“If we sell the house and buy something smaller, we’ll have plenty left over.” I hear some version of that from almost every couple who starts thinking about downsizing, and they’re usually right that they’ll free up money. What surprises them is how much less it is than the simple difference between the two prices. Commission, capital gains tax, the purchase costs, and the move itself all take a bite, and HOA dues or special taxes can eat up what you expected to save every year. Few people who sell a big Silicon Valley house buy another expensive home nearby, so this article runs the full math on two more realistic moves: a condo at The Villages in San Jose, or a single-family home outside Sacramento. It’s part of my ultimate downsizing guide for Bay Area seniors. Downsizing in Silicon Valley rarely frees up as much cash as people expect on day one, and I’ll show you why with real numbers.
Key Takeaways
Summary: Downsizing from a Silicon Valley house usually frees up much less cash than the price difference suggests once capital gains tax and commission are counted, and it may barely lower your annual costs. Running your real numbers first, including a Prop 19 transfer, is the best way to avoid a disappointing move.
From my practice: Freeing up cash is half the question, and turning it into income is the other half. One seller I worked with sold a house he’d bought for $490,000 for $1,275,000, and he wanted steady retirement income from part of it. We set up a structured installment sale that would have paid him $3,500 a month for more than eight years from about $300,000 of the proceeds, but the buyers declined to sign on at the last minute and we closed as a standard sale. Plan the income side before you list, so it can be written into the offer terms.
Running these numbers with families is where I start as a Silicon Valley senior real estate specialist.
A Worked Example: What You Net Selling a $2.4M House
A couple in their early 70s bought their Willow Glen home in 1990 and have about $600,000 in basis including improvements. Their assessed value is about $320,000. They sell for $2,400,000, and we’ll compare two places they might go next. The first is an $800,000 two-bedroom condo at The Villages Golf and Country Club, the 55+ community in San Jose. The second is a $900,000 single-family home in Roseville or Folsom, outside Sacramento.
Selling the house
| Amount | |
|---|---|
| Sale price | $2,400,000 |
| Commission and seller closing costs (illustrative, about 5.5 percent) | ($132,000) |
| Pre-sale preparation, cleanout, and staging | ($35,000) |
| Estimated capital gains tax on roughly $1,150,000 of taxable gain after the $500,000 exclusion | (About $325,000) |
| Net after sale costs and tax | About $1,908,000 |
The tax estimate uses roughly the combined federal and California rates from my capital gains tax guide. Yours depends on your basis, other income, and whether a spouse’s death has stepped up the basis.
Free 3-minute decision check
Stay, downsize, or move away? Find out which one costs you the least.
For longtime Bay Area owners, the wrong call can cost six figures in taxes, remodeling, or years of higher living costs. Answer a dozen quick questions and see all three paths side by side, with a rough dollar figure for what each one would cost you or free up.
See My Best Path →Rather talk now? Call or text 408.413.3087
Buying the next home
| The Villages condo, San Jose | Single-family home, Roseville or Folsom | |
|---|---|---|
| Net from the sale | About $1,908,000 | About $1,908,000 |
| Purchase price | ($800,000) | ($900,000) |
| Buyer closing costs | (About $6,000) | (About $7,000) |
| Movers, new furniture, and small updates | (About $20,000) | (About $25,000) |
| Cash freed up | About $1,082,000 | About $976,000 |
| Simple price difference | $1,600,000 | $1,500,000 |
Either way, about $520,000 of the price difference never reaches your bank account. Staying near your doctors and friends at The Villages frees up more cash than moving to the Sacramento area, because the condo costs less up front. For some couples, a million dollars is exactly what they need to fund retirement and future care. For others, it changes the plan, and they choose a less expensive area, a smaller unit, or renting. The point is to know before you start.
Annual Costs Before and After
| Annual cost | Willow Glen house | The Villages condo | Roseville or Folsom home |
|---|---|---|---|
| Property tax with the Prop 19 transfer | About $3,800 | About $3,800 | About $3,600 |
| HOA dues | None | About $16,200 | None |
| Mello-Roos special taxes | None | None | About $2,500 |
| Insurance | About $3,500 | About $800 | About $3,000 |
| Maintenance, gardening, and repairs | About $12,000 | About $1,500 | About $9,000 |
| Utilities | About $6,000 | About $2,000 | About $6,000 |
| Total with the Prop 19 transfer | About $25,300 | About $24,300 | About $24,100 |
| Total without the transfer | About $30,100 | About $30,400 |
Here’s what surprises people: with the Prop 19 base-year transfer, moving saves only about $1,000 a year in either place. Without the transfer, they’d pay about $5,000 a year more than they do now. The Villages dues are the big number, and they vary by unit. Recent two-bedroom units from $837,000 to $890,000 show dues of about $1,350 to $1,500 a month, so confirm the figure for any unit you consider. Those dues do cover a lot, including club membership, golf, pools, water, trash, cable, and earthquake insurance. Near Sacramento, the cost to watch is Mello-Roos, which can run from under $1,000 to more than $10,000 a year depending on the age of the neighborhood, so ask to see the actual tax bill before you fall in love with a house. That’s why the base-year transfer is one of the most important tools for older Silicon Valley homeowners, and I explain it in the Prop 19 base-year transfer for homeowners 55 and older.
Free Guide: Selling a Home You’ve Owned for Decades
A real example: Here are real numbers from one downsize. My seller, in her eighties, sold an older four-bedroom creekside house for $1,400,000 and bought a newer three-bedroom single-level home nearby for $725,000, all cash. At closing, $721,033.75 of her proceeds went straight into the purchase, and she moved once, with no bridge loan, no rental and no storage. She went from an older house on a creek to a newer single-level home she can manage on her own.
How to Keep More of Your Money When You Downsize
- A step-up in basis. A widow or widower whose home received a community property step-up may owe little or no tax. See the community property double step-up.
- Documented improvements. They reduce the taxable gain. See how to calculate your adjusted basis.
- Selling well. Targeted preparation and strong marketing on a $2.4 million house can easily move the net by more than the entire cost of the move.
- Choosing the next home carefully. HOA dues, Mello-Roos, and special assessments can eat up the savings.
- Timing income. Delaying IRA withdrawals in the year of the sale can keep more of the gain in lower brackets.
Before You Decide
Downsizing is rarely just a financial decision. Stairs, isolation, the burden of maintaining a large house, and being closer to family often matter more than the dollars. But the dollars should be clear. When I meet with a couple considering a move, I build a version of these tables with their actual basis, assessed value, likely sale price, and target homes, and we bring in their CPA for the tax line. For the broader planning picture, see my ultimate downsizing guide for Bay Area seniors and the Best Move method. And if you’re weighing whether to move at all, my comparison of a reverse mortgage vs. selling your Silicon Valley home runs the same $2.4 million example through four different paths.
Thinking about selling?
Just list with me, I'll do the rest.
Minimum hassle, maximum profit, and a sale on your timeline at a price and terms you'll love.
Let's Get Started →Rather talk now? Call or text 408.413.3087
Frequently Asked Questions
How much money will I free up by downsizing in Silicon Valley?
Usually much less than the price difference. In one example, selling a $2,400,000 home freed about $1,082,000 after buying an $800,000 condo at The Villages in San Jose, or about $976,000 after buying a $900,000 home near Sacramento, once commission, preparation, capital gains tax, and purchase and moving costs were paid.
Will my property taxes go up when I downsize?
If you’re 55 or older, Prop 19’s base-year transfer can let you keep your current assessed value on a replacement home of equal or lesser value anywhere in California. HOA dues and special taxes like Mello-Roos are separate and aren’t covered by the transfer.
Do your annual costs go down when you downsize?
Sometimes by less than you’d expect. In one example, annual costs fell by only about $1,000 with the Prop 19 transfer, whether the couple bought a condo with high HOA dues or a home with Mello-Roos taxes. Without the transfer, they rose by about $5,000.
What is the biggest cost of downsizing?
For couples who bought decades ago, capital gains tax is often the largest cost, followed by commission and closing costs.
How much capital gains tax will I pay when I downsize in California?
It depends on your basis and other income. A married couple can exclude up to $500,000 of gain on a primary residence ($250,000 if single). The rest is taxed federally at up to 20 percent, plus the 3.8 percent net investment income tax for higher earners, and California taxes it as ordinary income. In the example above, roughly $1,150,000 of taxable gain produced about $325,000 in combined tax.
How can I increase what I net from downsizing?
Document improvements, use any step-up in basis, prepare and market the house well, use the Prop 19 base-year transfer, and choose a replacement home whose HOA dues and special taxes fit your budget.
Sources and Further Reading
Simple Strategy Guide
The Downsizing Guide for Bay Area Seniors
What to keep, what to let go, and how to get your home ready for today's buyers without a costly remodel, so you protect your equity and move on your own timeline.
You're all set. Thanks! The Downsizing Guide is on its way to your inbox. If you don't see it in a few minutes, check your promotions or spam folder.
Senior Friendly Homes in Silicon Valley South
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
