Archive for August, 2012


New Federal Tax on Investment Income

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On January 1, 2013, a new 3.8% Federal tax on the investment income of individuals, estates, and trusts is scheduled to come into force.  The tax was enacted in 2010 as part of the Administration’s health care legislation, and there is of course some political uncertainty regarding whether Congress will amend or repeal it before it comes into effect.  For the time being, though, we need to be prepared for this new tax that will be imposed on interest, dividends, annuities, royalties, rents, capital gains, and certain other items.  The tax will be in addition to all otherwise applicable Federal, state, and local income, transfer, and other taxes.

This memorandum focuses on the tax’s application to owner-occupied residential property (including single-family homes, condominiums, and cooperative apartments).1   Although the tax is complicated, here are a few simple rules to guide you:

  • In general, if an individual’s home is sold, the 3.8% tax will be imposed on the gain “recognized” by the seller (and not on the gross purchase price).
  • As you are aware, a limited portion of an individual’s gain on the sale of a primary residence (generally, $250,000 for a single individual, and $500,000 on a joint return) may not be taxable for ordinary Federal income tax purposes.  The same rule applies for purposes of the new tax.
  •  If the seller’s “adjusted gross income” (with certain modifications) is below specified levels (generally, $200,000 for a single individual, or $250,000 on a joint return), the seller may be exempt from the new tax.

We hope that this general guidance is helpful to you.  However, each seller should consult with a qualified tax advisor to determine the application of the new tax, as well as the application of all other tax rules, to the seller’s particular circumstances. 

For more information on this Federal Tax,  see our post “The New 3.8% Real Estate Tax Is Coming” and the document explaining the new tax with examples.

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In the News: August 26, 2012

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08/20/2012  Sales of high-end pads jump 36%:   The number of contracts signed in Manhattan at over $4 million so far this summer stands at 106. Prices, however, are flat and properties are taking slightly longer to move.  See the story at Crain’s New York   

08/20/2012  The Dakota, New York’s most exclusive building:  The Victorian-era German Renaissance co-op apartment building at 72nd Street and Central Park West is best known as the home shared by John Lennon and Yoko Ono from 1972 to 1980 and the site of Lennon’s murder. Ono still lives there, as do many other celebrities, but being famous is no guarantee of residency at the Dakota, and neither is simply having ample savings.  See the story at Yahoo! Real Estate 


How’s the Market – July 2012

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While Quarterly Sales Reports show closed activity for the previous quarter, monthly Contract Signed reports are the ‘crystal ball’ of closed sales to come.  Granted all contracts signed for any given month may not close in the next month, and some may not close at all but most (over 95%) will become closed sales which will become part of the next Quarterly Sales Report.

In the following charts and graphs you can see how the market stacks up against last month and this month last year.






In the News – August 19, 2012

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08/15/12  In Manhattan Home Search, Some choose to Go Big:  There are a small, but growing group of New Yorkers with deep pockets and the stomach for renovations, some are creating single-family homes out of an apartment building.  Behold the return of the urban mansion.  See the full article in the Wall Street Journal 

08/16/12  Refinancing a Vacation Home:   Homeowners who want to take advantage of historically low mortgage rates and refinance a vacation home should be prepared for stricter loan requirement especially if they rent out the property.  See the full article in the New York Times

08/17/12  Rent or Buy?  Blanching at their rent bills, more New Yorkers are being forced to confront that age-old question, should I rent or does buying make more sense?  See the full article in the New York Times 

08/19/12 Upper East Side  fourth-grader Samuel Wohabe is cooking up quite a career in food: White House ‘State Dinner’ is next for the 9-year-old upper East Sider and co-winner of national Healthy Lunchtime Challenge  See the article in the New York Daily News


Staging more Prevalent in New York Real Estate

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Thanks to realty TV shows that have convinced us that aesthetics is paramount when selling a home, stagers have become visible part of the New York City real estate scene.  And they don’t come cheap.  Most charge a consultation fee of a few hundred dollars then hundreds to thousands to follow through with the vision they created. 

Stagers see their job as stripping apartments of anything that might distract a buyer; strong paint colors, distracting artwork, family photographs and personal items.  Then they add small touches to win over buyers.  Mostly the job is to show buyers how a space can be used; creating a vision of what life could be like in a particular apartment.

Usually brought in by brokers, stagers are  paid by owners, to hopefully sell apartments for more than they could have or more quickly than if they had not set the stage.  They have to be part best friend, part worst enemy, and tread carefully around sometimes fragile egos.  Who wants to hear their decorating taste isn’t up to the challenge?  Sometimes a stager’s advice is unwelcome, even completely disregarded, causing the loss of a listing because the seller is offended.  Occasionally, the seller falls back in love with their apartment after staging, and decides to stay, taking the apartment off the market.

In New York City, stagers have the added challenge of dealing with co-op rules, freight elevators and superintendents.  Their costs include overhead, storage units for the furniture, artwork and linens, labor, paint, and the little touches that most people can’t even imagine.

Sellers don’t need to go overboard with the staging.  In most cases buyers aren’t interested in buying what’s there.  They just need to see the space in a positive light.  Whether the seller runs with the advice from the initial consultation, or goes for the full package, staging can help the buyer see the possibility of their family in the space.

When prepping your home for buyers, some areas need special cleaning efforts.

Lose the clutter:  It distracts buyers. 

First Impressions:  The entry sets the first impression for any potential buyer.  Make sure it shines.   Lose the clutter, polish the furniture, vacuum the rug, and clean the floor.

Kitchen:  Make sure the dishes are done, and the counters are clear, clean and sparkling.  While on the market, try to avoid making or serving meals that give off strong odors that linger for hours.

Bathrooms:  Make sure the tile and grout are sparkling clean.  Mildew is a big turn-off.  Clear out the personal paraphernalia and make sure your medicines are locked up and out of sight.

Everywhere else:  Spotless is the way to go.  Clean the windowsills, picture frames, light fixtures, baseboards, cabinets and shelves (yes people will look in your medicine and kitchen cabinets!).  Wipe the doors around the doorknobs, the walls around the switch plates, and the front of appliances.   Make your bed with fresh linens.  If time is an issue, occasionally skip the upper shelves and tops of cabinets.


Inspired by New York Times article and New York Times article.

Categories : Manhattan, Selling, Staging
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The friendly rivalry between London and New York City just tipped in New York’s favor in the global competition for wealthy buyers of million-dollar homes.  According to a recent study by Knight Frank, an international property consulting firm in London, the difference hinges on the tax burdens faced when heading to the closing tables in each city, with New York real estate purchases  over $3.1 million (about £2 million) resulting in about half as much in transaction taxes as those in buying in London.

In March, the British government raised the ‘stamp duty’ on properties valued over £2 million from 5% to 7% of the total purchase price.  Offshore corporations pay a staggering 15% to capture the revenue from wealthy foreigners who are the biggest buyers of central London properties.  For years, they have been legally avoiding paying stamp duty by structuring their deals through offshore entities.  Foreigners will also be subject to capital gains taxes when they sell their British properties.  The total sales in central London over £2 million has fallen by at least 3% from April to July compared to the same period in 2011.

Members of the London real estate community are outraged, saying the government is trying to wring more revenue from a thriving part of the British Economy.

European countries, who are struggling with recession and deficits, including France and Italy, have made similar moves to extract more from the wealthy.

Many billionaires who are, for the most part, obsessed with secrecy, tend to hide their identities inside complex corporate structures to protect their privacy.  These corporate structures will now cost buyers additional tax to protect their privacy.

The big question is, will the higher cost of buying in London and other cities in Europe drive high-end buyers to New York?  Even though New York is lagging in revenues, and already impose a ‘mansion tax’ on purchases of more than $1 million, there haven’t been any serious moves to push real estate taxes higher at this point.

Inspired by New York Times article


In the News – August 12, 2012

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08/05/12:  Surge in shipping has New York hot on L.A.’s heels:   New York is the nation’s third-busiest port, right behind L.A. and neighboring Long Beach. But the region is growing at a faster pace than its West Coast rivals.  According to reports, two-way trade through New York’s seaports and airports increased by 18% in 2011 over the prior year, to $418.3 billion, while L.A.’s traffic grew by 12%. Chinese imports grew at a faster rate for New York than for L.A., accounting for much of the discrepancy.  Read the full article at Crain’s New York Business.   

08/07/12  MTA Bus Service Restorations  From New York State 26th Senate District Senator Liz Krueger  

08/09/12  Parisian Bakery Maison Kayser Opens on UES Upper East Siders were eagerly soaking in the je nes sais quois — and world-famous French bread — as baker Eric Kayser’s first U.S. brasserie-styled café opened Wednesday Read the full story at

 This week, we released our Second Quarter report for the Hamptons & North Fork Sales Market.  Hamptons & North Fork Sales Overview Q2 2012 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

 “The East End recorded its highest number of spring market sales in six years.”

  • There were more sales in the second quarter spring market than there has been in any second quarter throughout the past six years. The second quarter total was 676 sales, 9.2% more than 619 sales in the prior year quarter.
  • Listing inventory was 2,452, 5.3% above 2,329 in the same period last year. As a result, the monthly absorption rate, the number of months to sell all listings at the current pace of sales, was 10.9 months, faster than the 11.3 months in the prior year quarter and the 12.9 month six-year average.
  • Median sales price was $735,000, 4.1% below $675,250 in the prior year quarter. Average sales price slipped a nominal 0.4% to $1,507,255 from $1,513,636 over the same period.
  • Days on market, the number of days from the last price change to contract date, was 193 days, 5 more than 188 days in the prior year quarter.
  • Listing discount, the percentage difference between the list price at time of contract and the sales price, slipped to 11% from 11.4% in the prior year quarter.


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