A client just called me with a contemporary real estate dilemma – now that she’s sold her place, when should she get back into the real estate market? She sold for good reasons: the neighborhood was changing for the worse, so her equity/investment was in jeopardy, and her new neighbors were not people she cared to share a county with. Given the slide in home prices, she rented an apartment to sit on the sidelines for a while.
But this is not just a tale about the real estate market – it’s also about the cost of property taxes. That’s because now that my client is 55 she can take her old property tax basis with her to her new place – but the clock is ticking on this deal.
It’s called Proposition 60, and it says that if she sells her primary residence and within two years buy another of the same or lesser value, she may take her property tax base with her. Proposition 60 applies when you do this within your own county, and Proposition 90 is when you move to another county that allows reciprocity (those counties are Alameda, Los Angeles, Orange, San Diego, San Mateo, Santa Clara, and Ventura).
[By the way, if a couple divorces, the first person to take advantage of this deal gets it. The other one loses out].
So should the client wait until real estate prices really fall, but lose out on Prop 60? Probably not. She’s going to look for a new place. Sure, she could rent and live off the equity from the sale of her home, but then she may never be able to afford to buy again. I’ve had other clients lose their Prop 60 opportunity for one reason or another, and now they can’t stand the thought of buying again – the mortgage is doable, but it’s tough to justify the cost of higher property taxes.
The moral of the story: Be sure you know the true cost of buying and selling real estate, especially when it comes to your primary residence.