Before You Sell...


If you must sell, consider Seller Financing

My advice to most clients who come to me is: If possible, don’t sell. If you are moving up to a nicer neighborhood or a larger home, even if your job takes you to another location, consider converting your present home to a rental. We offer the best property management for a small percentage of the monthly income.

There are advantages to keeping the home that improve with time.

Tax Considerations:

If you have lived in your home for two years of the last five, California and IRS rules allow you to exclude from your taxable gains $250K ($500K if married, filing jointly). If you have occupied the home for less than two years and have significant gains (appreciation) from original purchase, keeping the property is even more advantageous. If you do choose to sell after all, then consider an “Installment sale”. This IRS sanctioned method allows you to spread the gain over multiple years provided you offer Seller Financing. For details and pros and cons see seller financing options below.

If you are downsizing from a more expensive to a less expensive home, California offers a one-time tax benefit if you or your spouse has reached the age of 55 or over. This state law allows the individual to transfer his low “tax basis” to his new property, potentially saving thousands in property taxes. See Prop 60 for specifics.

SELLER FINANCING is a way to appeal to a larger market and in many cases demand a higher sales price by as much as 10 percent.

With the current low interest rates on mortgages the all-inclusive-trust-deed, or wrap-around mortgage, allows the seller to keep his present loan and act as the bank, lending the new buyer an equal or greater amount at a higher interest rate. The difference in interest rates is profit to the seller. This works well with buyers who have difficulty qualifying for a bank loan due to credit issues or if they are self-employed. With proper screening of applicants, this offers a “win-win” to both buyer and seller. This may be a problem for the seller in that the original mortgage still shows on his or her credit record and may make it difficult in acquiring a new bank loan if buying another property. And, as with any loan, a large enough down payment is necessary to prevent the buyer from abandoning the property if property values decline or his or her income is no longer adequate.