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Old 03-19-2017, 03:54 PM   #21
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I recently retired and am currently in escrow to buy a new home in an area up the coast from where I currently live. Since I am buying the new place before I sell my current home, I figure I would use my taxable account to buy the new home and then put the money back when I sell my old home. I have no pension or other income, so I figured I would not qualify for a home loan. I modeled the tax implications in Turbotax and will have to deal with a huge tax bill. If I did not buy this new property, my 2017 taxes would be around $500, while the raising the cash for this new home will give me tax bill of over $50,000. Does anyone know of a better option to finance the home purchase? I am 56 years old with about half my portfolio in a taxable account and the other half in rollover IRA and Roth accounts. The new home is costing about the same what my current home is worth. Thanks for any suggestions.
Wow! What a tough situation. That's something I never thought about, when hearing about how much real estate costs in some parts of California.

Hope you are able to figure out a way to buy your dream home and not be taxed to death for doing so. The only approach I can think of is to sell your present home first, but if you are already in escrow on the new home then that probably isn't the best idea.
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Old 03-19-2017, 05:41 PM   #22
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Is the margin loan an option?
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Old 03-19-2017, 11:09 PM   #23
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I wonder if all these roadblocks are telling you to BAIL OUT of the purchase. If I were you, I'd stop trying to buy this place and focus on selling the one you have. So many people have been screwed over by buying before unloading their current property and ending up in a very bad place. Peace of mind will be so much better! Risk will be greatly reduced. I've heard of prop 60 for the over 55 people who move from one property to another and get to retain their current taxes if they purchase a home within 5% of the sales price of their former home are in same county or in a reciprical county (I have not heard of prop 13 moving with you but I'm no expert). But, under any circumstance, Good Luck to you!


+1 You will have a much better negotiating position if you sell your house first and just rent until you find what you want. You could rent in the new area and make sure you like it as much as you think you will before making a permanent commitment.
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Old 03-19-2017, 11:36 PM   #24
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Whenever I buy a place, I put down $1,000 earnest money.
Oh you should hear the real estate agents scream about "showing my seriousness" etc.

But the real reason they want a big payment is then you are screwed out of the money if something goes wrong. While I understand I would still be liable to be sued for screwing up a deal, if I'm immediately out only $1,000 instead of $15,000, I'm in a better position.

Plus it does not tie up a lot of money if the deal collapses and the Realtor is supposed to return it to me.
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Old 03-20-2017, 02:54 AM   #25
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Originally Posted by Travelfreek View Post
I wonder if all these roadblocks are telling you to BAIL OUT of the purchase. If I were you, I'd stop trying to buy this place and focus on selling the one you have. So many people have been screwed over by buying before unloading their current property and ending up in a very bad place. Peace of mind will be so much better! Risk will be greatly reduced. I've heard of prop 60 for the over 55 people who move from one property to another and get to retain their current taxes if they purchase a home within 5% of the sales price of their former home are in same county or in a reciprical county (I have not heard of prop 13 moving with you but I'm no expert). But, under any circumstance, Good Luck to you!
We are the other argument on this topic. We have purchased 5 homes before selling our existing home (twice paid cash, 3 x with double mortgage payments). It worked just fine each time. Sometimes the "perfect home" comes along, at a great price. Under those circumstances, we set our selling price of the existing home a touch under market. There is some stress, but it is short lived. (IMHO, the stress of finding "the replacement home" quickly after receiving an offer is much higher than two mortgages for short a time.)

Plus, it is easier to make repairs/upgrades to the new house when it is empty-and only one move to make-no putting things in storage.
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Old 03-20-2017, 06:29 AM   #26
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Whenever I buy a place, I put down $1,000 earnest money.
Oh you should hear the real estate agents scream about "showing my seriousness" etc.

But the real reason they want a big payment is then you are screwed out of the money if something goes wrong. While I understand I would still be liable to be sued for screwing up a deal, if I'm immediately out only $1,000 instead of $15,000, I'm in a better position.

Plus it does not tie up a lot of money if the deal collapses and the Realtor is supposed to return it to me.
If I were a seller of a mid to high priced property, I probably wouldn't accept your offer, especially if the market was pretty good for sellers. $1000 isn't worth it to take my house off the market when you are showing strong signs that you'll back out.
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Old 03-20-2017, 11:04 AM   #27
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If I were a seller of a mid to high priced property, I probably wouldn't accept your offer, especially if the market was pretty good for sellers. $1000 isn't worth it to take my house off the market when you are showing strong signs that you'll back out.
I understand some folks have that view, and I know it could be a risk.
However I also don't put many other conditions in an offer.

To me buyers back out, using conditions, especially the satisfactory financing one.
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Old 03-21-2017, 02:43 PM   #28
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I am very thankful for the suggestions I received here. Until I posted my question, I had no knowledge of a margin loan or the 60 day IRA "loan". It turns out the sellers decided to give me five more days. That was just enough time to call Vanguard on Monday morning and start the settlement period for temporarily liquidating the portion of my IRA that I need. The mortgage loan I applied for earlier should be finalized next week, so I will be able to return the money to my IRA very soon. So now, I will neither lose my deposit or suffer a huge tax bill from selling my investments from my taxable account. Yay!!!!
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Old 03-21-2017, 04:33 PM   #29
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At the (possibly) worst time (2009/2010) we found ourselves in a very similar situation. We wanted to "trade" homes, but couldn't sell one before we bought the other. (We had found the "perfect" place and we would still needed a place to live while we remodeled the new "perfect" place - yeah, I know, I know.)

We COULD have cashed in assets, but there would have been either a big tax bite or we would have give up some very nice investment vehicles (think I-bonds procured in the early 2000s - back when they actually paid interest!) So we went to the bank and asked for a loan. They didn't care that we had lots of assets - in fact they said "why don't you just sell your assets?" THEN a bank person asked to see our 1040 for past 3 years. Turns out we had LOTS of income - because we had been converting tIRAs to Roths and paying the taxes. Believe it or don't, the bank said THAT was income and THAT qualified us for a loan. GO FIGURE.

SO, check you 1040s and see if you have more income than you might think. Naturally, YMMV.
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Old 03-21-2017, 07:06 PM   #30
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I am very thankful for the suggestions I received here. Until I posted my question, I had no knowledge of a margin loan or the 60 day IRA "loan". It turns out the sellers decided to give me five more days. That was just enough time to call Vanguard on Monday morning and start the settlement period for temporarily liquidating the portion of my IRA that I need. The mortgage loan I applied for earlier should be finalized next week, so I will be able to return the money to my IRA very soon. So now, I will neither lose my deposit or suffer a huge tax bill from selling my investments from my taxable account. Yay!!!!


Glad that it is working out for you, nice to keep that dough for when you really need it.
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