How much does it cost to sell an apartment building in Los Angeles?
Budget for four things: brokerage commission, transfer taxes, escrow and title, and whatever the buyer negotiates off the price during due diligence. Commission on LA multifamily generally runs 2% to 5% of the sale price, with smaller buildings at the higher end because the work does not scale down. Inside City of Los Angeles limits, Measure ULA is usually the largest single line above its threshold, and it is charged on the gross price whether or not you made money. The number that matters is net proceeds, not price, and the two can rank two offers in opposite orders.
Answered by Shaya Lowenstein, a Los Angeles multifamily broker at Lyon Stahl Investment Real Estate, CA DRE 01942326, with 15 years in apartment buildings and land across Los Angeles County. His closed sales are published with addresses and recording dates, so anything claimed here can be checked against the county record.
Start typing the address. The answer comes from the county roll and the city ordinance, on this page, free, with no email required.
The four real line items.
Commission is negotiable and is the one most sellers focus on, usually at the expense of the others. Transfer taxes are not negotiable: the county and the city both charge a documentary transfer tax on the deed, customarily paid by the seller in Los Angeles, and inside City of LA limits Measure ULA sits on top of those above its threshold. Escrow and title fees are modest by comparison and their split between buyer and seller is customary rather than fixed, so it is a term you can trade. The fourth item is the one nobody budgets for and it is frequently the biggest: what the buyer takes off the price after due diligence. An open soft-story retrofit order, a SCEP inspection with outstanding items, unpermitted work, a tenant with no signed estoppel, or a rent roll that does not reconcile to the bank statements all become price reductions, and they are worth more in a renegotiation than they cost to fix in advance.
Why ULA changes the price rather than just the cost.
Measure ULA taxes the gross sale price, not the gain, so it does not behave like a cost at all above its threshold. It behaves like a cliff. A building priced just over a threshold can net its seller less than the same building priced just under it, which creates a dead zone that buyers understand perfectly well and price into their offers. Anything that could plausibly trade near a threshold needs the tax modelled into net proceeds before the listing goes out, not discovered on the estimated closing statement. The rates and thresholds adjust every July and the guide on Measure ULA carries the current ones.
The taxes that are not selling costs but decide whether you sell.
Federal capital gains, depreciation recapture at up to 25% on the portion attributable to prior depreciation, California income tax on the gain, and the net investment income tax are not costs of the sale in the escrow sense, and they usually dwarf everything that is. On a building held twenty years they routinely decide the entire question. That is what a 1031 exchange exists for, and it is also why "what does it cost to sell" is the wrong first question for a long-held property. The right one is what you net, in cash, after everything, against what the building earns if you keep it. I run that comparison before I talk about a listing agreement, and it is the reason a fair number of these conversations end with a refinance.
EDUCATIONAL ONLY, NOT LEGAL OR TAX ADVICE. RATES, THRESHOLDS AND ORDINANCES CHANGE, AND SEVERAL OF THE FIGURES HERE DEPEND ON FACTS SPECIFIC TO YOU. CONFIRM ANYTHING YOU PLAN TO ACT ON WITH YOUR OWN ATTORNEY OR CPA, OR WITH THE AGENCY THAT SETS IT.
What commission is normal for an LA apartment building?
Generally 2% to 5% of the sale price, trending lower as deal size rises: a $15M building does not carry five points and a $1.5M fourplex rarely trades at two. What matters more than the rate is what it buys. Get the marketing plan, the buyer list and the listing term in writing, and find out who actually runs the file day to day rather than who shows up to the listing presentation.
Who pays the transfer tax in Los Angeles, the buyer or the seller?
Custom in Los Angeles County is that the seller pays the documentary transfer tax, and Measure ULA is likewise a seller cost inside City of LA limits. Custom is not law, and it is negotiable in principle, but a buyer asked to absorb ULA will simply reduce the price by the same amount. Verify current rates and thresholds with the LA Office of Finance before you price anything.
Should I fix the soft-story retrofit before selling?
Usually yes, or at least get a bid and an engineer's scope. An open retrofit order is an unquantified liability, and buyers price unquantified liabilities pessimistically: the credit demanded is reliably larger than the actual cost of the work. Even if you do not do the retrofit, having a real bid in the file converts an open question into a known number, and known numbers do not move price nearly as much.
Does a 1031 exchange avoid Measure ULA?
No. ULA is a transfer tax on the deed, not a tax on gain, so a 1031 exchange defers the income tax and does nothing about ULA. Both still apply and they are calculated on completely different bases, which is why they have to be modelled separately in the net-proceeds math.
SHAYA LOWENSTEIN · LYON STAHL INVESTMENT REAL ESTATE · DRE #01942326 · (323) 944-2221