Our job goes beyond the bread and butter of home sales — like helping to navigate that pesky “stepped-up basis” home value.
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The personal stories of one Realtor’s battles and triumphs in the highly-competitive Bay Area Real Estate Market, seeking to illuminate and humanize the very real ups-and-downs of homeownership.
What’s a “stepped-up basis,” you ask?
If you’re unfamiliar with the concept, a “stepped-up basis” creates a new baseline value for a property, as opposed to the purchase price on the tax records, often from years ago. For those who have lived in their homes for decades, their original purchase price is likely a small percentage of their home’s current market value which means the tax implications can be HUGELY significant with respect to selling.
As one stark example, I know a charming couple who bought their one and only Piedmont home as young newlyweds fresh out of CAL Berkeley and are now in their 80s. Sixty years later, that modest “starter” home is worth more than $2.5 million. Their original purchase price had been (drum roll please) a mere $14,000 (that’s not a typo – $14k). Even with $500,000 of tax-free capital gains currently allowed by the government ($250,000 each), should this couple ever decide to downsize, they’d pay taxes on their net profit – and that’s a LOT to willingly hand over to Uncle Sam (not that he wouldn’t be thrilled to take it).
Because well-maintained homes in high-end neighborhoods have appreciated by MILLIONS of dollars (not thousands) many seniors will opt to wait for a “stepped-up basis” event before selling. If one spouse predeceases the other, OR if both parents pass while still owning the home, and the property is inherited by their children, a “stepped-up basis” provides relief for the heirs, including NOT strapping the survivors with capital-gains taxes that force the sale of the home. (Please speak with a real estate attorney or certified CPA for more information about the stepped-up basis laws.)
As an aside, whether you agree with the concept of “generational wealth,” most of us have worked hard to get a toehold into the real estate market; thus it behooves homeowners to know the rules around such things. You are certainly welcome to sell at any time and pay the capital-gains taxes (and many people do), but understanding the implications may save your family hundreds of thousands of dollars in the end, and that’s where your REALTOR® comes in (in conjunction with your trusted attorney, estate planner, or CPA).
Because Sarah, Jill, Kate, and I are delivering toffee this week (and next) and having conversations around all manner of real estate related questions, it’s a reminder of how many things experienced Agents do beyond the basics of helping Buyers buy and Sellers sell (although make no mistake, transacting real estate IS our bread and butter).
So here’s our TOP TEN list of the many ways Agents can, and should be called upon:
- Creating Real Estate Evaluations (REVs). Whether you’re thinking of selling or not, having a sense of your home’s current market value can be helpful in terms of understanding the equity in your property.
- Consulting on remodels BEFORE you undertake the expense. In other words, understanding what brings the highest rate of return is worth a second (or third) opinion given the high cost of renovations – especially if you plan to bring the house to market in the near future. ALL improvements are NOT created equal.
- Recommending excellent local mortgage/bank lenders to guide you through a purchase or home equity line of credit. With volatile interest rates at hand, a savvy lender’s knowledge is more important than ever.
- Providing reliable vendors and trade professionals. Every seasoned Agent has a list of tried and true tradesfolk at their disposal. These are highly-skilled service providers we’ve worked with and come to rely upon through the years. Whatever the challenge, we probably already know someone who can meet it.
- Underwriting community events. Supporting the communities that support us is not only the right thing to do but part and parcel of a REALTOR’S® practice. Giving back should be central to every caring Agent’s ethos.
- Educating and providing market context. Good Realtors stay on top of the market and network with one another. We are the conduits for the “backstory” and the link to any “off-market” opportunities as well. We tour, we write, we guide, we learn, we pviot, and we’re always happy to talk about real estate. (Get the picture?)
- Creating clear schedules, budgets, and goals around the marketing of your home, AND providing a road map throughout the escrow process.
- Communicating frequently and often, in whatever manner suits you best. (Communication is a two-way street.)
- Supporting you and your family through the transition, whatever the circumstances.
- Being a point of reference long after the sale. While our legal representation technically ends once the escrow has closed, REALTORS® often work generationally, and we take great pride in being your “go-to” person. Real Estate is ultimately about the RELATIONSHIPS we create and maintain over time; thus your satisfaction is critical to our success.
How can we help you?
Julie Gardner & Sarah Abel | Compass Realty
Not just Realtors, but consultants in all things house and home, we’re here to educate, explore, examine and refer . . . In short, you may count on us to take care of your home as if it were our own and anyone who knows us, knows we take pretty darn good care of our homes.
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