Prop 60 question. Sold for 975. Found a house for 1.2m but is thought to be worth 999. If I get it appraised for that but offer 1.1 can I Prop 60 it?

Asked by Carriedeverian, Claremont, CA Thu Oct 13, 2011

I understand that the appraised worth of the home needs to be close to the sale price of my original home. The home I am interested in is over that price at $1,250,000. I am able to pay close to that price but still want to be able to keep my old tax rate, since I am over 65. Would it be worth it to have the home I am interested in appraised to see if it is actually worth $999,000? Can I do that? Would that make this work for me, even though I may pay more? Thank you!

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Carriedeveri…, Home Buyer, Claremont, CA
Sun Oct 16, 2011
Thank you, everyone, for the great advice. I have gone forward with getting an appraisel on the property. We can only hope that it comes in at the price we need in order to legally get the tax break. Just to be clear... that was always our intention. Would not want to do anything shady! Hopefully it all works out and we can get our tax break and the homeowner gets a fair price. It is our dream home and probably our last move.
Thanks again!
0 votes
John Juarez, Agent, Fremont, CA
Fri Oct 14, 2011
If you think the house that you want to buy is worth $999K and you expect an appraisal to come in at that figure, why would you offer to pay $1.2M? If the house is worth more than $999K, how do you expect a legitimate appraiser to come in with a lower figure? That sounds fishy. You did not mention whether or not you intend to pay cash for the house. If you need a loan, your scenario may be self defeating since you will have to come up with cash to bridge the appraisal gap.
By the way, tax avoidance is legal and encouraged. Tax fraud is not so good.
0 votes
Steven Ornel…, Agent, Fremont, CA
Thu Oct 13, 2011
Carriedeverian:

"Prop 60 question."

There are actually THREE CA Propositions that allow transfer of tax base. In fact, there are special circumstances that not only allow some to transfer tax base TWICE, the replacement property may be 110% of the sale price (see page 2 of the linked document below).

PROP 60 provides for the transfer of a base year value from a principal residence to a replacement dwelling within the SAME County by a homeowner age 55 and over.

PROP 90 authorizes County boards of supervisors to adopt ordinances allowing base year value transfers between DIFFERENT counties. As of 2/15/10 (confirm current status before taking any action) only the following eight counties in California have an ordinance enabling intercounty base year value transfers:

Alameda, Los Angeles, San Diego, Santa Clara, El Dorado, Orange, San Mateo, Ventura

Now, generally, a person can use Prop 60 or 90 only once. However, PROP 110 provides the sole exception where a person first received relief for age and then subsequently the claimant or claimant's spouse became severely and permanently disabled and has to move because of the disability.

Prop 110's Section 74.3(b) extends Prop 60 & 90 to "... any person who has a physical disability or impairment, whether from birth or by reason of accident or disease, that results in a functional limitation as to employment or substantially limits one or more major life activities of that person, and that has been diagnosed as permanently affecting the person's ability to function, including, but not limited to, any disability or impairment that affects sight, speech, hearing, or the use of any limbs."



“Sold for 975. Found a house for 1.2m but is thought to be worth 999. If I get it appraised for that but offer 1.1 can I Prop 60 it?”

Probably not. You can go up to 110% of the of the full cash value of the original property; BUT, there are timeline hurdles, as follows:
1) 100% of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed prior to the date of sale of the original property,
2) 105% of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed within the first year following the date of the sale of the original property [your max purchase price is $1,023,750], or
3) 110% of the full cash value of the original property as of the date of sale, if the replacement dwelling is purchased or newly constructed within the second year following the date of the sale of the original property [your max purchase price is $1,072,500].



“Would it be worth it to have the home I am interested in appraised to see if it is actually worth $999,000? Can I do that?”

Well, you can ask the Seller if they would allow this and as long as the value is < or = to the 105% level of $1,023,750 you could move forward. I would first obtain a Comparative Market Analysis from a Realtor® for free.



“Would that make this work for me, even though I may pay more?”

You can only pay up to $1,023,750 in this first year after the sale of you home. HOWEVER, have you considered building your dream home at the 110% level? Option #3 above is a tax base option that might be a fantastic estate planning move depending on your local housing trends.

Whatever you do, please consult a tax/financial/estate planner before making your final decision!

You can read much more about the three propositions here: http://docs.Steven-Anthony.com/Prop60-90-110.pdf

-Steve
0 votes
Ann-Marie Vi…, Agent, Pasadena, CA
Thu Oct 13, 2011
This is the official information from the Board of Equalization web site:

3.What are the eligibility requirements for Propositions 60/90?1.You, or a spouse residing with you, must have been at least 55 years of age when the original property was sold.
2.The replacement property must be your principal residence and must be eligible for the homeowners' exemption or disabled veterans' exemption.
3.The replacement property must be of equal or lesser "current market value" than the original property. The "equal or lesser" test is applied to the entire replacement property, even if the owner of the original property purchases only a partial interest in the replacement property. Owners of two qualifying original properties may not combine the values of those properties in order to qualify for a Proposition 60 base-year value transfer to a replacement property of greater value than the more valuable of the two original properties.
4.The replacement property must be purchased or built within two years (before or after) of the sale of the original property.
5.To receive retroactive relief from the date of transfer, you must file your claim within three years following the purchase date or new construction completion date of the replacement property.
6.Your original property must have been eligible for the homeowners' or disabled veterans' exemption either at the time it was sold or within two years of the purchase or construction of the replacement property.

The original property must be subject to reappraisal at its current fair market value at the time of sale, unless the buyer(s) of your original property also qualify the property as a replacement property for a base year value transfer due to disaster relief or a base year value transfer for a severely and permanently disabled person. Therefore, most transfers between parents and children will not qualify.

This is a one-time only benefit. Once you have filed and received this tax relief, neither you nor your spouse who resides with you can ever file again, even upon your spouse's death or if the two of you divorce. The only exception is that if you become disabled after receiving this tax relief for age, you may transfer the base year value a second time because of the disability, which involves a different claim form.

You certainly should always talk to your tax advisor attorney or CPA, but this should give yout the tools that you need. If I can help you further, Please let me know.
Ann-Marie Villicana
626-319-0585
Dilbeck Real Estate/ Christie's Great Estates
225 E. COlorado Blvd, Pasadena, CA 91101
CA Broker DRE #00974188
0 votes
Walter 'Skip'…, Agent, Brea, CA
Thu Oct 13, 2011
Hi Carrie,
It is best to get professional tax advice on this. My understanding is you can purchase a replacement home within the first year after the sale for 105% of the sale price of the sold property. (If you purchase before the sale the replacement property must be equal too or less).
Goodluck,
0 votes
Lee Bothast, Agent, San Marino, CA
Thu Oct 13, 2011
The tax code is mostly interpreted along these lines:

If you or your spouse that resides with you are age 55 or older, you may buy or construct a new home of equal or lesser value than your existing home and transfer the trended base value to your new property.

If you require additional detailed information, please contact your tax consultant, or the Los Angeles County Assessor at:

http://assessor.lacounty.gov/extranet/guides/prop6090.aspx

The appraiser will be required to represent the best interest of the lending bank and cannot be instructed by the buyer to appraise a property at a chosen price. You can certainly hire an independent appraiser to perform an appraisal on the property.

I hope that helps! Good luck!
0 votes
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