If you're looking to downsize your home in San Francisco, Prop 19 offers a new pathway to make the transition financially appealing. San Francisco's real estate landscape is known for its unique challenges and opportunities. For homeowners considering downsizing or selling their homes in the city, Proposition 19 (Prop 19) has introduced new considerations into the mix. In this article, we'll delve into how Prop 19 impacts San Francisco home selling, particularly for empty nesters looking to downsize or rightsize.
Before 2021, many long time San Francisco homeowners felt trapped. They wanted to downsize and/or move to a new neighborhood, city or locale within California. But when they ran the numbers, facing a property tax bill at the market value of their desired new home, it was often less expensive to stay in the long term family home than move into a home that would better meet their empty-nester needs. This is just one of the reasons why we have had systemic supply constraints in the local SF housing market.
Now with Prop 19, you can sell your primary residence in San Francisco and take your low property tax base with you wherever you go, as long as you stay in California and purchase within 2 years of selling your home. And you can do this up to three times in your lifetime!
+ Read real SF home buyer and seller success stories in our ongoing series of San Francisco Real Estate Case Studies.
Prop 19, the California ballot measure passed in November 2020 and effective April 1, 2021, has introduced notable changes to property tax rules, directly affecting home transfers, inheritance, and property tax assessments. This holds significance for those looking to sell their homes in California, especially in a competitive market like San Francisco.
Prop 19 is designed to help homeowners over the age of 55, those who are severely disabled, or victims of wildfire and natural disaster. It allows eligible homeowners to keep their original Prop 13 tax base when moving to a home of equal or lesser value anywhere in California. Even when moving to a more expensive home, an adjusted tax rate based on the Prop 13 tax base can be secured.
Prop 13 has been a cornerstone of California's property tax system since 1978. Under Prop 13, property tax increases are limited to no more than 2% per year. With Prop 19, the "locked-in" property tax assessment base of Prop 13 can now be transferred from your current home to your next home anywhere in the state.
Eligibility extends to homeowners who are:
In some cases, eligibility also extends to children and grandchildren, with specific conditions related to the use and value of the property.
San Francisco's real estate market is unlike any other, with its iconic neighborhoods, stunning views, and diverse architectural styles. For homeowners looking to downsize, Prop 19 can play a pivotal role in making that transition smoother and more financially appealing.
Empty nesters—those whose children have grown and moved out—often find themselves at a crossroads. The family home that was once bustling with activity can suddenly feel too large and demanding to maintain. Many empty nesters in San Francisco are drawn to the idea of downsizing, or as we like to put it, “rightsizing,” whether to a new neighborhood in San Francisco or to another part of California. (Palm Springs, Sonoma, Napa, even a downtown SF luxury high rise are amongst the popular choices.) But the prospect can be daunting, especially if you are retired and have owned your home a long time. You may have plenty of equity (“equity rich”) to make the move but want to make sure your cost of living stays manageable.
Prop 19 offers a silver lining for empty nesters considering downsizing in San Francisco. For homeowners who are 55 years old or older, Prop 19 permits the transfer of the current property tax assessment to a new home anywhere within the state of California. This means that you can move to a new primary residence and retain the property tax benefits you enjoyed in your previous home, even if the new home's market value is higher.
Prop 19 doesn't just offer property tax benefits for empty nesters looking to downsize. It also has implications for intergenerational transfers. If you're planning to pass your San Francisco home on to your children or grandchildren and the property will be used as their primary residence, they may be able to avoid a full property tax reassessment, provided the market value falls within certain limits.
+ Planning to sell your San Francisco home to buy a new, low-maintenance condo instead? Get important tips in our blog, Do You Need a Realtor to Buy New Construction Condo in San Francisco?
As empty nesters contemplate the prospect of downsizing, San Francisco's real estate market holds abundant possibilities. With Prop 19 on your side, the transition to a smaller, more manageable home becomes not only practical but financially savvy.
And for those of you, like us, who are thinking, “Wait a minute! 55 is not the retirement age! I still have kids in school to pay for!”, we have good news for you too. This youthful bar of entry lends itself to savvy long term real estate planning.
Navigating the San Francisco real estate market can be complex, but Prop 19 has introduced another ray of hope for empty nesters looking to sell their homes and downsize. As you consider embarking on this new chapter, remember to stay informed about the implications of Prop 19. Always seek guidance from an experienced real estate professional. If you embrace the prospect of a downsized dream home in San Francisco or anywhere in California, we’ll be your guide to maximize your results in selling your San Francisco home, buying a new home in CA, and getting the most from regulations like Prop 19.
Taxes are complicated, so a disclaimer is in order. Danielle Lazier and Vivre Real Estate are amongst the best listing agents in the San Francisco Bay Area. We have a proven track record of results and over 500 five-star client reviews! However, we are not attorneys nor tax professionals. If you are wondering about your own eligibility under Prop 19 or considering applying for the tax benefit, please seek the advice of a qualified California real estate attorney or tax advisor.
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