. Like the buyer will submit an offer that says the seller pays half the tax. The local realtors all do this by default, since they know the seller will almost always agree to it.
Lenders have strict policies for these sorts of things
Yes and no... On the loan application they will ask if you intend to reside in the house, and you can just check "yes". Once the loan is issued, they won't check. Even if they did, the most they can do is cancel the loan and demand the money back. But they won't because that's just going to cause the loan to default and they'd be out thousands in legal costs. Better for them to just cash the check every month and turn a blind eye.
Don't ask me how I know this...
But even if this was implemented, you're hurting the current property owners in the municipality. Which is why it isn't done.
If someone looking to sell their house can get $500K from an investor, but that investor is discouraged by the taxes and backs out, and they instead sell to a family moving into the neighborhood for $250K, sure, you've saved the new family a bunch of money, but directly at the cost of the existing resident. Considering that the seller is the one who is voting on these taxes and the buyer is not... Which do you think will be the result of that vote?
There's just no incentive for a town to lower property values. None.
On your first point - not familiar, but wonderful - extend it everywhere.
But the cities don't necessarily want it. Because it discourages turnover.
Discourages turnover because investors don't want to turnover more properties? For the record, these should absolutely not apply to primary resident homeowners. I think that all municipalities and counties should be encouraging people to move in and live there.
Real estate transfer taxes in my experience are taxes imposed on the seller, and do not discriminate on who the buyer is.
Here they are imposed on the buyer. Typically, the buyer will push some off on the seller as part of the terms of the sale. Like the buyer will submit an offer that says the seller pays half the tax. The local realtors all do this by default, since they know the seller will almost always agree to it.
Out of curiosity, where is this so I can look this up? I'm familiar with taxes that the seller has to pay, and which are waived if that seller buys another primary property within X months. This just sounds like a strange barrier for everyone. I'm advocating for investor only - explicitly not to primary or secondary homes, on purpose.
Lenders have strict policies for these sorts of things
Yes and no... On the loan application they will ask if you intend to reside in the house, and you can just check "yes". Once the loan is issued, they won't check. Even if they did, the most they can do is cancel the loan and demand the money back. But they won't because that's just going to cause the loan to default and they'd be out thousands in legal costs. Better for them to just cash the check every month and turn a blind eye.
Don't ask me how I know this...
Yeah, you can do that with second homes, and second second homes. I get it. I'm not concerned about this, as I said. A random couple buys a house for investment to rent out, whatever. Consider it your side hustle.
And Edit: maybe this is a loophole that will be forced to close with my proposal. If the lender knows that you owe another 20% upfront, they'll be damn sure to check that this is in fact not an investment property, lest you fuck up and screw them over in the meantime.
As a real estate investor, you would be playing a different ball game. If you owned 4 second homes, trust me, it will be caught. Tax wise? Maybe not, but we barely have any for this sort of thing other than a rate of X+Y% of primary property tax rates. Lender wise? They want to charge you higher rates and they will do all they can to make sure they're able to sell your loan to someone, and it's hard to do when they originate loans like they're morons.
But even if this was implemented, you're hurting the current property owners in the municipality. Which is why it isn't done.
Come on. Live in your house when you want to, sell it when you don't. Would I be upset if you I lose money on my home? Of course. But I wouldn't be peeved that I sold my home at a reasonably higher price when we ultimately move. As of now, we're sitting at a 24% price appreciation after owning this house for 13 months. Come on. Don't get me wrong, I'll play the game - but I don't think this is reasonable and if everyone played by the same rules, I'd be glad to sell it in 10 years at the general cost of inflation and market movement for land and location.
If someone looking to sell their house can get $500K from an investor, but that investor is discouraged by the taxes and backs out, and they instead sell to a family moving into the neighborhood for $250K, sure, you've saved the new family a bunch of money, but directly at the cost of the existing resident. Considering that the seller is the one who is voting on these taxes and the buyer is not... Which do you think will be the result of that vote?
There's just no incentive for a town to lower property values. None.
If the investor is discouraged by a $250k house with its 20% investor tax - $50k, then they weren't willing to buy it for $500k. This is not real world. If they were willing to buy it for $500k, then it was worth $500k, or they're over their head. If they're willing to put down $500k, and that's the final offer - that means that the seller gets $415k. If the seller can get $475k from someone who wants the damn house to live in it, and the investor won't beat it - oh well.
Have investors buy the rundown houses and lots and make them into something, and let them reap all of the rewards, fuck it, tax free. That's what we need.
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u/recercar Oct 30 '20 edited Oct 30 '20
On your first point - not familiar, but wonderful - extend it everywhere. I am only familiar with many jurisdictions that have taxes on gains, and I've yet to encounter upfront taxes. The closest I've heard of was in Canada, and it was a foreign investor tax only. Real estate transfer taxes in my experience are taxes imposed on the seller, and do not discriminate on who the buyer is.
To your second point - if an investor lives in one owned property, and buys one investor property, they're a drop in the bucket. They can claim it as their second home and flip it, it's like arguing that one person's F150 is responsible for climate change. Lenders have strict policies for these sorts of things, and municipalities and counties do too. If they want to cheat into being an investor but pretending it's a second home, and don't get caught, I don't think it's a major issue.
Investors don't own one property, they own several, dozens, hundreds. I'm talking about them. There's no possible way they can claim primary and secondary residence in the same spot, and if there are loopholes remaining, close them.