High-end realtors have started to receive different proposals from wealthy homeowners. They’re suddenly demanding brokers to sell their properties in less than 5 months, and the main reason for this request is the fiscal cliff. Sellers are in a hurry to sell their proprieties before the 1st on January 2013. At that date, tax cuts imposed by former president Bush a few years ago will expire and fees charged will greatly increase. This will happen to owners who want to sell very pricy proprieties and who will find themselves owning the state millions of dollars in taxes. Being aware of this situation, people intend to vend their proprieties as soon as possible
Mansion Cliff Effects Homes That May Take Longer to Sell
Moreover, this phenomena is known as “The Mansion Cliff” and, according to real estate agents, it might have some serious casualties. This continuous hurry of the rich to sell because they are afraid will probably increase inventory rates and lower the prices of all the other proprieties. Considering the fact that this price increase on the real estate market was the only good thing that happened in years, the situation is very disagreeable. The housing market is about to be put again under pressure and since it was so close to collapse, such sudden modifications are not that welcomed
Nevertheless, there has been said that these exaggerated tax fears are unfounded and that the rates will not suffer any modification in the near future. There are voices that claim people worry too much for an insignificant issue, and that they should be more concerned by the real problems with whom the US economy is confronting. In addition, once the number of sellers grows so will the number of buyers. They are mostly from foreign countries and have become very interested in purchasing valuable proprieties in America. This is also considered to be an undesired fact because as soon as foreigners make such large investments in the real estate market, the other fields, like the stock market will be forgotten and the economic balance of the country will be disturbed. A similar situation occurred in 2010 when it was thought that the Congress will raise taxes. The aftermaths were terrible and prices on the real estate market decreased dramatically
Furthermore, even if the Bush taxes will conclude the growth, it will be with about five percent, a seemingly small difference; but when there are involved extremely valuable proprieties, those five percent are millions of dollars. Rumor has it that those who sell a second home, that has been in their possession for several years, will be forced to pay capital-gains taxes, these being the difference of price between the sale and the purchase price; thus, they will have no additional earnings, except that they will recover the initial investment
Taxes on Sale Go Up in 2013
For instance, if a house that was worth $38 million was bought few years ago with just $8 million and it suffered improvements of another $2 million, still the total earning was of $28 million, an incredible sum. In this case, the federal tax bill will currently be of about $4 million, but with the increases that are expected to take place next year it will probably reach $5.5 million a $1.5 million dollars difference. Also, a new heath-care tax might be approved in 2013 too, with a value of 3.8 percent, valuing about $250.000. And if another $1 million tax is added, the total difference will be of no less than $2.5 million, a large amount even for millionaires. What is more, for residences where people lived for two up to five years, there will be applied an exclusion tax of $500.000. However, brokers claim that this is not a decisive factor in houses that are worth over $10 million.