Home Seller’s reasons for choosing not to move – Part 1

So there we were at the Swiss Park with our booth all set up ready to talk business. As people approach, the common theme for folks talking was why they were not selling. Learned some interesting things about why sellers think they can’t sell. Here’s what we heard.

Let’s first define what type of sellers these are. These are folks who lived in their homes for maybe 25 or 30 years.  Their homes have appreciated. They know there are tax ramifications, if they sell.

Others talked about the accumulation of stuff that they didn’t know what to do with or have so much in storage that they don’t know where to start to de-clutter.

Still others brought up Proposition 13 which keeps the assessed value of their homes lower. We’re back to taxes. They feel if they move, they’ll have to pay higher property taxes and that’s not very desirable.

Lastly they brought up the fact that they knew nothing about other areas they might be interested in and the amenities that those cities and neighborhoods offered.

Let’s take the first one, having over $500,000 in profit. Single taxpayers can exclude up to $250,000 in profits on their home’s sale. Married couples who file jointly can exclude $500,000 from their taxable income. There are ways to minimize the taxable income by increasing the cost basis.  Your cost basis is the purchase price, plus certain other expenses.

Certain fees and other expenses you pay when you buy a home are added to your basis in the property. Most of these costs should be listed on the closing statement you receive after escrow on your property closes. However, some may not be listed there, so be sure to check your records to see if you’ve made any other payments that should be added to your property’s basis. These include real estate taxes owed by the seller that you pay, settlement fees and other costs such as title insurance.

You must increase the basis of any property by:

1. the cost of any additions or improvements
2. amounts spent to restore property after it is damaged or lost due to theft, fire, flood, storm, or other casualty
3. tax credits you received after 2005 for home energy improvements
4. the cost of extending utility service lines to the property, and
5. legal fees relating to the property, such as the cost of defending and perfecting title.

So as you can see, there are ways to minimize taxation that you may not have known about. Stay tuned for more reasons that might be keeping you from moving, but shouldn’t.

The question really is where would you rather be…here or there.