(Newswire.net — August 21, 2023) — For some, the American dream centers around a picket fence, porch swing, and patch of green paradise. For others, it’s more about investing in an entrepreneurial journey or college education. When California Governor Gavin Newsom signed Senate Bill 9 (SB9) into law, allowing residents to sell part of their backyards, he enabled many Californian homeowners to chase down more than one dream at a time.
SB9 states that homeowners in single-family residential zones are eligible to receive a profit from the sale of their backyards. To qualify, these yards must be relatively flat, single-family properties that they currently reside in — not investment properties.
“This historic legislation offers exciting new options for homeowners in California,” says Matt Lucido, CEO of Yardsworth. “But before making your decision, be sure to weigh the benefits and costs.”
How will California residents profit by selling part of their backyards?
The most significant benefit this groundbreaking legislation offers is the ability to access home equity without taking on new debt. “Selling a piece of your backyard is a debt-free alternative to HELOCs or cash-out refinancing,” Lucido explains, “as both of these options come with considerably high-interest rates today.”
The proceeds from the sales of residents’ backyards can provide funds for any number of life-changing options, such as debt elimination, small business investments, stock purchases, and educational opportunities. Better still, the new program won’t hit participating homeowners hard when tax time rolls around.
“When you split off a portion of your lot, typically most — if not all — of the sale’s proceeds will be tax-free,” Lucido says, “because every home has assessed tax values for both land and improvements. When you sell a portion of your land, you’re selling part of an asset assigned a value by your local assessor’s office and it is treated as a return of basis, just like when you buy a share of stock for $1 and sell it for $1 or less.”
In other words, this legislation allows California’s homeowners to make the most of rising property values without selling their properties. Recently, many homes in the state have seen a dramatic rise in home value. By selling just a portion of the backyard, residents profit from the increase without being forced to relocate or succumb to gentrification.
Why California residents can feel good about the decision to sell part of their backyards
Selling a section of a backyard is being hailed as socially responsible in light of California’s current housing shortage. As the number of available dwellings in a neighborhood increases, many communities hope to find relief from the housing crisis. The additional housing units created by SB9 also promise to spur economic growth by attracting new people and businesses to an area.
Furthermore, SB9 proposes a sustainable approach to the challenge of urban growth, as selling a portion of existing backyards for the construction of additional dwellings, rather than developing new subdivisions, is known as infill construction. A focus on infill construction makes use of existing infrastructure and lessens the encroachment of urban sprawl.
Another reason many residents feel good about this decision has to do with the time, labor, and money spent on a property’s upkeep and maintenance. Homeowners can cut watering and landscaping costs in half by selling off a portion of their backyard.
Reasons to think twice before selling part of your backyard
“Selling a portion of your yard in exchange for a lump sum has its benefits, but it may not be in every family’s best interest,” warns Lucido. “In fact, selling a heavily used yard is probably a last-resort choice for most. Thankfully, even after a backyard sale, you’ll still have yard space to enjoy with your loved ones.”
As Lucido explains, a smaller lot isn’t the only consideration. If families intend to sell their homes or foresee the possibility of moving in the near future, they will need to think twice. SB9 mandates a three-year commitment to owner occupancy from participants in the program.
Additionally, families may lack enough equity to participate in the program right away. “If you just purchased or refinanced your house, your loan-to-value may be as high as 90%,” says Lucido, “which can make it challenging for you to acquire clearance from your mortgage lender. Most banks require a maximum of 70% LTV before they give you the green light to sell a portion of your backyard. However, most lenders permit you to pay down your mortgage principal out of the proceeds you receive from the sale to meet LTV requirements.”
Indeed, the decision isn’t one that will work for every eligible California homeowner. But for those who decide that selling off a portion of their backyard space is worth a six-figure tax-free bump in income, Yardsworth can help them streamline the process. This Los Angeles firm provides homeowners with fair market value cash offers for a piece of their backyards.
To find out how much your yard is worth, California residents can visit Yardsworth.com and enter their address into the site’s online form.