Palo Alto Seniors Have Many Options

There are many people living in Palo Alto who have been here for a long time and have a lot of equity in their homes. They may not have huge retirement income, but there is money in the value in their home if money is needed. The question is what is the best thing to do if a senior needs money? Sell, rent, reverse mortgage?

There is no correct answer. Each option has pros and cons. The first thing to do would be to speak with an accountant or financial adviser to understand the tax consequences of the different options. I just want to give you some broad information about each of these options to help you make an informed decision based on what is best for your particular circumstance.

Reverse Mortgage: The mortgage company will give you a monthly amount, or a lump sum. The interest and fees are paid when the home is sold. These costs are high, but they are ultimately paid by the heirs, not the home owner, under many circumstances. You get to live in your house, off of the money you have in equity. However, once you leave the home for 3 months or longer (in most cases) the home must be sold and the bank repaid. This means if you go into a nursing home for 3 months or longer, the home is sold and the owner pays any capital gains tax at that time as well as paying off the fees and interest on the loan.

Rent Out your home: Rentals in Palo Alto are scarce and are fetching large sums. You can probably rent your home for enough money to pay for care in assisted living. You would not have to sell your home and pay the capital gains tax so there would be more equity preserved for your heirs. However, you are still responsible for any repairs that may be needed, which could be expensive, and you will need someone to manage the property once you move out.

Sell: Prices in Palo Alto are back to their peak levels. Homes rarely sell under a million dollars, with 1400 square foot Eichlers and ranches easily selling in the 1.4-1.6 million dollar range. That is plenty of money to pay for expenses if you need assisted living. However, once you sell you need to pay capital gains tax, and you need a safe investment that pays you income to help pay the expenses you need in your retirement living situation.

This is never an easy decision, and it requires excellent profession advice to determine what is best for your situation. My best professional advice is make this decision early so that your plans can be carried out in a systematic way rather than after a crisis has occurred. This will enable you to focus on a change in health or family circumstance, not "What do I do now?"

If you have any questions about buying or seling homes in Palo Alto please feel free to contact me.

Marcy Moyer
Keller Williams Realty Palo Alto
www.marcymoyer.com
marcy@marcymoyer.com
650-619-9285
D.R.E. 01191194