California AB 736: What Home Buyers and Sellers Need to Know About Proposed Transfer Tax Changes

If you own a home in California—or hope to buy one soon—you may want to keep an eye on Assembly Bill 736 (AB 736). The legislation has generated significant discussion throughout the real estate industry because it could reshape how local real estate transfer taxes are applied across the state.

What Is a Transfer Tax?

A documentary transfer tax is a fee collected by a city or county when real property changes ownership. Traditionally, most California cities have operated under a relatively low transfer tax rate, although some charter cities, including Los Angeles and San Francisco, have adopted substantially higher local transfer taxes through voter-approved measures.

What Would AB 736 Do?

The bill has undergone several amendments during the legislative process, but one of its primary goals is to establish statewide limits on local transfer taxes while allowing certain jurisdictions with existing higher taxes to continue charging above the statewide cap under specified circumstances. It also includes special provisions for higher-value residential properties and disaster-related exemptions.

The proposal has sparked debate because different organizations interpret its impact very differently.

Why the California Association of Realtors® Is Concerned

The California Association of Realtors® (C.A.R.) has publicly opposed AB 736, arguing that the legislation could:

• Increase closing costs for many homeowners.
• Make selling a home more expensive.
• Leave certain higher-value single-family homes subject to significantly higher local transfer taxes.
• Treat residential property differently than some commercial or multifamily property transactions.
• Create additional financial barriers for homeowners and small property owners.

From C.A.R.'s perspective, higher transfer taxes could discourage homeowners from selling, reduce available housing inventory, and ultimately make it more difficult for buyers to find homes.

Supporters See a Different Outcome

Organizations supporting AB 736 argue that the bill would create statewide limits on transfer taxes, reduce some of the highest existing local transfer taxes, and provide greater consistency across California. They also contend that local transfer tax revenue helps fund affordable housing, public safety, infrastructure, and other essential community services.

How Could This Affect Home Sellers?

For sellers, transfer taxes are often paid at closing. If local transfer taxes increase, homeowners may experience:

• Higher transaction costs.
• Reduced net proceeds from the sale.
• More difficulty pricing homes competitively if buyers factor additional closing costs into negotiations.
• Less incentive to move, particularly for long-time homeowners.

Luxury homeowners could experience an even greater financial impact depending on where their property is located and how local governments choose to structure transfer taxes if the legislation becomes law.

How Could This Affect Buyers?

Although sellers often pay transfer taxes, buyers are not immune to the effects.

Potential impacts include:

• Sellers adjusting asking prices to offset higher taxes.
• Fewer homeowners choosing to sell, reducing inventory.
• Less flexibility during negotiations.
• Reduced affordability if transaction costs continue to rise.

In an already challenging market with elevated mortgage rates and affordability concerns, any increase in transaction costs can influence buyer behavior.

The Bigger Picture

California continues to face one of the nation's most significant housing shortages. Policymakers are working to balance several competing priorities:

• Expanding affordable housing.
• Funding local government services.
• Protecting homeowners.
• Encouraging housing production.
• Maintaining healthy real estate activity.

AB 736 has become part of that larger conversation, with supporters emphasizing local funding and housing investment while opponents warn about increased costs for homeowners and potential impacts on housing supply.

Final Thoughts

Whether you're planning to buy, sell, or simply own property in California, legislation affecting transfer taxes deserves attention because it can directly impact the cost of real estate transactions.

As this legislation continues through the legislative process, homeowners should stay informed and understand how any final version of the bill could affect their local market.

As your trusted local real estate advisor serving Westlake Village, Thousand Oaks, Agoura Hills, Calabasas, Lake Sherwood, and the surrounding Conejo Valley, I'm committed to keeping clients informed about changes that may affect their real estate decisions. If you have questions about how proposed legislation could impact your home's value, selling strategy, or purchasing plans, I'm always happy to help.

Tina Lucarelli (310) 738-8089 | DRE 02102354