November 19, 2013
2755 Fillmore Sells For $9,999,998 And The Likely Reason Why
Originally listed for $12,500,000 in mid-October prior to being "modified" to $10,950,000 after a week on the market, the sale of 2755 Fillmore has closed escrow with a reported contract price of $9,999,998.
While the $9,999,998 sale price might seem a bit odd to some, keep in mind that a sale at $10,000,000 would have increased the transfer tax for the transaction by $50,000 (from $200,000 to $250,000) as the transfer tax rate jumps by 25 percent for sales of $10,000,000 or more.
And while a 25 percent jump in the transfer tax rate might seem stiff, it's nothing compared to the 167 percent jump in the rate for sales as soon as they hit the $5,000,000 mark.
First Published: November 19, 2013 12:00 PM
Comments from "Plugged In" Readers
So it is a flat rate tax within bands, not a marginal rate? Perhaps the city should take a look at the IRS, or there will be a lot more sales like this.
[Editor's Note: That's correct.]
Posted by: conifer at November 19, 2013 12:46 PM
Why in this day of fancy pocket calculators and personal computers equipped with floppy disks and such can we not compute a smooth curve for sales price vs. transfer tax ?
With that huge jump at $5M it seems likely that there will also be a cluster of sales just below that and nothing between $5M and $5.1M
Posted by: The Milkshake of Despair at November 19, 2013 1:31 PM
From the Assessor's website:
What is the Transfer Tax Rate for the City and County of San Francisco? If entire value or consideration is:
More than $100 but less than or equal to $250,000, the tax rate is $2.50 for each $500 or portion thereof;
More than $250 but less than $1,000,000, the tax rate is $3.40 for each $500 or portion thereof;
$1,000,000 or more but less than $5,000,000, the tax rate is $3.75 for each $500 or portion thereof;
$5,000,000 or more but less than $10,000,000, the tax rate is $10.00 for each $500 or portion thereof;
$10,000,000 or more, the tax rate is $12.50 for each $500 or portion thereof.
My point is I doubt this was indexed to inflation as the levels are absolute round numbers. This may become more of a burden in the future.
Posted by: d-b at November 19, 2013 2:20 PM
The transfer tax schedule was created by measure n in the 2010 election.
I believe you are correct about the inflation indexing.
Posted by: lyqwyd at November 19, 2013 2:39 PM
From the argument in favor of measure N:
"...Proposition N will help fund vital city services when the largest downtown office buildings are bought and sold. It will NOT impact homeowners or small property owners."
emphasis mine. Seems like this will affect more and more homeowners as time goes on.
Posted by: The Milkshake of Despair at November 19, 2013 3:05 PM
If my condo that I bought for less than $500,000 ever inflates to $5 million, I'll be happy to pay the extra $25,000 that prop N raised the transfer tax and would even say it didn't impact me. Prop N raised it from 1.5% to 2%, it did not change the rates for properites below $5 million.
Posted by: Rillion at November 19, 2013 3:36 PM
Rillion - I think that the extra you'd need to pay if the sales price were 4,999,999 vs 5,000,000 is closer to $62,500, not 25,000. Maybe I got the math wrong though. lessee ...
$5,000,000 is 10,000 $500 bills
If sold for $4,999,999 and taxed at $3.75 for each $500 (the $1-5M rate), that's $37,500
If sold fort $5M and taxed at $10 for each $500 (the $5-10M rate), that's $100,000
difference is $62,500 extra paid in taxes for receiving $1 more in sales price.
Even rich people don't mind receiving an extra $60K.
By the way, why on earth does the assessor express the payment in terms of "for each $500 or portion thereof" instead of just a simple percentage? Yeah, there are little differences depending on how close the actual sales price is to a multiple of $500, but come on assessor. At least use a cash chunk that is a power of ten.
Posted by: The Milkshake of Despair at November 19, 2013 5:20 PM
From my earlier post, I suggested this would have a hard time selling over $10m.... Just saying. :)
This is a pretty good outcome for this property and its hard to price these homes. Not sure I would have gone with such a high ask; but the strategy worked none-the-less and nabbed a buyer at $10m (plus or minus $2 :)
A sincere congrats to all.
Posted by: eddy at November 19, 2013 7:07 PM
How much was for the house and how much for the view?
Posted by: conifer at November 20, 2013 9:29 AM
Milkshake - You are completely ignoring that the transfer tax rate before Prop N was 1.5% for properties over $5mm. You specifically brought up Prop N, I specificially mentioned the effects of Prop N and the DIFFERENCE that resulted from Prop N.
Difference in transfer tax between $4,999,999 sale and a $5mm sale before Prop N, $37,500. Difference in same sale after Prop N, $62,500. Difference between pre- and post-Prop N sale, $25,000.
Was I not clear enough when I wrote "that prop N raised the transfer tax"?
Posted by: Rillion at November 20, 2013 9:51 AM
OK, I get it Rillion. Good thing I'm not a tax accountant!
Posted by: The Milkshake of Despair at November 20, 2013 10:19 AM
Maybe this was a deal? Considering someone just paid $1k/psf for a redone SFH in LPH on Sutter Street a block off Gough.
Every once in a while something happens that makes me scratch my head.
Posted by: eddy at November 22, 2013 4:44 PM