With negative news about the real estate market and economy cropping up daily, it might appear that no one should sell his home now. On the contrary, despite the doom and gloom, there are some excellent reasons why selling today could make good sense.
Clients of mine have owned their home for a long period, but have not lived there for over two years. During that time, they decided they prefer living in their recently purchased condo. Per IRS rules, if they sell the house, and fulfill the requirement of having lived there two of the last five years, they can exclude their gain, up to $500,000. Their tax savings will more than make up any reduced amount they may receive when selling.
Seniors have another incentive to sell – keeping their present property tax rate. A California resident who is at least 55 years old can maintain his current property tax when buying a replacement principal residence of equal or lesser value within his county.
In addition to the within-county tax savings, seven California counties, including Alameda, allow the transfer of base year value from another county. This property tax benefit is the result of Propositions 60 and 90. For more information, go to
http://www.boe.ca.gov/proptaxes/faqs/propositions60_90.htm#3.
There are a number of other conditions that must be fulfilled in order to qualify, such as purchasing or building the replacement property within two years before or after the sale of the original property. As always, check with your tax advisor to confirm your specific tax situation.
The drawbacks of selling can be the advantages of buying if you are considering doing both. In a move-up scenario, depending on price range, you are likely to save more when you purchase a higher cost home than you might lose in selling your present one. As an example, if you receive 10% less on a $700,000 home and pay 10% less on one for $950,000, you are ahead $25,000.
Bear in mind that, in our local market, there are no quick and easy percentages for determining likely selling prices. Standard subdivisions, with a limited number of models and sizes, are not common in the Oakland to El Cerrito corridor. Most properties differ in numerous ways and cannot be simply compared in terms of a formula. Nonetheless, buying up can work nicely for the thoughtful seller/buyer.
Remember that real estate is a long-term investment. If you bought fewer than five years ago and are thinking about selling now, you must consider the cost of buying, selling and buying again. That could make the plan economically infeasible at this time.
When gas was “only” two bucks a gallon, commuting from Oakland to outlying areas every day probably seemed reasonable. Conversely, at a price approaching five dollars a gallon, many homeowners are reassessing the commuting cost both in dollars and time expended.
For many, selling in this area and then buying in a more expensive area, like San Francisco or Marin, may save commuting expense but is not a sound financial proposition. Alternatively, if you work in a city like Davis, selling here and buying closer to there could yield substantial savings in both commuting and housing costs.
Perhaps you are ready to retire, but hesitant to do so because of the soft market for sellers. You could wait until the market turns around. In my opinion, and those of experienced professionals whose views I respect, it may take years rather than months for real estate to rebound. We are in agreement it is likely that both the economy and real estate market will get worse before they improve.
Does it make sense to put off a new life in the hope of netting some additional dollars? For some, this may be the case. Others, particularly those planning to move to a lower cost area, will choose not to put their lives on hold, especially given the tax advantages mentioned above.
Even in the most difficult markets, there are always personal situations that dictate a move. Among these can be family issues, health problems, financial stress, size of the home and relocating to another area..
Knowledgeable Realtors will attest that there are plenty of buyers out there looking. Nevertheless, contrary to our last seller's market, today's buyers are not in a rush. They feel, correctly, that they have choices and will respond to properties/prices that seem reasonable to them.
Do not be unduly influenced by media reports; they always emphasize the negative. In good markets, they stress how difficult it is to buy. In this buyer's market, media are telling us how tough it is to be a seller and how risky to be a buyer.
Real estate, viewed on a long term basis, has always been one of the world's best and safest investments. If you have a strong motivation and price your property sharply, the home will sell, allowing you to move on to the next phase of your life.
