To help homeowners over the age of 55 be able to afford to move to a different home in California or purchase a “move down” home and not suffer an increase in property taxes, Propositions 60 and 90 were passed. The Propositions, also known as the Reappraisal Exclusion Program, provide a one-time property tax relief by preventing a property valuation increase when someone over the age of 55 sells their home and purchases another home of equal or lesser value, effectively saving the seller thousands of dollars each year.
Both Sellers and REALTORS need to understand that there are specific timelines to apply for the exclusion, they need to know which counties in California allow the transfer, and what are the qualifications for the exclusion. Let’s start by defining Proposition 60, 90 and 110.
What are Propositions 60 and 90?
Propositions 60 and 90 are constitutional amendments passed by California voters that provides property tax relief for persons aged 55 and over. it allows these persons, under certain conditions, to transfer a property’s factored base year value from an existing residence to a replacement residence. Typically the property tax of a newly purchased or constructed residence is based on its current market value upon change of ownership. However, the provisions of Propositions 60 and 90 may result in substantial tax savings since it allows the property tax of the original (sold) property to be transferred to the newly purchased or constructed home if eligibility requirements are met.
Proposition 110 allows the transfer of a base year value for severely and permanently disabled persons. Except for the disability factor, the qualifications for Propositions 60/90 are same as Proposition 110.
What is the difference between Proposition 60 and Proposition 90?
Proposition 60 allows transfers of base year values within the same county (intracounty). Proposition 90 allows transfers from one county to another county in California (intercounty) and it is the discretion of each county to authorize such transfers. As of January 2007, only seven counties have passed an ordinance authorizing intercounty transfers; however, it is recommended that you call your assessor for verification as it could change at any time.
Here are the counties currently allowing the Exclusion Program:
Alameda, Orange, San Mateo, Los Angeles, San Diego, Santa Clara and Ventura.
Here is a list of counties that have rejected Prop 90:
Butte, Calaveras, El Dorado, Fresno, Lake Madera, Mendocino, Merced, Mono, Monterey, Napa, Nevada, Placer, Sacramento, San Benito, San Bernardino, San Luis Obispo, Santa Barbara, Santa Cruz, Shasta, Siskiyou, Solano, Sonoma, Stanislaus, Tulare, Trinity and Yolo.
What does “equal or lesser value” mean?
Sellers are able to take advantage of the Reappraisal Exclusion Program when they sell a home and purchase another home of equal or lesser value. What does that entail?
Equal or lesser value means that the fair market value of the replacement property does not exceed one of the following:
100% of the market value of the original property as of the date of the sale if the replacement property is purchased before an original property is sold.
105% of the market value of the original property as of its date of sale if the replacement property is purchased within 1 year after the sale of the original property.
110% of the market value of the original property as of its date of sale, if the replacement property is purchased within the 2nd year after the sale of the original property.
If you purchase a property of greater value than the original sale property, there will be no exclusion.
Timeline:
You must buy the replacement property within two years of selling the original property in order to qualify. You have three years following the purchase date or new construction completion date of the replacement property to file an application for the exclusion. As of the date the original property sold, the seller or the spouse of the seller must be 55 years or older or be permanently disabled.
Proposition 110 creates an exception to the one-time-only limitation for anyone who becomes permanently disabled after having received a reappraisal exclusion as a claimant over the age of 55 years. If a person over the age of 55 years transferred the base year value from an original property to a replacement property and subsequently becomes disabled, then that person may now transfer his or her base value a second time.
A seller may apply for this exclusion in the county of the replacement property by completing and submitting the necessary application form. Contact the County Assessor or download the application directly from the County Assessor’s website.
For more information about the Propositions, frequently asked questions and more, go here.
Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.
Become a fan of American Trust Escrow on Facebook and follow us on Twitter.
In a prior post we explain the terminology associated with Short Sales. In order to further clarify the short sale process, this post explains the process a seller must go through if they find themselves facing a short sale.
A Short Sale comes in to play when a seller must sell their home and the value of the property is just not sufficient to cover the balance owed to the existing lender. In order to accomplish this the seller must work with their existing lender(s), and any other existing lien holders, to request approval of the sales price, the sale terms, and payoff of their loan to be at a reduced amount.
The Short Sale process is as follows:
- The owner or their agent/negotiator must contact the existing lender.
- The lender will direct them to their website, or will advise how, to obtain specific forms, instructions and lender requirements.
- This group of documents, along with the lender’s financial forms (Short Sale Package*) is then sent to the lender as per the lender’s instructions.
- After the lender receives the package it is then assigned to a contact person in the lender’s Loss Mitigation Department. This process can take anywhere from two weeks to two months and sometimes even longer.
- At this point the Loss Mitigation Dept then reviews the package and will contact the homeowner to request any additional items that may be required by the lender. This request is usually made verbally to the homeowner or negotiator but can sometimes be found via the lender’s website.
- The lender will then request a Broker’s Price Opinion (BPO) from an agent chosen by the lender.
- Once the lender has received the BPO as well as the Short Sale Package they submit it for final review. Once the lender has completed their final review they may give approval as is or their approval may be subject to changes such as sales price changes. Or the lender, at this time may decide that the seller did not have ample reason for the short sale and therefore deny the request for the short sale.
*Short Sale Package can consist of 100 to 200 pages including, but not limited to, the following items:
1. Listing Agreement
2. Short Sale Addendum
3. Offer to Purchase
4. Proof of Buyer’s funds
5. Owner’s Tax returns
6. Paystubs
7. Owner’s Bank Statements
8. Hardship letter from owner (explaining why the short sale is needed)
Remember that every lender and every situation is a different story so it will help to keep a handle on each request by staying in touch with the lender constantly through the process.
Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.
Become a fan of American Trust Escrow on Facebook and follow us on Twitter.
One of an escrow officer’s simpler jobs is calculating the amount of property tax that is payable by the buyer and the seller on any given real estate transaction. One of the agent’s tougher jobs can be explaining to the buyer why they may get an official property tax adjustment bill months after the sale is done. Let’s wade into the arithmetic and explain the situation.
Property Tax Defined
Every property gets assessed by the county assessment office every year, establishing the amount of tax due on that property. At the time of a sale, it’s a simple matter for the escrow agent to find out the property’s tax for the full year, and apportion the correct amount to the seller for the year to that date, and the right amount to the buyer for the remainder of the year.
Say, for example, the property tax of the year is $1200, and the transaction closes on May 1. The seller pays $400 for the first 4 months, and the buyer pays $800 for the last 8 months. These numbers show up on the closing statements.
Sale Triggers Assessment
The complication arises because a property sale triggers a new assessment. This assessment happens according to the schedule and timetable of the county assessment office; this means it could happen months after the transaction has closed, when the buyer has long since thought the sale over and done with.
When it eventually occurs, the property has a new assessed value – and a new tax burden – retroactive to the date of the sale. It might be more or less than what the buyer paid on the closing statement, but chances are good that it will be different. Therefore, the assessment office will issue an adjustment notice. If it’s a tax increase, the buyer needs to pay more. If it’s a decrease, each county handles the situation differently. Check with the links below for your own area’s procedures.
Escrow Works With The Numbers
The escrow officer’s job with prorating property tax is just to work with the existing numbers. They use the property tax amount provided to them by title at the time of the escrow (the current property tax amount). They take this current tax information and allocate the charges to the parties accordingly.
That’s why, in an appreciating market, a buyer can get an additional tax bill, months after the sale, when they thought it had already been covered. And that is why, in a depreciating market, the potentially reduced taxes on the home cannot be determined and applied at escrow. For specific tax questions related to a particular parcel, further information can be gained by contacting your county’s tax recorders office:
Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.
Become a fan of American Trust Escrow on Facebook and follow us on Twitter.
In a previous post, the nuts-and-bolts differences between REO (Real Estate Owned) escrows and standard escrows were discussed. This post is designed to highlight a significant psychological difference that can help you and your clients successfully navigate the REO terrain: patience.
For a number of reasons, the process for an REO escrow can take longer than a standard escrow:
- The Seller of an REO is a Bank or Lending Institution who may have many properties in escrow at once. This means that what may seem like a simple response to a question can take days to be considered, much less answered.
- An accepted offer or contract may take several days to be uploaded onto the Seller’s online system where it will only then be listed as a “task” to open escrow.
- Banks must follow specific, strict procedures that can take longer than a standard escrow.
- Finally, the HUD process takes approximately five days after the Buyer has signed the loan.
Realtors: Realizing these differences and delays can help you keep your Buyer calm and confident while working through an REO escrow.
Buyers: Knowing it can take longer to work through an REO escrow can help make the process much less stressful.
When all parties understand how these differences add time to the process, they can sit tight and allow the escrow officers to focus their time on processing the transaction. Ultimately, your patience can lead to a successful (and less stressful) transaction for everyone.
Interested in what you are reading? To automatically receive these Escrow Tips in your email box, subscribe to these articles at the top right corner of this site (www.ATEblog.com) in the box titled “Subscribe via Email”.
Become a fan of American Trust Escrow on Facebook and follow us on Twitter.
