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January 16, 2013

REAL ESTATE Experts: Year End Sell Off Was Significant


By Rick Murphy

Jerry Della Femina may have been the poster child, but he wasn't the only Hamptons-based homeowner rushing to sell his house before 2012 ended.

In fact, it might have been a national trend. Sales in many markets saw considerable increases in 2012 – it is unclear how much can be attributed to a market recovery, and how many sales were triggered by the seller's desire to avoid paying more taxes.

"Our affiliates in New York, Manhattan, Westchester, all did well – there was a big boost all around," said Enzo Morabito, a top broker for Elliman.

With the capital gains tax scheduled to rise on January 1, more than a few sellers saved millions of dollars by completing a sale before the deadline.

The full extent of the sell off won't be known for another week or so – that's because many of the deed transfers have yet to be recorded and released by the Suffolk County Clerk's office.

"We had over $35 million in the last month," Morabito reported. "Normally we get a little buzz but nothing like this."

Kelly Bensimon of "Real Housewives" fame sold her Further Lane estate near the end of the year and "saved over $500,000," Morabito reported.

The capital gains tax went up by over eight percent on January 1, when the Bush tax cuts were eliminated for wealthy Americans. "The savings were substantial, so a lot of bull and a lot of posturing went out the window. The savings were so substantial you'd have to be a fool not to be flexible," Morabito added.

In another instance, a would-be seller with a confidentiality agreement who took his property off the table in the fall returned to the table "after the true implication [of the tax hike] came to light." In another instance a purchaser cooperated with the seller to close the deal in a hurry – and save the seller $1 million.

"One deal we literally went to contract on Friday and closed Monday," Morabito reported. "We did everything – title, termite, inspection, in three days. Of course, I pay a premium for that."

The Mortgage Relief tax was also set to expire – though Congress ultimately extended it. "That was a sigh of relief for anyone dealing with debt forgiveness," said John Brady, Senior Vice President of Nest Seekers, although he added, "No one was saying 'if I don't sell I'm doomed.'"

The sell off wasn't limited to just real estate. According to a Wall Street Journal article in November, "The prospect of higher taxes on capital gains is prompting many to unload some of their winning stocks." The WSJ reported that many money managers were advising clients to sell before the year ended. "The wave of selling is a twist on the usual year-end rush among financial advisers, who typically help their clients sell their losing stocks to offset gains from other investments," according to the article.

George Simpson, the president of Suffolk Research Inc., has been charting market trends for decades. "It's like a big ocean liner," he said of the local real estate market. "It doesn't change very often." If there were a selloff, he guessed, it would be "statistically insignificant."

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