Having a paid-off house can be great! A lot of retirees do or soon will have a paid-off home. But there can be some risks that YOU need to know about… so maybe you won’t be a victim.
Here are Three Risks to a Paid-Off House
Retirees with paid-off homes are pretty common. Check out the article below to learn just how common it is and for a discussion of the pros and cons of paying off your home.
Of course there are a lot of risks in owning a home and in having a mortgage but also in having a paid-off home as well. One of the reasons is that great big pile of equity just sitting in one place is so very tempting to crooks… criminals in the private sector as well as your government.
California Government Targeting Your Equity
There’s a proposition on Californian’s November ballot called Prop 40. This is advertised as a “one-time wealth tax” that applies to billionaires. This taxing mechanism, for the first time, goes after an individual’s equity… that is to say, the money they have minus liabilities.
For people with paid-off houses, the tax would apply to the total amount your house is worth… regardless if you are selling it or keeping it or whatever.
I know, you’re saying that “they” said it’s only a “one-time” tax AND it only applies to billionaires. But that the really important thing about this Prop 40 is that it sets a PRECEDENT… that being, the state can tax you on your wealth (your equity) and not, as is the case now, on your income or things you buy.
Will it just be “one-time”? Check out the answers from Google below about this. Short answer: California has a history of making “temporary” taxes permanent… especially when the recipients of that tax money become dependent on that tax money and when much of that tax money goes back to influence politicians in Sacramento.
But, but, but… the Prop 40 says it’s only one time and for billionaires.
And the Prop 40 also says that this law can be changed to continue on forever and can be applied to anyone who has any amount of equity… it only takes a change by two-thirds of the California legislature (of which the Democrats already have a two-thirds majority).
To get the law that sets the precedent requires the approval of the people… the ballot measure. To change that law only takes an act of the legislature.
When California’s wealth tax comes for you… and you have a paid-off house with all that equity sitting there… there’s a HUGE risk that the state will be taking your value as much as any street thug would… except the government has more guns.
Private-Sector Criminals
While not as heavily armed as the government criminals, private-sector criminals are another risk to your paid-off house… and even homes that are not paid off but have some amount of equity built up.
The following from Google tells us how home title theft works. It’s not complicated and there are not many, if any, real checks in place to make sure a crook doesn’t take your home equity.
Are you safe from these private-sector criminals doing title theft against you if you do have a mortgage on your home? Well, no… not completely. There is still a real risk.
These crooks will go for the easiest marks possible… like Google says below, vacant, rental or paid-off properties.
It’s possible that your paid-off home will be more attractive to these private-sector criminals… but all home owners with any equity are at risk.
Idaho Protects Homes from Government
Speaking of government criminals who could be steeling your home’s equity… Idaho recently stepped up to clamp down on that happening here.
Before Idaho’s ban on government theft of home equity, your home might be foreclosed on for some reason such as to satisfy a tax debt. Maybe you owed some government entity, federal or state or local, let’s say $1,000. They foreclosed on your home that had $500,000 in equity (paid off or not). The would take the $1,000 to satisfy the debt and, I’m sure, some amount for going to the trouble, AND then they would keep ALL of the rest of YOUR equity!!
Can you just imagine the incentive for any government department to go after homeowners with any substantial equity? It would be like shooting fish in a barrel! And, I don’t know if I mentioned this already, the government has MORE guns than you do!
What Idaho’s new law does is removes the incentive for these government departments to increase their funds by taking your equity… maybe with just reasons or maybe not.
Talking about Paid-Off Home Risks
Check out my recent video on these risks of having a paid-off house!
Heads-Up! A reader just shared this video with me… the FBI issues a warning about having a paid-off home. Probably worth a few minutes to check this out!
Treasure Valley Dave's Thoughts
Having a paid-off house with all that equity just sitting there is a risk. Getting out of bed in the morning is a risk. I suppose it all comes down to a couple of things; is the benefit worth more than the risk… and how do we reduce the impact of the risk.
A paid-off home can bring an important peace of mind especially as we enter our retirement years with more of a fixed income. So that’s a huge benefit. When it comes to mitigating the risk, I’ll be doing more research on this and I suggest you do your own research as well. I know there are some services who will monitor the title of your property… but I don’t know how much they actually help. If YOU have any experience with these kinds of companies, please let me know how it worked out for you and I’ll include that info in a future post so that we can both help others.
And speaking of helping others, Mareen and I are ready to help you find answers to your questions about buying a home, selling a home or maybe even relocating to the Treasure Valley! Just give me and Mareen a call, text or email… or smash that Contact Us button and let’s get answers for your questions! Maybe we can get a coffee or a nice lunch! 
