Homes sold for more than $2 million in San Jose now are billed an additional transfer tax, depending on the price point. San Jose already has a city transfer tax, which is $3.30 per thousand, which customarily is split 50/50 between buyer and seller. The new Measure E fee is on top of that amount.
The new Measure E transfer or conveyance tax is progressive, with higher values paying a steeper tax. There are not many homes in San Jose selling for over $10 million, but perhaps they wrote this in planning for future inflation of real estate sale prices. (Please keep in mind that right now the average house in San Jose is selling for about $1,850,000, so it may not be long before a $2 million house represents just something ordinary and not a luxury home.)
• $7.50 per $1,000 of transfer value on properties priced between $2 million and $5 million
• $10 per $1,000 of transfer value on properties priced between $5 million and $10 million
• $15 per $1,000 of transfer value on properties priced at $10 million and above.
For example, let’s see how those dollars play out in real life. This morning I ran the numbers (pulled from the Old Republic Title website, which anyone can use – see the page for net sheets). Please note that traditionally the seller pays the county transfer tax here, and the city transfer tax is split 50 / 50 between the buyer and the seller. This is not fixed by law and can be negotiated. The chart below displays who pays how much if it were handled the common way here today.
Who pays the new Measure E transfer tax?
While the regular San Jose transfer tax is customarily split 50/50, and so far, it seems that the Measure E tax is being paid the same way.
Where does the Measure E money go?
The funds raised from this tax will go to help the homeless and to provide affordable housing in the city. Read more about the funds will do to help locally on the city’s housing investment plans page.
What if your purchase price is just over $2 million?
There are ways to get a $2,001,000 or similar borderline home price below the threshold. We see this often enough when there is some reason for a buyer to want to lower the sale price. Since some sale costs are customarily paid for by the seller, one work around is for the buyer to pick up some of those costs and request a lower sale price. Just this week I saw a home close escrow at $1,999,999. You can see from the chart above that buyer and seller both saved quite a bit of money by keeping it under the threshold for the Measure E tax.
Is this impacting the luxury real estate market in San Jose?
So far, I have not seen any noticeable impact. Clair and I recently have been working with home buyers who were looking in San Jose (Almaden Valley, west San Jose with Cupertino schools, Cambrian, Berryessa), Cupertino, Los Gatos, and Saratoga, and so far we have not found anyone saying that they were going to avoid buying in San Jose because of the extra tax.
Most of our buyer clients are motivated by good schools and shorter commutes (as much as possible), and they don’t seem to balk at the one time cost of buying where they want to buy. (I’m pretty sure if it was an additional property tax item that would be a different matter.)
Lastly, it should be noted that in Santa Clara County, only 3 cities have a transfer tax: San Jose, Mountain View, and Palo Alto. Of those, this extra transfer tax is only in San Jose.