As soon as the clock struck midnight on January 1, 2015, a number of new laws went into effect. One new regulation receiving little attention is Assembly Bill 1888, which requires transfer tax amounts for all real estate sales to be recorded on the new deed.
Previously, both buyers and sellers were able to shield that information from public accessibility by filing this information separately from the deed. With the passing on AB 1888, this information will be mandatory for both commercial and residential transactions.
Although the tax disclosure doesn’t specifically state the price paid, it is directly connected to the value of the property, and with some simple math, the property price can be easily determined.
Sponsored by the Appraisal Institute and authored by Assemblyman Phil Ting (D-San Francisco), the goal of the law is to help provide a more accurate picture of property values. Many Silicon Valley-ites who prefer to keep their real estate dealings discrete may find this law unappealing, especially developers, corporations, and people purchasing high-end estates in Atherton and other wealthy boroughs.
The transfer tax provides an important piece of the transaction puzzle but doesn’t offer key valuation issues such as unique buyer and seller impetuses or other reasons that impacted the sale price. Appraisers, who are generally in favor of the new bill, claim the availability of transfer tax information speeds up and regulates information access. The California Association of Realtors (CAR) supported this measure because of information accessibility and public record transparency.
A good majority of real estate transactions already have the transfer tax listed on the deed, as most people either don’t know how to ‘hide’ this information or they aren’t concerned about it being public knowledge. But even when this information was purposefully kept off the deed, it was still publicly available, though it took a significant amount of Sherlock Holmes sleuthing to dig up the details.
One of the key reasons for enactment of AB 1888 was to eradicate confusion surrounding access to records on transfer taxes. A Senate Governance & Finance Committee analysis found “disparities from county to county in how information about (transfer tax) can be obtained.” According to the report, “In some counties, the recorder’s office will disclose the amount of (documentary transfer tax) to anyone who requests that information for a specifically-identified recorded document. In other counties, a Public Records Act request must be filed to learn the amount of DTT paid on a recorded document. In at least one county, the amount of tax paid may not be provided even in response to a Public Records Act request.”
In the weeks prior to the New Year, word about the bill was being shared as title companies, real estate attorneys and others in the know communicated the details of the law with their clientele. It remains to be seen if there is a backlash, or how those who prefer privacy attempt to circumvent the new ruling. Two theories are floating around as to how this might occur: buying the entity that owns the property versus the real estate itself or exaggerating the transfer tax to provide incorrect data at the outset. Both options run up against challenges.
It is also possible that, after some initial pushback, buyers and sellers simply learn to live with the transparent transfer tax disclosure.
“It’s a good thing for appraisers, but also a good thing for the market, because it makes it more efficient,” states Stan Tish, principal with Silicon Valley appraisal company, Berliner, Kidder & Tish. “It can operate with better knowledge. The real estate market is illiquid and inefficient compared to the stock market. You can know the value of a company instantly. In real estate transactions, it takes a long time, and being able to know all the sale prices gives everyone in the market more knowledge.”