As Ben Franklin said, “It’s an ill wind that blows no one good…”. Certainly, the current real estate woes are an ill wind for a homeowner who needs to sell. So, who get’s to take advantage of this “ill-wind’? The “Move Down Buyer”.
First off: What/Who is a “Move Down Buyer”?
Most of these things are true of the “The Move Down Buyer”:
- Long time owner with equity.
- Usually over 55 years (I’ll explain why).
- Needs a smaller home.
- Wants to bank some tax-free money.
- Usually wants to stay in L.A. County (There are exceptions)
By selling the current, larger, home now, you will “lock in” more equity. If your old house & your new, less expensive, house both go down 10% you get to pocket some of the money. An example follows.
If either spouse is over age 55 (when the old home is sold), PROP 60 allows replacement of a primary residence with a new home of equal or lesser value (but see below) within the same California county and transfer of the Prop 13 assessed valuation from the old home to the new property.
Let’s say you paid $130,000 for your current, larger home many years ago. Your property tax might be $1,500 to $2,000 per year. Most people who pay $500,000 for a home pay about $6,250 or about $4,000 more in property taxes per year. Proposition 60 lets you keep your old property tax and transfer it to the New, easier & cheaper to maintain home. Or, in the example, a savings of about $4,000 year.
So, in this example the homeowner stands to save $25,000 in lost equity, bank up to $500,000 in tax free money, save around $4,000 in property taxes and have a less expensive, easier to maintain home.
There’s nothing wrong with that!