Small Boost in Cal housing prices: homestead exemption increased from 75k to 600k

[gzz]

This is the amount of home equity protected from non-mortgage creditors:

https://www.jdsupra.com/legalnews/california-amends-increases-its-34069/

Our prior 75k for single people and up to 175k for the elderly and disabled was oddly stingy. Many states, most famously Florida, it is unlimited for the primary residence.

Here’s how it may work in practice. Take the owner of a failed business with a $800,000 house and 500,000 mortgage on it. Under the old rule, his creditors could force the sale of it, pay the 500k mortgage, give him 75k, and keep the remaining $225k.

Now, the exemption plus mortgage on the 800k house is 1.1m, up from 575k. This means the minimum bid at action would be 1.1m, and as a practical matter the creditors cannot force the sale of the house.

This provides a small boost to property prices by making them more secure from creditors, and decreasing the frequency of forced sales.

[scaredyclassic]

I need a bigger mortgage

[carlsbadworker]

[quote=scaredyclassic]I need a bigger mortgage[/quote]

That’s incredibly easy. Buy this:
https://www.redfin.com/CA/Temecula/40520-De-Portola-Rd-92592/home/8172035

[scaredyclassic]

That ones ok, but my place is significantly nicer.

Also its not 600k, its median county sale price or 300k whichever is greater. 450k in riverside.

Maybe a big cashout refi.

[FormerOwner]

Could the Homestead Exemption be used with a duplex if one unit is owner-occupied?

[gzz]

Happy to do that research for $$$! If you want to do it, just go to a law library.

The two likely answers are (1) in a foreclosure the court needs to disentangle the value of the owner’s half to determine the homestead exemption (2) it just is all homestead. Courts often have to make simplicity versus fairness determinations like this.

Given that the exemption was so tiny here for so long, I doubt we have any cases on it, and California would simply follow the majority approach of other state courts.

[FormerOwner]

LOL. Thanks for the feedback gzz; makes sense.

[gzz]

I will predict another upcoming law that will boost local RE: a restoration of the SALT deduction. Nancy and Chuck both are strong supporters.

It doesn’t even need to be a complete restoration, they could cap it at 30k for example, and it still would be a big boost to both incomes and buying power of people in the 700-2.5m part of the market.

[gzz]

Two sources now say FULL SALT is coming back.

That plus 100% biz meal deduction for 2021 makes me a happy camper. 🙂

[Author]

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