The looming January 1, 2013 “TAX CLIFF” is Prompting High End Listings

Wealthy home owners are reportedly contacting their real estate agents with an urgent request: They must sell their home within the next five months, CNBC reports.

Why are they suddenly in such a rush to sell?

Wealthy home owners—those with million-plus home values—are seeing Jan. 1 as a deadline to sell their home in case Congress allows the Bush tax cuts to expire and for capital-gains taxes to rise (the current 15 percent rate could rise to 20 percent). If these go into effect, wealthy home owners could owe millions of dollars more in taxes on their home sales, CNBC reports.

“Real-estate experts say that, as more of the wealthy sell out of fear of a tax increase, they could drive up inventory and lower prices in the top of the real estate market, which has been one of the few bright spots in the economy,” CNBC reporter Robert Frank writes. “Any softening at the high end, or a spike in inventory, could ripple through the housing market and add new pressure to prices, although it could also increase sales volume.”

Some sellers are in such a rush to sell that they are even accepting lower asking prices in order to avoid the possible increases in taxes next year.

A New York real estate broker says she’s been getting more listings recently from sellers who are being driven by tax fears. For example, she had sellers who “were on the fence on whether to sell, but when they considered the [fiscal tax] cliff, they decided to list. They want to do this quickly. The message to me is, ‘Get this done now.'”

Regardless of what happens with the Bush Tax cuts and the decision on an increase in the capital gains rate from 15% to 20%, the existing capital gains exclusion of $500,000 for married couples and $250,000 for single taxpayer will continue to be in effect.