Whether it’s called downsizing or rightsizing, if you are deciding to downsize you’ll want to start by considering a few basic questions.
- What are the main goals with selling your current home and moving to something smaller?
- Do you want less to maintain (home, yard, both?)
- Are the reasons primarily economic? (i.e., smaller home is less expensive to heat, cool, maintain, or cash out , or sell to get rid of the mortgage, or something else)
- Would you prefer to stay close to where you live now, or to relocate?
- What kind of living space would be ideal for your next home? Do you want a yard or patio? Do you want to be in a seniors community? Would you prefer more rural or more urban than what you have currently?
Deciding to downsize can be for people in many different decades of their lives
Some people drastically change their house or move somewhere smaller (or more remote / less expensive) the moment the youngest child has packed up and gone away to college. They may be in their 50s or 60s and still relatively young, working, and saving for retirement. I’ve seen people sell in Los Altos, Saratoga, and Cupertino to economically downsize to Almaden or nearby areas when they no longer wanted to pay to live in a more expensive school district.
Others keep the “family home” as long as possible. My grandparents moved many times in their lives due to my grandfather’s military career, but in their retirement years they enjoyed a large home with room for everyone to visit – and we all did. They were 90 and 92 when they moved from their 5 bedroom house at Pasatiempo in Santa Cruz to Dominican Oaks, a retirement community just a few miles from there. At their ages, more help was needed. (For my grandmother, moving to a community was wonderful socially, as she wasn’t still driving at 90.)
If you are deciding to downsize, you could be at either of these ends of the spectrum, or you could be anywhere in between. It’s a huge gamut and there’s no “one size fits all” or one “right answer” with this topic.
What makes you consider rightsizing?
Interested in moving your property tax basis when you sell your current home and buy the next one? For those over 55 in California, this is a great one time option.
There are actually two propositions involved. Prop 60 applies to moves within your own county, and Prop 90 relates to moves between counties which are participating in the transfer arrangement. Unfortunately, of California’s 58 counties, only 10 have the cooperative agreement to accept a property tax basis transfer from other participating counties.
Cooperating Property Tax Basis Transfer Counties (Prop 90)
The counties cooperating in the property tax basis transfer are only these, as of the date of this posting: Alameda, Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Mateo, Santa Clara, Tuolumne, and Ventura.
Some of the basics for the property tax basis transfer:
- Homeowners must be 55 and older at the time of sale of the original property.
- Homeowner must be on record both for the home that’s sold and the replacement property.
- The replacement residence must be equal to or lesser in value than the original residence.
- There are special rules for multi-family (duplex, triplex, fourplex) properties and for mobile homes.
In the most typical scenario, a senior homeowner would sell a house (or townhome or condo) and “downsize” to another, less expensive, smaller house or condo. If the homeowner had been in the first property for a very long time, then the low tax rate would be hard to give up, but Props 60 and 90 enable that homeowner to go to another, less expensive home and carry the old tax rate along – one time, and either in the home county or in one of the participating counties.
I have known seniors to sell a house in Los Gatos, Saratoga or San Jose and move to The Villages or to gated senior communities out of the area but closer to their grown kids and make use of these two propositions.
It should be noted that while the price of the replacement home must be less than the home being sold, that doesn’t mean that the new home must be smaller. I’ve known people to move out of area and get a larger, newer, nicer home – at a lower price tag. So it’s really an economic downsizing (or “right sizing” as some like to say now).
For more information and to get all the details, please click on the California state page for these two propositions.
One of the hardest things that adult children must sometimes do is to assist their parents in downsizing. Most of the time, this means also getting the parent(s) to agree to sell the home, perhaps also to move into a seniors facility (independent living, assisted living, skilled nursing, memory care) or perhaps to move in with one of the adult kids. Very often, leaving the house also means leaving a good deal of memories and perhaps independence. It can be terribly difficult for everyone involved.
Sometimes our older family members can live at their own home until they die, which is what they want and what makes everyone happy. It may also be the most economical thing to do. As they age, there are services which can come to them (gardening, cleaning, meals being prepared or dropped off, errands being run, driving services provided when reflexes slow or eyes fail). One company has invented a medicine dispenser which is timed and will alert family members if the meds aren’t taken! It may be good to utilize some sort of safety device in case there’s a fall. If you can get all the bases covered, it can be close to worry free for everyone. In those cases, perhaps worrying about real estate can wait.
For others, though, either medical needs or social needs drive the change to a place with many other seniors. For some, this infusion of new friends can be an emotional lifeline that greatly improves the quality of life. Particularly for those who lose the ability to drive and move about independently, a transition to a seniors facility can mean a reconnecting with others which was lost due to lack of independence. I have seen that with some of my own relatives. Or when a beloved spouse dies, sometimes the loneliness is compounded by remaining in the same home and being mostly alone. A move can be a big help, and the companionship of others is no small part of it. (more…)
Recently I read an article on Realty Times about the tax credit for non-first time homebuyers. Did you know that it may be used for “move down” buyers as well as “move up” buyers?
There are some caveats – the home cannot cost more than $800,000 and a couple cannot earn more than $255,000 per year. Owners must have been in the home for five consecutive years of the last eight. This may be the ideal help for Silicon Valley seniors wanting to downsize.
To read the article on Realty Times, click here.