Buying new construction in California

A finished building, the same report

A completed condominium in California is still sold under the Department of Real Estate’s final public report, described in our pre-construction guide. What changes is the timing. Contract to closing can take weeks rather than years, so the closing costs arrive quickly, and in some cities they are large.

Taxes at closing

Every California county may charge a documentary transfer tax of $1.10 for every $1,000 of the price, under section 11911 of the Revenue and Taxation Code (opens in a new tab), and some cities add their own. In the City of Los Angeles the city adds 0.45 percent, and Measure ULA (City of Los Angeles Office of Finance, opens in a new tab) adds 4 percent of the whole price on sales above $5.4 million and 5.5 percent from $10.9 million. Those thresholds took effect on July 1, 2026, and change each July.

San Francisco, which is both a city and a county, charges one tax that rises with the price and applies to the whole of it, from 0.5 percent on the smallest sales to 5.5 percent from $10 million and 6 percent from $25 million. The city has debated lowering its top rates, so check the current schedule before you offer.

The contract says who pays. In California these taxes usually fall to the seller, but a developer’s contract can move costs to the buyer, so read its closing cost section. Expect title insurance, escrow fees and, in many new buildings, a contribution to the association’s reserves at closing.

Property tax, and a second bill

Under Proposition 13, property tax is 1 percent of the assessed value plus local charges voters have approved. The assessed value starts at the purchase price and rises no more than 2 percent a year after that. A primary home also takes a $7,000 homeowners’ exemption off the value.

A purchase also brings a supplemental assessment (California State Board of Equalization, opens in a new tab): a separate bill, on top of the annual one, for the difference between the new value and the old, prorated to the end of the fiscal year on June 30. With a new home the old value may be only the land or a partly built house, so the supplemental bill can be large. It is mailed to the owner, so plan to pay it yourself.

Many newer neighborhoods, in Irvine above all, lie within community facilities districts, known as Mello-Roos districts, which levy a special tax on each home to repay the bonds that built their roads, schools and parks. The buyer receives a notice of the special tax before the sale, and the tax appears on the property tax bill for as long as it runs.

What the builder owes you

California’s Right to Repair Act sets standards for new homes sold since 2003, condominiums included, covering the structure, the systems, water getting in and more. Under Civil Code section 900 (opens in a new tab), the builder must give a written warranty of at least one year on fit and finish: cabinets, flooring, countertops, paint and trim. Under section 941 (opens in a new tab), most claims under the act may be brought up to ten years after the home is substantially complete, and some components carry shorter periods.

Before suing, the owner must give the builder written notice of the claim. The builder then has 14 days to acknowledge it, may inspect and may offer to repair. A builder that skips those steps loses the right to insist on them, and the owner may go to court.

Questions to ask before you sign

1. Which transfer taxes and closing costs does the contract pass to me?
2. At this price, does Measure ULA apply, and at which rate?
3. What will the supplemental tax bill come to, and when will it arrive?
4. Is the home in a Mello-Roos district? What is the special tax, and when does it end?
5. Which warranty comes with the home, and how do I make a claim?
6. Can I insure the home, including against fire, and at what cost? Ask for a quote before you sign.

Why an advisor helps

In California the closing costs change at the city line, and near a Measure ULA threshold a small change in price can move the tax by hundreds of thousands of dollars. A buyer’s advisor knows what developers have agreed to before and how this home compares with the ones around it. If you are weighing a new home in Los Angeles, San Francisco or Orange County, we are glad to talk it through. 

General information only, not legal or tax advice. California’s rules and tax rates change, and every contract is different. Review your documents with a California real estate attorney before you sign.