Should Empty-Nesters Sell to their Kids?

Empty-nesters often decide to downsize their homes after the kids leave the "nest." This is particularly true among those nearing retirement that have a large family and thus a large house with more bedrooms than they need.

Often is the case that one or more of those children are starting their own lives and families and may find themselves interested in just the type of house that Mom and Dad have. What about selling to the kid?

This can be an effective way to downsize. Of course there can be some family squabbles over this arrangement especially if their is more than one child. Those issues aside, parents can make it easier for their kids to buy the house by offering to gift them the down payment. Most lenders will allow a gift directly from parents.

Parents could even carry a note for the kid, but that is less desirable if the parents were hoping to pull out a lump sum. If parents wish to sell their house to their kid(s) then they should consult a local Realtor® about the value, what price the home might get if it were exposed to the market at large. They can use that information as a baseline for selling to the child. Obviously they have the ability to sell it to the kid cheaply if they want to, but they should still know what the market would likely bring.

Many Realtors®, myself included offer services to aid in the purchase process for a low processing and paper work handling fee. A Realtor® can make sure both the parents and child know the requirements and regulations regarding the transfer of property and help both parties through the closing process. Perhaps the savings on traditional real estate fees can offset the 'discount' to the kid or the gifted down payment.

Parents concerned with legal concerns regarding the transfer of property to children named in a will or trust or any other legal concerns should absolutely consult and attorney prior to any transfer of real property.

Washington is Great for Washingtonians Too!

How's that for a title twist? Huh? Well it's true, most of the themes about 'Retire to Washington' are centered around the idea of someone coming to Washington State form another state for a better retirement opportunity. Though it is true, Washington is one of the best states in America for retirees, it is also great for locals.

There are a great many Washingtonians that may be looking for a place to retire. They just might be perusing information on those classic sun-belt locales, Like Florida, Arizona, or even Texas. But what about Washington? The same great attributes that make Washington a great place to retire for people current residing in other states, certainly still applies to locals.

This is particularly true for people living in King or Snohomish Counties when we consider the exchange of property concept. What do I mean by this exchange? Simply put people that live in very expensive parts of the country such as the 9 County Greater Bay Area in California, Southern California's Coastal Counties, New York City, or Metro Seattle, will have tremendous buying power when they leave those areas to settle in a less expensive market.

The median home price in King County is among the highest in the US. One can sell a modest 3 bedroom 1100 SF ranch home on a dinky little lot in King County for $800,000 and buy a spacious 2500 SF one level home on 5 acres with a view for that in Clark County, Washington. Yikes!

For some, selling that little ranch in Seattle and exchanging it for a similar ranch in SW Washington could lead to a massive surplus of cash as the equivalent home might be $350,000 in Vancouver, WA. That's a tidy $450,000 in cash to pad the retirement.

Retiring to Washington is not just about coming from another state to escape unfavorable retirement conditions, but also about staying in Washington State to continue in retirement what you have enjoyed all along.

For Many Retirees, Income Tax is a KILLER!

Let's look at why an income tax is more of a killer than a sales tax especially for retirees. Retirees often do not have many tax deductions or exemptions. So a retired couple earning a taxable household income of 35,000 will pay about $3150 in Oregon State income tax. Contrast that with the a typical annual sales tax paid in Washington at $1200.

Sales tax is something you only pay when you buy a taxable item. In Washington food for example is not subject to sales tax. An income tax is levied before you receive your net check. You are going to pay it whether you buy things or not. Sales tax is almost always a lower expense than income tax with the notable exception of being poor. Those in Oregon who have a taxable income of $0 will not pay any income tax, obviously. But in Washington a person with a taxable income of $0 will still need to buy things and some of those things will be subject to sales tax.

Please take note I am using taxable income, because retirees are not subject to income taxes on a sizable portion of their Social Security, ROTH IRA's are tax free, and standard exemptions and deductions reduce taxable income. So someone earning $20,000 could in fact have a taxable income of $0.

So the rule of thumb is, if you are poor live, in Oregon, if you are middle or upper income, move to Washington. Well it isn't always quite that simple, but that simple solution is not to far from reality in actuality.

High-rise Condo Living, well suited to Retirees

Many retirees are looking for living arrangements that don't require a bunch of yard work or travel to get to activities. Downtown urban condo living could fit the bill quite nicely for some. In SW Washington, Vancouver has a nice opportunity to own a high-rise condo unit with views of the Columbia River, Esther Short Park, and as many as five Majestic Cascade Volcanoes.

A short ride down the elevator to the street offers up everything your need in a few blocks. restaurants, post office, stores of all kinds, the park, waterfront, government agencies, banks, insurance, you name it and you can walk there.

This style is not for everyone, but it could be for quite a few retirees. 2 bedroom units range from $300,000 to well over a million dollars depending on the view and of course the interior decor and quality. Vancouver's downtown and waterfront area is rapidly becoming the hot spot for urban living in the Portland-Vancouver metro area.

You can visit Urban Living in the 'Couv' for updates on condos for sale and project status for new and upcoming high-rise projects.

Limits on SALT Makes Washington State Even Better!

SALT an acronym for "state and local taxes." The recent tax changes now caps state and local tax deductions at $10,000. So high income retirees are limited to that figure for deducting these "SALT" payments from their federal taxes.

Washington State levies no personal income tax so their is another benefit against states like Oregon and California that have a heavy income tax. In Oregon one needs to make only a bit more than 100k with average property taxes to cap that SALT limit out. Be sure to check with your tax professional to see how the federal taxation changes will affect your personal situation, but the mass exodus from high 'SALT' states such as California, New Jersey, New York, and Connecticut is a clear indicator that it is making a difference.

Washington is already one of the best if not the absolute best high latitude state in the US in which to retire. Sun Belt states continue to out poll Washington due almost exclusively to the warm winters and not the economic advantages. Washington State has excellent weather with something for everyone, really. Well you won't find any 75 degree January days, but aside from balmy winters, we have it all.

Washington and in particular Southwest Washington, offers an amazing blend of mild weather, favorable taxation for the retired, and proximity to Oregon for the interstate economics. Playing in Oregon is not subject to sales tax, living in Washington is not subject to income tax. Best of both.

It is more than just a bit likely that thousands will again flee the 'salty' states of California and Oregon to the beautiful Evergreen State of Washington.



 

Local Impact of California Exodus

The great California Exodus continues as both families and retirees are fleeing that state in droves. Epic levels of taxation along with a crumbling infrastructure and a middle class on the verge of extinction has led to an migration of biblical proportions from the Golden State. Californians are moving to Texas, Arizona, Nevada, Oregon, as well as Washington, Idaho, and Montana in numbers that have never been seen before.

Here in Southwest Washington Oregon continues to dominate the list of states sending people our way, but that makes sense as they are a border state and Clark County is just a river crossing away. But California is the number two state sending people here and it has been for quite some time. State wide California is the number one exporter of new residents. Yes even more than Oregon. California is number two for Clark County but is easily number one statewide.

But the population of California has been dropping but not as fast as the domestic migration might suggest. Even as tens of thousand leave every month thousands more pour into the Golden State to fill some of the vacancies left by those who migrated out.

Locally real estate prices have been impacted by this additional market force and for some this is irritating as they view it as outsiders driving up values; but many others like the fact that the extra demand makes owning real estate a better investment. For retirees the extra attention means home owners can count on being able to cash out their residence when the time comes or utilize a reverse mortgage to access equity later in life.

Our local market is not feeling the California effect nearly as much as Seattle is. Our out of state migrants are by far mostly Oregonians moving locally across the river. Many Oregon retirees are tired of sending 9% of their income to Salem and find Washington's lack of an income tax refreshing. Californians are actually moving to both Texas and Arizona in far greater numbers than they are sending north to Oregon and Washington.

There really isn't a strong impact from California in Southwest Washington. The value difference between Portland and Vancouver does create a bit of a pressure point but the difference is not enough to stress the pricing here much. Most of Oregon is less expensive than Clark County. In fact of Oregon's 36 counties, only Multnomah, Washington, and Clackamas counties have median home prices in excess of those here in Clark County Washington.

We can roll out the welcome mat to retirees from all over the country, including California.

Happy Holidays!

Hey it's Christmas Day so I'm taking it off. I won't leave you empty handed however, take a look at this article from the archives about climate in Washington's wide ranging spaces.

This was originally posted here, by Rod Sager, June 4th, 2014

Real estate tends to perk up this time of year. The sun is shining, the sky is blue, and the temperature is warm. It is easy to get sucked into the greatest summer weather on this planet. But what about winter? Many retirees would love to have a little winter but hate the idea of shoveling snow. Here in Washington State we have options for your winter wonderland. There are places in the Evergreen State like Mount Baker, that have snow so heavy it rivals anywhere in the world. Fortunately those are places people visit rather than live. East of the Cascade Mountains delivers sunnier weather that is warmer in the summer and colder in the winter than this side here in the west. There are many areas that offer an in-between winter experience.

Here in America's Vancouver we have a very mild winter. It gets chilly but rarely gets truly cold. Heavy snow is a twice a decade event and light snow is sporadic every year throughout the winter from late November to early March. Not much shoveling here. As you move up in elevation so your shovel moves up in usage. Those gorgeous view homes up above 1000 feet will see on average double the snowfall down in the city. Move up another 1000 and it's triple.

West of the Cascades you will find the legendary Pacific Northwest clouds and showers. East of the Cascades is California Dry.

East of those mighty Cascade mountains the mercury will plunge down below zero at times and they tend to stay cold from December through February. The good news over there is that those same mountains that block the warm moist air of the Pacific Ocean also block allot of the clouds. Precipitaion on the eastside is dry, dry, dry. So it does snow often but in small doses. Again places like Ellensburg and the Tri-Cities don't have a heavy snow shovel workout.

Spokane will give you a healthy dose of snow with nearly 4 feet falling annually and that rivals Minneapolis. Spokane is not quite as bitter cold as Minnesota and has a shorter winter. If you hate the shovel stay out of the far eastern part of the state.

In case you are looking around in Washington State I have all these little charts for you to consider regarding snowfall and temps. Data was collected from the Western Climate Data Center.