Selling a home in California can be an exciting yet stressful process. With the state's competitive housing market, it’s crucial to make your property stand out to potential buyers. Proper preparation and staging can help you sell your home faster and for more money. Follow this guide to learn the steps for preparing your home for sale in California.
Gather Necessary Documents for the Home Selling Process
Before listing your California home, collect important documents needed for the selling process:
- Deed of Trust - This proves homeownership and outstanding mortgage balances. Obtain from your lender.
- Property tax bill - Shows assessed value and tax-exempt status. Retrieve from your county assessor's office.
- Home inspection reports - Inspections done in the last 5 years highlight issues for disclosure.
- Home improvement receipts - Documents for upgrades done recently prove their value.
- HOA documents - Provides rules for modifications and dues owed. Request from your HOA.
- Disclosure forms - Describe known defects per state law. Your agent will handle these.
Having paperwork ready streamlines the dealing process. Consult your real estate agent to ensure you have all the required documentation.
Make Improvements and Repairs
Fixing up your home before listing grabs buyers' interest. Focus on high ROI repairs first:
Curb Appeal Upgrades:
- Paint or power wash the exterior
- Landscape yard and pruned bushes
- Ensure doors, windows, and shutters are in good shape
- Fix cracked walkways, fencing
Interior Repairs:
- Patch holes, cracks and touch up paint
- Fix leaky faucets, showerheads, toilets
- Update old light fixtures
- Replace torn screens or cracked glass
Big Ticket Fixes (if budget allows):
- Kitchen/bathroom remodel
- Replace the roof or HVAC system
- Refinish hardwood floors
Repair issues flagged in past inspection reports. Declutter and clean before listing. A well-maintained, move-in-ready home offers buyers fewer reasons to negotiate.
Hire a Real Estate Agent
A qualified real estate agent markets your home professionally and handles sale paperwork. When hiring an agent in California:
- Ask friends for referrals
- Search online listings and reviews
- Interview multiple agents
- Ask about their pricing, marketing strategy, and experience selling in your neighborhood
- Choose an agent you trust and communicate well with
Top agents have networks of qualified buyers ready. They’ll guide pricing strategy and negotiation. Paying their commission often yields a higher sale price.
Determine a Competitive Listing Price
Overpricing your home because you feel attached loses potential buyers. Consider:
- Comparable recent sales in your neighborhood
- Your home's condition relative to others
- Latest market data from your agent
- The amount owed on your mortgage
- How quickly do you need to sell
Price it competitively based on market demand rather than emotion. You can always adjust the price later. Listing too high means having to lower it after no showings occur.
Prepare for Potential Buyers
Once your home is listed, it could see lots of traffic. For showings:
- Keep all rooms spotlessly clean
- Make beds, put away laundry, empty trash
- Put pets in an outdoor run or take them out
- Open blinds and let daylight in
- Turn on all lights
- Keep driveways and walkways clear
- Mow lawn and tidy yard
Great showings motivate buyers. Offer times you’ll vacate for viewings. Follow up for feedback after.
Know the Costs of Selling
Selling costs money upfront but nets more cash in the end. Budget for:
Agent commissions - Usually 5-6% of the sale price.
Staging fees - If using a professional stager.
Inspection costs - General plus pest, chimney, etc. if needed.
Appraisal fee - If lender requires. Typically $300-$500.
Title search - For establishing a clear title. Around $150.
Termite clearance - If in a high-risk area. Around $150-$200.
Property tax - Prorated amount due at closing.
Loan payoff - If selling before the mortgage is satisfied.
Legal fees - If resolving title issues.
Transfer taxes - Based on the sale price, like $1.50 per $500.
Home warranty - Optional. Can help sell quicker.
Moving costs - If using a moving company.
Utility fees - For final bills.
Work with your agent so you don’t overpay for services. Take costs into account when pricing a home.
Timeline for Selling a House in California
The typical timeline for selling a house in California is:
- 2-4 weeks to prepare the property for listing
- 1-2 weeks for the agent to evaluate and price
- 1-2 days to photograph and upload the listing
- 30-60 days to market until an offer
- 30 days for buyer financing contingencies
- 3 days for final walkthroughs
- 1-2 weeks to close after signed sale contract
The total process averages 90-120 days but can be shorter or longer. Be patient yet ready to negotiate and move quickly once serious buyers emerge.
What Documents Are Required to Sell a House in California?
Several key documents are legally required during the California home-selling process:
Seller's Disclosure Forms
Per California Civil Code 1102, the state mandates sellers provide a Transfer Disclosure Statement (TDS) or Seller Property Questionnaire (SPQ) revealing known defects. This includes issues like:
- Structural damage
- Pests/dry rot
- Roof leaks
- Foundation/soil problems
- Zoning violations
- Neighborhood noise issues
- Pending litigation
Accurately complete these disclosures with your agent's guidance. Failing to can allow the buyer to void the sale.
Smog Inspection Reports
In certain California counties, a smog inspection certificate proving your property meets air quality standards is required. This applies to homes in high ozone zones selling with a fireplace or wood-burning stove.
Natural Hazard Disclosure
The Natural Hazard Disclosure Statement discloses if the home is in a flood, fire, earthquake, or special assessment zone per maps. Buyers can rescind offers if not properly notified of risks.
Property Tax Clearance
Before closing, you must obtain a certificate from the county tax collector showing no back taxes owed on the property. This releases the property tax lien so the title can be transferred.
FIRPTA Affidavit
The state requires foreign sellers to fill out an affidavit of non-foreign status and file it with the IRS. This ensures taxes on capital gains from the sale are paid.
Consult your real estate attorney and agent to ensure all required disclosures and affidavits are completed accurately before listing your California home for sale. This protects you from liability down the road.
Tips for Preparing Your Home for Sale in California
To market your California home effectively, certain preparations should be made prior to listing:
Declutter and Clean Thoroughly
Pack away excess furniture, kids' toys, kitchen items, and knickknacks. Buyers want to envision their own belongings occupying the home. Deep clean using checklists so no spot gets overlooked.
Make Minor Repairs
Fix minor plumbing leaks, broken appliances/fixtures, sticking doors or windows, cracked grout/tiles, and faucet drips. Handle safety hazards like loose railings. Buyers expect move-in ready.
Update Paint and Flooring
Fresh interior paint in neutral tones makes rooms feel clean and spacious. Refinish hardwood floors or replace worn carpets. New floors offer great ROI if selling.
Improve Curb Appeal
Focus on the exterior too. Plant flowers lay fresh mulch, wash windows, add house numbers, paint the front door, and ensure the yard looks neat. Great curb appeal can help buyers overlook flaws inside.
Remove Clutter
Rent storage or hold a garage sale for excess furniture and household items you won’t move or don’t have room for. Less stuff makes rooms appear larger.
Organize Closets
Buyers inspect closets. Neatly arrange closets with space to add belongings. Consider closet organization systems to maximize space.
Update Light Fixtures
Modern or vintage-style light fixtures update a home's look cost-effectively. Make sure all bulbs work and are bright. Well-lit rooms feel more inviting.
Preparing your home thoroughly removes buyer objections and encourages great offers. Consult your agent for staging tips tailored to your neighborhood's market.
How Long Do You Have to Live in a House Before Selling in California?
In California, there is no minimum time you must own and occupy a home before selling. However, living in the property before selling has financial implications for taxes owed.
Capital Gains Tax in California
When selling your primary residence, you can exempt up to $250,000 in capital gains per person (or $500,000 per couple) if you lived in the home for 2 of the past 5 years. This excludes single filers making over $250k ($500k joint). The rule incentivizes longer-term residency to get the full exemption.
For non-primary residences or vacation homes, there is no ownership time rule. You must pay capital gains taxes on all profits.
Property Tax Reassessments
Under Proposition 13, property taxes are capped at 1% of the purchase price, with annual increases limited to the rate of inflation or 2% - whichever is lower. This assessed value resets to market value whenever the home sells.
However, in some cases, transfers do not trigger reassessment:
- Parent to child - Assessed value transfers.
- Grandparent to grandchild - If parents are deceased.
- Disasters - Value maintained after damage from wildfires, floods, and earthquakes.
- Seniors/disabled - One-time transfer of tax base.
Consult a tax professional to maximize savings when selling property in California. The longer you own, the more tax exclusions may apply.
How Do I Avoid Paying Taxes When Selling My House in California?
California taxes capital gains on home sales not meeting residency rules. While you can’t avoid taxes completely, here are tips to reduce your tax bill:
Claim Primary Residence Exemption
If you lived in the home for 2 of the past 5 years, claim the capital gains tax exemption on profits up to $250k single or $500k married filing jointly. Maintain records proving primary residency.
Do Home Improvements
Any money invested in eligible home improvements like remodels and repairs can reduce taxable capital gains. Keep all receipts and documentation.
Sell After Major Life Events
Certain life events like marriage, divorce, or having a baby can extend the capital gains exemption period temporarily. Consult a tax pro for your situation.
Time the Sale
Wait until you reach long-term capital gains status by owning for over 12 months before selling. This qualifies you for lower Federal capital gains taxes.
Offset Gains with Losses
Reporting capital losses from selling other investments can offset capital gains from the home sale. This strategy reduces net taxable income from the sale.
Donate Proceeds to Charity
If you donate some profits to a qualifying charity, you may receive a tax deduction for charitable giving. Maintain careful documentation.
Perform a 1031 Exchange
Selling then reinvesting proceeds in another like-kind property through a 1031 exchange defers capital gains taxes. Use a qualified intermediary.
Thoughtful tax planning and timing around the sale can help lower your overall tax liability. Work with a CPA or tax attorney to determine the most strategic approach for your situation.
How Much Tax Do You Pay When Selling Your House in California?
If you don’t qualify for capital gains tax exemptions, the profits from selling your California home are taxed between 15% - 23.8% federally based on income:
Federal Capital Gains Tax Rates
For single filers:
- 0% for up to $40,400 in 2023
- 15% for $40,401 to $445,850
- 20% for over $445,850
For married filing jointly:
- 0% for up to $80,800 in 2023
- 15% for $80,801 to $501,600
- 20% for over $501,600
3.8% Net Investment Income Tax
It was added to the top brackets for singles above $200k and married couples above $250k. This brings the maximum rate to 23.8%.
State Taxes in California
California also taxes capital gains on home sales as ordinary income:
- 1% for $0 to $9,325
- 2% for $9,326 to $22,107
- 4% for $22,108 to $34,692
- 6% for $34,693 to $48,435
- 8% for $48,436 to $613,996
- 9.3% for $613,997 to $1,000,000
- 10.3% for $1,000,001 to $2,613,000
- 11.3% over $2,613,001
Consult a tax professional to estimate taxes owed based on your home sale profit amount, income, and deductions. Thorough planning can help lower your burden.
Do I Pay Taxes If I Sell My House in California?
In most cases, yes. Profits from selling your home in California are subject to federal and state capital gains taxes. However, primary residences get tax breaks that can eliminate your bill.
When Capital Gains Taxes Apply in California:
- You owned the home for less than 2 years of the past 5 years
- Your profits exceed $250,000 single or $500,000 married filing jointly
- You used the home as a rental property or vacation home
- Your income exceeds limits to claim exemptions
When Capital Gains Taxes May Not Apply:
- You owned and lived in the home as your primary residence for 2 of the past 5 years
- You qualify for the $250k/$500k capital gains tax exemption
- You do a 1031 exchange into another property
- You have capital losses to offset the capital gain
- Your profits were reinvested in home improvements
- You donate proceeds to a qualifying charity
Even if one exemption applies, you may still owe capital gains taxes if your profit exceeds the amount excluded. Consult a tax professional to determine your specific tax liability when selling a home in California. Proactive planning can reduce what you owe.
How Much Are Closing Costs in California?
Closing costs for sellers in California average between 8% to 10% of the home's sale price. This covers real estate agent commissions, taxes, legal fees, and other transaction costs.
Average Closing Costs Breakdown for Sellers
Agent Commissions - 5-6% for the listing agent and 3% for the buyer's agent.
Escrow Fees - Around $700-$1000 paid to the title company.
Document Prep Fees- Covers deed preparation. Around $150-$300.
Recording Fees - To record the deed. Usually under $100.
Transfer Taxes - Based on the sale price, like $1.50 per $500.
Home Warranty - Optional but encouraged. $300-$600.
Termite Inspection - If required. $80-$150.
HOA Fees - The prorated amount owed when moving out.
Property Taxes - Any due for the current tax year.
Loan Payoff - If selling with an outstanding mortgage.
Title Insurance - Optional owner's policy for protection.
Seller Concessions - Credit given to the buyer for closing costs.
Work with your real estate agent and lender to understand the total estimated fees when setting your listing price and proceeds expectation. The buyer typically pays their own closing costs too.
Do Non-Residents Pay Capital Gains Tax on California Home Sales?
Yes, non-residents are subject to California capital gains taxes when selling a home there, regardless of residency status.
California Tax for Non-Resident Home Sellers
California taxes non-residents on gains from the sale of California real estate. This includes secondary homes, rental properties, inherited properties, and vacation residences located within state borders.
The gain is taxed as regular income at progressive rates up to 13.3% as of 2023, with no primary residence exclusion.
Exceptions for Non-Residents
Non-residents may qualify for a full or partial capital gains tax exemption in California if:
- They used the 1031 exchange to purchase the replacement property.
- Their income falls below minimum state tax filing thresholds.
- They have other capital losses to offset the gain.
- The property was jointly owned by a California resident.
- They meet partial residency requirements.
Even with an exemption, they still owe Federal capital gains taxes. Out-of-state sellers should plan for California capital gains liability when selling homes there. Consulting a tax professional can yield significant savings through strategic filing.
What is the 183-Day Rule in California?
California determines tax residency using the 183-day rule - if you spend more than 183 days in California during a tax year, you are considered a resident for tax purposes.
This matters for home sellers because California residents pay different capital gains tax rates than non-residents when selling property within the state’s borders.
How the 183-Day Rule Works
To count as a tax resident under the 183-day rule, you must be physically present in California for at least 183 days of the tax year, which runs from January 1 to December 31. Short temporary absences are counted as days present.
Any portion of a day spent in California, even just passing through, qualifies as a full day for residency purposes. Business travel, vacations, housesitting, and other reasons all contribute to your total.
You do not need to be domiciled or own property in California to meet the 183-day threshold. It is based solely on physical location.
Impact on Home Sellers
If selling a home in California, being deemed a resident under this rule can lower your capital gains tax rate versus non-resident rates. It also allows you to claim the $250,000/$500,000 primary residence capital gains exclusion if you lived on the property for at least 2 of the past 5 years.
Conversely, non-residents pay higher capital gains tax rates on the full profit amount when selling. Carefully tracking your days to manage residency is crucial for California home sellers.
Proactive tax planning based on the expected closing date is wise. Consult a tax professional to determine the most advantageous approach to reduce your tax burden when selling real estate in California as a non-resident.
What is the 546-Day Rule in California?
The 546-day rule in California provides a temporary capital gains tax exemption for those who sell their primary residence, move out of state, then move back and buy another primary residence within 546 days.
Here is how it works:
- You sell your primary California home and owe capital gains tax.
- You move out of state and establish tax residency elsewhere.
- Within 546 days, you move back and purchase another California primary residence.
- The gains from the initial home sale become exempt.
This provides tax relief for California residents relocating and then returning quickly. You must meet several requirements:
- You must establish full tax residency out of state in the interim period.
- The 546 days are calculated beginning the day after you sell the first home.
- You cannot have already lived in the new home as a primary resident before the sale.
- You cannot have rented out or used the new home for other purposes already.
Carefully track dates and maintain documentation proving you are qualified. Consult a tax professional before using this exemption to ensure you meet all eligibility stipulations.
How Long Can You Stay in California Without Being A Tax Resident?
To avoid becoming a California tax resident, you generally must stay under 183 days in the state within a tax year, which spans January 1 to December 31. Here are key things to know:
- 183 days - Once you exceed this, you're considered a resident by California for tax purposes.
- Any part of a day - Even just passing through counts as a full day toward the 183-day limit.
- Temporary absences - Being briefly away still counts prior days present upon return.
- Business travel - Days in California for work purposes count.
- Reason doesn't matter - Visiting family/friends, vacationing, and housesitting all contribute to the total.
- Physical presence - Just staying under 183 days physically present avoids tax residency, regardless of property ownership or other ties.
- Tax year basis - The count resets annually on January 1st.
- Impact on taxes - Establishing California tax residency can increase what you owe on home sales and income.
Carefully tracking days and maintaining strong documentation is key. Consider the 183-day impact when planning real estate transactions, accepting jobs that involve travel, or spending extended time in California. Consult a tax expert to ensure you stay compliant. Even one day over can mean thousands in extra taxes owed.
Conclusion
Preparing a home for sale in California involves considerable effort - from fixing defects and staging to navigating disclosures and taxes. Allow 2-4 months for the entire process. Consult professionals like real estate agents, attorneys, CPAs, and stagers to ensure you maximize your sale price and comply with all legal requirements. Paying taxes owed on your profits reduces headaches down the road. With strategic preparation, you can sell smoothly, close quickly, and walk away with more cash in your pocket.
