Jenna Christensen

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Portability Initiative Is Designed To Help owners who are 55 and Over To Sell Their Homes And Buy Another

Wednesday, February 14th, 2018 at 2:09pm Jenna Christensen


 The California Association of REALTORS® (CAR) is attempting to qualify a ballot initiative, The Property Tax Fairness Initiative, which will restructure the way property taxes are calculated for buyers over the age of 55 (and also the disabled and/or natural disaster victims). In many cases REALTORS® are already circulating petitions asking for ballot-placement of the initiative, and, in short order, professional signature-gathering organizations will be engaged as well.

CAR's approximately 200,000 members have been assessed $100 each in support of the effort; and there are expectations that the Association's substantial reserves will also be tapped in efforts to support the initiative's passage.

What would this accomplish and why is it needed? In what follows I will seek to summarize CAR's answer to those questions. First: the why?

As is well-known, California is currently experiencing a shrinking inventory of housing available for sale. This lack of supply has driven up prices, which makes it extremely difficult -- in many cases, impossible -- for first-time buyers to enter the market. In many cases, it also makes it difficult for move-up buyers to find replacement property.

There are, no doubt, multiple causes for this, but, no doubt, a major one is this: nearly 75% of California homeowners 55 years of age and older have not moved since the year 2000!

Why? Because of the way property taxes are calculated under California's Proposition 13. For tax purposes, properties are valued on the basis of purchase price, not current market conditions. (Example: Suppose I bought my house for $1.500,000 a few years ago; and that my neighbor bought the same model -- as identical as can be -- in this heated market for $1.800,000. My tax will still be calculated on $1.500,000, whereas his will be based on $1.800,000.)

CAR says, "A large part of the reason why [55 and overs are not moving] is that, even if they want to downsize or move closer to family, the prospect of a property tax increase of 100, 200, or even 300 percent effectively locks our parents and grandparents in their homes." Thus, CAR maintains, "…The Property Tax Initiative…will help these homeowners to sell their current homes and move without being subjected to a what is effectively a massive "moving penalty."

How will it help? By modifying current law to expand the conditions under which those over 55 would be allowed to transfer their current tax base -- based on their original purchase price -- to a replacement home that they are purchasing.

Currently there are only limited conditions under which someone over 55 may transfer his or her old tax base to a newly purchased home. The Initiative would expand this. "C.A.R.'s Property Tax Fairness Initiative would allow homeowners 55 years of age or older to transfer their Prop. 13 tax base to a home of any price, located anywhere in the state, any number of times."

CAR's talking points offer two examples of what would happen if the Initiative should pass.

Buy Up Example

  •        Original Purchase Price: $100K
  •        Estimate Property Taxes: $1K/annually
  •        Existing Home Sale Price: $300K
  •        New Home price: $400K
  •        New Property Taxes: $2K/annually

The $100K difference between the $300K sales price and the $400K purchase price is added to the original Prop.13 property tax base of $100K for a new Prop. 13 tax base of $200K. The buyer still pays their fair share of taxes but isn't blocked from making the move.


Buy Down Example

  •        Original Purchase Price: $100K
  •        Estimated Property Taxes: $1K/annually
  •        Existing Home Sales Price: $300K
  •        New Home Price: $200K
  •        New Property Taxes: 1/3 of $200K = $67K [value] or $670/year for property taxes

If a homeowner buys a less expensive home, the property taxes will be proportionally the same as for the original home. In other words, if the tax base was one-third of the sale price, the new property tax would be one-third of the new sale price. Buying down reduces the homeowner's annual property tax bill.

Among the objections raised to the Initiative is that it will reduce revenues to local governments. In response to this, CAR says: "The revenue loss is the result of a ‘static' analysis -- it only looks at the revenue lost, not the revenue gained which a ‘dynamic' analysis would do. All buyers of homes formerly owned by a senior homeowner will have the home reassessed to market value and pay property taxes based on the reassessed value."

Lots to think about. There's an election coming…



In addition to the potential loss of their original tax base, it is my experience that many folks who would like to sell, oftentimes can’t afford to do so because of the capital gains taxes they would owe upon the sale of their home.

Currently I’m working with a couple who’ve owned their home since 1976 and paid $69,500 for it. Today, the property is valued at $2.000,000 and their tax burden upon sale will be $328,000!! They want to move closer to family, but their tax problem prohibited them from doing so – until they met me.

I have associated myself with a tax analysis and solutions research company which since the 1970’s has been solving capital gains and other tax issues for sellers of real estate, businesses and other capital assets.

As a seller of your property or business, we will demonstrate to you and your CPA how you can lawfully walk away from escrow closing with NO immediate capital gains taxes due and receive a tax-free lump sum of money that is nearly equivalent to the amount of the proceeds.

If you would like more details, I am happy to facilitate a conference call-webinar with my affiliate who will introduce and explain to you visually how this program works. Holding on to your proceeds for 30 years (as this program allows) provides you with the opportunity to make investments of your choice so when the taxes are due, you have the funds to pay them plus the growth over 30 years available. The amount owed will be adjusted for inflation so the value of the taxes you pay down the line is much less. Rather than paying the taxes up front and lose out on that benefit, you’ve had the opportunity to hold on to and manage your proceeds the way you see fit.

Now what’s not to like about that?

CALL ME TODAY for more information and to set up a no-obligation consultation-webinar.



Real Estate Advisor Lic# 01341901



Los Angeles – South Bay

302 Avenue I, Redondo Beach, CA 90277

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