I was emotional for the first time this week when my daughter and son in law got in the car to head to the airport to go back to Israel. With travel being so difficult now, people who live a long plane ride away feel more like they’re on another planet than before the pandemic; I hadn’t seen my kids since August when they came to visit last week. The world got less small and the distance feels much greater since travel got more difficult. I miss the people who live so far away and it’s hard for me when they fly away again.
And then I was emotional when I said goodbye to my house that I sold. I pulled up in the driveway for the last time, I slid my key off my key ring and I handed my key to an excited buyer. She slid the key on to her key ring and with a big smile she casually put her key ring in her pocket. And just like that my house was hers and no longer mine. I held back the emotion and it didn’t feel so different from saying goodbye to my kid. It’s interesting to experience for myself what I observe in my sellers all the time. We get so attached to our houses and it’s hard to separate. It’s a big deal to sell our house.
And then on the very same day, Austin, who has worked with me for five years, announced his exciting news that he got a job at a start-up. I hired Austin more than five years ago when he was in his young 20’s. He’s a brainiac engineer and he set up a platform and technology tailor-made for our business. After years of developing it, our technology is in place now and the time has come for Austin to spread his wings and to set up technology for a new venture. I’m grateful that Austin is feverishly setting us up and making sure we know the workings of everything he created before he moves on. And of course the goodbye is so hard.
The best thing in life is pushing ourselves to learn and to grow as people. As a parent, even as tears streamed down my face, I know that it’s good for the young kids to fly far away to grow into adulthood independently, forging their own way. As a homeowner, it’s awesome to see a young family excitedly begin the next chapter of their lives close to their cousins in a house that captured their hearts. As an employer, it’s a moment of pride to hire a very young talented person and then grow them so they graduate into the next phase of an upwardly mobile career. Change and transition is a catalyst for growth all around, even as it’s hard to leave the old and to usher in the new.
Conversations this week centered around the tax consequences of selling property. It’s important for sellers to have conversations with their accountants to understand the taxes tied to the transfer of property. I knew that if you sell your primary residence and you lived in the home for 2 of the last 5 years, you can deduct 250,000 of the gain as a single person and 500,000 of the gain as a married couple when you sell. I just heard for the first time this week from a client’s accountant that you might be allowed to have a third person on title and deduct an additional 250,000 from the gain when you sell your primary residence. Also interesting for sellers to understand Prop 19. Some qualifying sellers (over age 55, disabled, living in the area of the wildfires) can sell their home and buy another and transfer their property tax base from the sold house to the purchased house. In the past, the new house had to be lower in price than the old house. Prop 19 recently changed the law as of April 1 and the property tax base of the old house can now transfer even if the new house is more expensive than the old one. When selling an investment property that’s not a primary residence, it’s important to understand the laws of 1031 exchanges, which allows you to postpone paying capital gains taxes and to buy a new investment property instead. To qualify for a 1031 exchange, you have to identify a purchase within 45 days and close on the new property in 6 months and the new property needs to be like kind, a passive investment, and of equal or greater value than the property sold. I spoke to a seller this week who is unemployed from Covid. She can’t sell her duplex because she can’t get a new loan right now. Without a loan, she can’t buy a replacement property of equal or greater value than the property she wants to sell because there’s a loan on the old property that will be paid off when she sells. Given that she wants to postpone capital gains taxes by doing an exchange and she can’t do an exchange without getting a loan, the timing isn’t right for her to sell her investment property now. Taxes need to be factored in before a sale no matter what kind of property is being considered to be put up for sale.
The biggest challenge we face today is limited supply. There’s so little for sale. Some opportunistic sellers are attempting to capitalize on the limited supply by putting their property up for sale at a too-high price. For the most part, those properties don’t sell. There is a lot of demand to buy but given the high price point in our area, purchase prices need to make sense for a buyer to purchase a property. There is an opportunity for sellers to sell now…within the limits of reason and market value, albeit increased market value. It’s fascinating to represent buyers who write reasonable offers that get rejected by sellers who are “insulted” by numbers not all the way at the “make me sell” prices they set for their home. Sellers who push the line too far are choosing not to be sellers at all, even when buyers are interested in their property.
This week for me was about change. Each change is a turning page. It is closing one chapter and opening another one. Ultimately change brings new beginnings and excitement to life. I’m excited to muscle up, through the tears, and to embrace the new chapters.
Wishing everyone an awesome weekend!
Xoxoxo,
Sheri
