Every month economic indicators help us gauge the depth of the recession and give us hints about recovery, and none are more telling than those that focus on the housing market. Are homes selling? How quickly? Are prices rising or falling? And how many are in foreclosure?
As Realtors, working with thousands of people looking to buy or sell a home every day, we have had a front seat for this recession. While there are signs of improvement, the past 18 months have been some of the most difficult times for home owners in recent memory. Many homeowners have found they owe more to the bank than their homes are currently worth. Others who have lost jobs and cannot make mortgage payments find they have to borrow money to pay taxes and fees to sell the home they can’t afford.
Foreclosures have risen significantly and the end is not yet in sight.
More than ever, struggling Connecticut homeowners need tax policies that support, not undermine their ability to stay in their homes, or get themselves out of difficult financial situations without additional distress.
This year the Realtors have supported a number of proposals, several of which have been collected in Senate Bill 434. Among the provisions, the conveyance tax on sales would no longer apply to homes in foreclosure, or to those who are in upside down sale situations where they owe more than the home sells for. An additional provision supported by the Realtors that would have exempted active military personnel and surviving spouses of those killed in service was removed from the bill.
Oddly, the tax on foreclosures has generated an agreement among longtime opponents of the conveyance tax and its supporters. Everyone but a select few seem to agree that asking homeowners already in financial trouble to pay an additional tax to lose their home seems heavy handed.
Senate Bill 434 would also extend the sunset of what were intended to be temporary increases in the real estate conveyance tax enacted in 2003, and set to expire the following year. As every expiration date came close, the legislature took action to extend it amid pleas from municipal officials who say they will be lost without the revenue the tax generates. The difference this year is that municipalities, like everyone else in this economy, are struggling to fund basic services like education.
The Realtors have a longstanding opposition to the conveyance tax because it is bad policy. The levy is imposed on the sale price, not equity or ability to pay. Most home sellers don’t realize they owe the tax until they are well into the process. Supporters of the tax claim there is no evidence the levy has ever stopped a home sale, but Realtor after Realtor has firsthand stories about home owners who have opted to hold off putting a home on the market after calculating closing costs and taxes.
The 17,000 Realtors who work with homeowners every day are also part of the communities where they do business. We are members of local boards, our children attend public schools and potholes that need repair appear in the streets in front of our homes too. We have no intention of dropping our opposition to the conveyance tax, but we understand that our city and town governments need revenue.
The bill before the legislature would sunset the conveyance tax increases in 2012, and the Realtors will oppose any efforts to extend the taxes at that time, or to make them permanent.
In the meantime, the bill before the legislature would provide much needed relief to home owners in foreclosure or selling short. It is imperfect, but we support the effort to exempt those most vulnerable.
Nicholle Dagata is president of the Connecticut Association of Realtors