Introducing Richard and Rachel…

Tom Brezsny
- Tom Brezsny

Introducing Richard and Rachel…

One conclusion I’ve come to is this: The market’s lack of listings isn’t a reflection of the lack of people wanting to sell their homes. Rather it’s just the opposite. There are actually an inordinate number of people out there who really do want to sell, are actively thinking about it and would probably put their homes on the market tomorrow, if… and this is a big if….

IF they could figure out how to sell their existing homes and move-down into a smaller ones in ways that make sense for them financially, emotionally and every other way. For the time being they are stuck. And for the time being, the market’s low inventory mirrors their stuck-ness.

Let’s narrow the discussion a little and focus on one local couple, wrestling with many of the same difficult questions we’ve been talking about over the last few months. Maybe if we eavesdrop on their process, we can get a better handle on the Downsizing Dilemma.

Here are Richard and Rachel (names changed to protect the innocent). They are a Santa Cruz couple in their mid 60s, trying to downsize from their 4br, 3ba, 3200 sq ft home on the non-ocean side of Hwy 1. They’re just beginning to come to terms with planning for what life looks  like for the last third of their lives and I think of them as the Poster Couple for the huge swathe of aging baby-boomers trying to do the same.

Their needs are pretty simple. They want something single-level, smaller and near the beach. With views and places to walk. For about $500,000 less than what they sell their current house for so they can meet their retirement goals and carry their property tax basis forward. Sound familiar? We’ll start with a few of the easier questions Richard and Rachel are asking:

How does property tax work in California after the age of 55? What are Props 60/90? How do we avoid a huge jump in property tax after retiring?

What about Capital Gains? Is there a one-time exemption? Did it change? $250,000 or $500,000? What happens if we bought years ago for $400,000 and the gain is more than $500k? We don’t want to pay any taxes!

How much is our house worth anyway? Zillow says $2.300,000! That could mean huge taxes!! If we wait till we die, can our kids inherit the house without paying any taxes?

Next Week: Continuing the Quest with Richard and Rachel

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