Seniors entering the current real estate market will be facing situations – some shared with all other buyers and sellers – and some unique to them.
Unique challenges for seniors who have been homeowners for many years and are now considering a move include potential exposure to significant capital gains taxes, the logistics of moving lots of “stuff” and finding a home that works for them that also is near family, friends, and services.
When a homeowner sells their home, the difference between what they originally paid and the sales price – the “capital gain” – may be taxable. According to the National Association of Realtors (NAR) since 1997, up to $250,000 for a single person or $500,000 for a married couple in capital gains on the sale of a home is exempt from taxation if the home has been a principal residence and for other factors.
In Pleasanton, with home sales prices typically in the million-dollar range, even with these capital gains “exclusions,” the tax bill a home seller may have to pay can be significant enough to keep current owners from selling their homes.
Tracey Esling, 2024 president-elect for Bay East Association of Realtors, suggested senior homeowners concerned about a capital gains tax bill, “find an accountant and a financial person because those people are going to guide you.”
Esling, a Tri-Valley resident and realtor, said some senior homeowners may have a head-start on dealing with capital gains taxes. “What we do is we typically will tell them to go back and find every receipt of everything they’ve ever done for their home. We do find with many seniors is they were very meticulous in doing things like that. So again, get those receipts.”
Increasing the capital gains exclusion, which can decrease the tax bill a home seller may have to pay, has been a priority of the NAR.
Esling was recently in Washington D.C. with a team from the Bay East Association of Realtors, to encourage the East Bay congressional delegation to pass H.R. 1321, the More Homes on the Market Act. This bi-partisan bill will double the capital gains exclusion on the sale of a primary residence and index the exclusion to inflation. This legislation could make it financially feasible for seniors, and other homeowners, to make a move, and create home ownership opportunities for others.
In addition to the financial aspects of selling a home, the logistics of moving furniture, clothing, housewares and “stuff” can be difficult for anyone. For a senior who has lived in their home for decades, this may be particularly challenging because they may have more of everything compared with other home sellers.
“Sell it on Facebook marketplace,” was one suggestion Esling had for making minimizing easier. She also suggested the Pleasanton Garbage Service bulky items cleanup service. Esling said both options are easy for seniors and all home sellers because they don’t have to leave their homes to manage the minimizing process.
With fewer things to move and store, a smaller home becomes more attractive and feasible. Esling shared that many senior homeowners want something smaller because it’s easier to maintain. “They’re coming out of homes that are 3,000 square feet, four bedrooms, three bathrooms. They don’t want that larger yard,” Esling said. “They want a smaller home that is two bedrooms, two baths with a small lot and that’s typically a condo in Pleasanton.”
However, they will need to be prepared for a high price tag. During April 2024, the median sales price for an attached unit in Pleasanton was more than $830,000 and more than $1 million in Dublin. “It’s going to be a challenge staying local if they want to downsize,” Esling said.
As an alternative, Esling mentioned many seniors seeking to make a change are considering communities to the north and east. “Lincoln and the Sacramento area seems to be the most affordable right now: restaurants and shopping are really conducive to the senior lifestyle,” Esling said.
The median sales price for a single-family detached home in Pleasanton during April was more than $1.9 million. Esling said current market conditions in Pleasanton can help all home sellers, including seniors, “the opportunity is you’re going to get the best amount of money for your home right now.”
If selling or buying a home now makes sense for a senior, Esling said their experience may be different compared with the last time they were in the real estate market. “It’s a whole different process than it was most likely when they purchased these homes some time ago. It’s just faster paced,” Esling said.
Esling shared that one skill can make coping and even thriving in the current real estate market easier for buyers and sellers regardless of their age: patience.
“You need to be patient with the process: whether it’s moving fast or slow or there’s too much stuff or I can’t do it all, or I don’t want to move,” Esling said. “Be patient with what people say to you and how people react to you.”
Compared with other home buyers or sellers, seniors in a real estate transaction may have other interested parties: their children. Esling said the same advice applies to them: “Be extremely patient. Be mindful. Be patient. Be empathetic. Be helpful. It’s a process.”
Asked about a recent transaction involving a senior homeowner, Esling said: “The last success story was a woman whose husband passed away and she wanted to move. The house completely got away from her, and she knew she was going to have to pay capital gains.” Esling brought in a team of landscapers, cleaners, painters, stagers, and movers. She told her client: “Go be with your family. Let me handle the house. It took about six weeks after she left to get that house in awesome condition, and we ended up selling it for over her asking price.”
Editor’s note: David Stark is chief public affairs and communications officer for the Bay East Association of Realtors, based in Pleasanton.