Buying Parents or Grandparents Home? Save on Property Tax.

A friend was in the process of buying his parents home when he asked me if there were any tax or insurance benefits resulting from this type of sale.  I startled him when I blurted out a quick ,”YES!”

Thanks to a little-known section of the California Constitution (Sec. 2 of Article X111) or, more commonly referred to as “Prop. 58” the sale or transfer of a principal residence between parents and children is NOT subject to reassessment. Translation: My friend could purchase his parents home and continue their low property taxes as his own.  The savings was huge!  With a sales price of $480,000 the taxes would have been $6,002/yr. but employing Prop. 58 the parents taxes: $1,876 became their son’s property taxes.  In this case that is a whopping $4,126/yr. savings!

Not only did my friend experience a monthly savings of $344 in property tax but he more easily qualified for his home loan.  He needed $905 LESS income to qualify because his Prin., Int., TAXES, & Ins. was so much lower.

There is a similar opportunity when grandparents are selling to grandchildren (Prop. 193).

Of course there are conditions but they are not difficult to satisfy.

So here is an opportunity to keep the good ole home in the family and bucks in the kid’s pocket.