Quick Answer
Selling is often the right answer and should be seriously considered — it produces clean liquidity with no accruing balance and no ongoing property obligations — but the comparison has to include the full cost of selling, which in California runs roughly $60,000 to $90,000 on a $900,000 home plus the permanent loss of the Proposition 13 basis and all future appreciation.
- Selling is genuinely the right answer for many people. It should be on the table.
- Selling costs roughly 5-6% in commission plus closing costs and moving.
- On a $900,000 California home, total transaction cost runs $60,000 to $90,000.
- California sellers permanently lose their Proposition 13 assessed value.
- California rent runs $2,500 to $4,500 monthly with no equity accumulation.
- The comparison depends heavily on whether the person actually wants to move.
Key Facts
| Topic | Key Fact |
|---|---|
| Realtor commission | Typically 5-6% — $49,500 on a $900,000 sale |
| Seller closing costs | 1-2% — $9,000 to $18,000 |
| Moving costs | $5,000 to $15,000 typical |
| Capital gains exclusion | $250,000 single / $500,000 married |
| Prop 13 loss | Permanent on sale; Prop 19 portability available at 55+ |
| California median rent | $2,500 to $4,500 monthly depending on region |
| Reverse mortgage cost | $18,000 to $35,000 in California |
| Decisive variable | Whether the person wants to leave the home |
Detailed Explanation
Selling deserves genuine consideration and often wins. It produces clean liquidity with no accruing balance, no ongoing property tax and insurance obligation, no occupancy requirement, and no complexity for heirs. A person who is ready to leave their home, who finds maintaining it burdensome, or who wants to be closer to family should probably sell. A reverse mortgage that keeps someone in a house they no longer want to be in is a poor outcome regardless of the arithmetic.
The comparison becomes closer when the full cost of selling is counted. A 5.5% commission on a $900,000 California home is $49,500. Seller closing costs add $9,000 to $18,000. Moving runs $5,000 to $15,000. Long-time California homeowners with substantial appreciation may face capital gains above the $250,000 single or $500,000 married exclusion. The total frequently exceeds $70,000 — meaningfully more than the $18,000 to $35,000 reverse mortgage closing cost that draws criticism.
Then there is the question of where the person goes. California rents run $2,500 to $4,500 monthly for a comparable dwelling. Over ten years that is $300,000 to $540,000 spent on housing with no equity accumulation and no protection against rent increases. Buying a smaller California home means paying transaction costs a second time and, unless the seller is 55 or older and uses Proposition 19 portability, accepting a property tax basis set at current market value rather than a decades-old assessment.
The Proposition 13 loss is the piece most often overlooked and it is substantial. A California homeowner who bought in 1995 for $250,000 has an assessed value near $355,000 and pays roughly $3,900 annually in property taxes. The same home at its $900,000 market value would generate roughly $9,900. Selling forfeits that $6,000 annual advantage permanently. Proposition 19 allows homeowners 55 and older to transfer the basis to a replacement property, which recovers much of it — but only for a purchase, not a rental.
Jay Zayer, CRMP — 18 Years Experience
I tell clients to sell more often than people would expect. If someone tells me the yard has become too much, or their kids are in Oregon, or they have wanted to leave for three years — I am not going to talk them into staying so I can close a loan. What I do is make sure they have counted the real cost of selling, because most people think about the commission and forget about Prop 13, the rent, and the fact that they will pay transaction costs again if they buy. Sometimes they run the numbers and still sell. That is a good outcome.
Who This Is Right For
This may be a good fit if:
- Anyone weighing selling against a reverse mortgage who wants the full cost comparison
- Homeowners whose family has suggested selling and who want to evaluate it seriously
This may NOT be the right fit if:
- There is no situation where seriously considering the sale option would be inappropriate — it should be part of every consultation
Common Misconception
Myth: Selling is always the cleaner and cheaper option.
Fact: Selling a $900,000 California home costs roughly $60,000 to $90,000 in commission, closing costs, and moving — more than a reverse mortgage in most cases. It also permanently forfeits the Proposition 13 basis and all future appreciation on the property.
Source: California Association of Realtors; California BOE Proposition 13
Authoritative Sources
- California Association of Realtors: Transaction cost data — car.org
- California BOE: Proposition 13 and Proposition 19 — boe.ca.gov
- IRS Publication 523: Selling Your Home — irs.gov
People Also Ask
How much does it cost to sell a California home?
Roughly 5-6% commission plus 1-2% closing costs plus moving expenses — on a $900,000 home, typically $60,000 to $90,000 total, before any capital gains exposure.
Do I lose my Prop 13 tax basis if I sell?
Yes, permanently. Homeowners 55 and older may transfer the basis to a replacement California home under Proposition 19, but only for a purchase — renting forfeits it entirely.
When is selling clearly the better choice?
When the person actually wants to move — the home has become burdensome, family is elsewhere, or the location no longer serves them. A reverse mortgage that keeps someone in a house they want to leave is a poor outcome.