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Value in the Preparation

By Datta Khalsa, Broker




Having a daughter in musical theater has taught us a great deal as a family about the many things that go on behind the curtain beforehand in order to have a successful opening day.


Much of these details are handled by parent volunteers, who generally don’t get enough credit for the many things they handle in the spirit of supporting their kid. Sets are painted, costumes are made, and many hours are logged driving to and from the actor’s lessons and rehearsals in the months, weeks and days leading up to the first performance.


It recently hit me that this process is no different than what a good agent does behind the scenes to facilitate the ideal outcome for their clients. Like the parent volunteer, much of our best and most meaningful work generally goes unpaid, and yet ironically it is often through this unpaid work that our value is established.


Earlier this week I visited a client who is facing multiple decisions of how to move forward after his house suffered from a disaster. My early input had very little to do with what constitutes licensed activity, as I helped connect him with reputable vendors to help assist with the cleanup and restoration process and we compared notes on how to deal with his insurance company.


From there, the discussion turned to whether to sell the home as-is or to take it through the permitting and construction to build it out to its highest and best use to maximize his proceeds. For this, I provided two different sets of analysis to help determine the likely difference in Fair Market Value he would get for the finished home and gave him the names of several good architects who can help him nail down nuances such as adding an ADU during the process.


I brought my property manager along on the walkthrough to get an accurate read on what the home could rent for both with and without an ADU, and then the conversation turned to taxes, which are outside the purview of a real estate license, but which any responsible agent should have at least a working knowledge of the client’s possible exposure and preemptive strategies that should be explored before putting a property on the market.


Since the client is over 55, I advised him to check (with either his CPA or mine) on the pros and cons of maintaining the home as his primary residence, which under Prop 19 would enable him to transfer his property tax basis to anywhere in the state. And we discussed an alternate strategy to have us rent the home out to make it eligible for a 1031 exchange so he could defer his capital gains taxes, which will likely run into the hundreds of thousands of dollars, by trading the proceeds into a replacement property (or properties) across town or across the country.


We are still in the early stages of our working relationship, and it is possible that I will never see a dime for any of this, but for me the project has already paid off in terms of both my personal fulfillment and validation as a professional.


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