Industry Braces for Rush to Close Real Estate Deals : Escrow Firms, Recorders Swamped as Many Try to Beat End to Tax Breaks
Like punch-drunk boxers entering the final round, real estate specialists across California are bracing for today’s last-minute rush to push through and record property sales before year-end.
Though the end of the year is normally a busy time at county recorders’ offices, the end of 1986 has been more crazed than usual, real estate specialists and civil servants say.
“It’s like a zoo,” San Diego County Recorder Vera Lyle said, referring to the long lines and record filings in her office Tuesday.
“In the 30 years I’ve been in the title business, I’ve never seen more closings than the last few days of this year,” said Sonny Vigil, manager of Fidelity Title in San Diego.
Benefits Will Decline
The additional last-minute crunch comes from those trying to capture the tax benefits of selling residential and income-producing properties before the start of 1987. The tax reform law, signed by President Reagan in October and set to go into effect Thursday, curtails depreciation benefits on income-producing property and raises the capital gains tax on home sales.
The year’s end will arrive none too soon for beleaguered real estate support companies, particularly hard-pressed escrow and title companies that have already been laboring under abnormally heavy workloads for months.
These firms act as middlemen in real estate transactions. They hold the down payment and ensure that the property being sold is free of liens.
“The escrow companies are jammed,” Santa Monica real estate attorney Thomas Nitti said. “They’re working 4 a.m. to midnight. They’re bursting at the seams.”
That, apparently, is no exaggeration.
Becky Austin of Beverly Hills Escrow said her office has been opening at 3 a.m. and does not close until early evening.
“We’re at the end of our wits, the end of our patience, the end of everything,” Austin said in a brief phone interview. “We are bruised and beat. I don’t know what (else) to tell you.”
Just reaching harried escrow and title officials these days is something of an accomplishment.
“We’re so swamped we can’t talk to The Times,” said a harried employee of Brentwood Escrow in West Los Angeles.
Many escrow and title companies are still reeling from the work generated earlier this year when thousands of homeowners flocked to refinance their mortgages after long-term, fixed-rate home loans fell below 10% for the first time in years.
Still Many Refinancings
“We’re seeing a lot of escrow refinancings from the first and second quarter that--believe it or not--are just now closing,” said Warren Vaughn, president of Western Mutual Escrow Services, which has 10 offices in Southern California.
County recorders’ offices ultimately feel the brunt of this activity because they must record the property transactions and collect the title fees. Mortgage refinancings are recorded because they require new deeds of trust.
County recorders say that all transactions will be recorded before the end of the year as long as applicants are in line before the close of business today. That closing time, though, varies widely--from noon in Marin County to 5 p.m. in Los Angeles County.
Los Angeles County Recorder Charles Weissburd said that as many as 10,000 recordings may be handled today, compared to the normal year-end load of about 7,500.
“We’ll stay as long as necessary (to get the properties recorded),” Weissburd said. “To midnight and beyond, if that’s what it takes.”
Near-Record Pace
Recordings in Orange County, already running at near-record highs this year, may surpass 4,000 today, according to Orange County Recorder Lee Branch. Normal volume for a Dec. 31 is between 3,000 and 3,500, he added. “It has been a freak year,” Branch said. The new tax law affects property owners in two vital areas. First, the current 19-year depreciation period for income-producing property will be stretched to 27.5 years for residential rental property and to 31.5 years for office rental property.
Second, the maximum capital gains tax is being raised to 28% from 20%. This affects property owners who sell their homes and do not buy another house of equal or greater value within 24 months, tax attorney Nitti said.
Some big deals are going right down to the wire.
One is a multimillion-dollar sale and lease-back agreement involving the headquarters building of Northview Corp. in San Diego. That deal is not expected to close until late today, according to John Burnham & Co., the company brokering the deal.
Not everyone is affected, of course. Life in California’s leisurely rural counties continues largely unperturbed, tax codes changes or not.
“First I’ve heard about anything like that,” said Peter Ithurburn, recorder for Lassen County, located along the Nevada border in northeastern California. “Not that many properties change hands here.”
Tom Furlong reported from Los Angeles and Bill Ritter from San Diego.
