As the needs of your family change, it’s not always easy to figure out if now is the right time for downsizing the family home. As a Baby Boomer, you’re still a vital part of the community and the economy – but your needs are different now than they used to be. Sold.com can help you evaluate if you might be ready to sell the family home and move to smaller digs.
Downsizing The Family Home
The kids have finally moved out. Maybe you or your spouse are now retired or thinking about retiring. You love your family home, but suddenly it seems like too much space for just two people. Is now the right time to downsize?
If you are ready to “right-size” (a much nicer euphemism, don’t you agree?), be sure to take the Sold.com Home Seller Quiz. This free and easy-to-use tool is a decision-making engine that will offer you personalized home selling options, including some that you might not be aware of.
Surprisingly, a lot of older people don’t want to downsize! Almost half of those in the “pre-retirement” age range didn’t buy a smaller house when they moved – and 30% actually bought bigger houses! But that means over half of these folks did decide to move to a smaller, more manageable home.
Do I Need Less Room? Can I Get By With Less Stuff?
Many of those buying bigger houses said they wanted plenty of room for family members to come to visit.
If this is a priority for you, then perhaps staying put makes sense. But there are many factors to consider:
Look at your monthly costs. If you have a big house, you may have a big mortgage. Even if the mortgage is fairly manageable, there are other expenses to consider like taxes, insurance, HOA fees – and utilities. All of these are likely to be more costly for a bigger property. Do some research and get an idea of what your monthly costs would be in a smaller home or a condo.
Consider how much upkeep you want to do. Maybe having a huge yard was great when the kids were growing up, but now you never use it and it’s getting overgrown. Deferred maintenance is going to negatively impact your property value over time. So while you may love your home and have many happy memories, you need to be realistic about your ability and willingness to maintain it.
Consider where you are. In high-cost urban areas like San Francisco, Los Angeles, or New York, moving to a smaller home in a less expensive area could provide major cost advantages. On the other hand, if you’re living in the Midwest or many parts of the Northeast, moving to a smaller home may only offer minimal savings to your monthly outlay. You might even end up paying out more per month if the cost of your current mortgage is low!
Consider taxes. If you’re going to end up paying a large amount in capital gains taxes, this may negate the financial benefits of selling your current home. While the IRS does exclude $250,000 of your gains ($500,000 for a married couple), any gains over that amount are going to be taxed at a 15% rate – or even 20% if your ordinary income is over a certain amount (currently $466,950). You might want to read Financial Questions to Ask When Selling a Home.
If you have heirs, it might make more sense to leave your home to them. The value of the property will be “stepped up” at the time of your death to the current market value. Your heirs can then sell the property and their gains (likely there won’t be any) will be taxed based on the new value, not based on the much-lower value you paid.
Would your home work better for you with a few changes? Sometimes you don’t need to downsize so much as to retrofit. If going up and down the stairs to the master bedroom is killing your knees, maybe turn that into guest quarters and create a new master bedroom area on the first floor? If maintaining the garden is too much work for you, maybe re-landscape with stones, bark, and low-maintenance shrubs? If mobility has become an issue, putting in a wheelchair ramp may be a much less expensive (and stressful) solution than moving to a new house.
Don’t forget hidden costs. When looking at expenses for your current place and your savings in a new place, don’t forget there’s going to be costs to get you there. If you’ve lived in your home for more than a few years, it is undoubtedly going to need updates and repairs to be fully marketable. You will also incur expenses in staging and selling the home. And of course, there will be the costs of moving itself, as well as of buying new furniture or finishing touches your new home will need.
Think about your financial goals. You may already be set for retirement. If so, good for you! But many Baby Boomers feel like they are still a long way off from their financial goals. Once you’ve done the math and figured out how much money you could save by downsizing, give some thought to what that money could do for you.
If you have consumer debt, you’re likely paying high-interest rates on it. If you put an additional $500/month toward that debt, think of how much faster you’ll be out of the hole! Or if you don’t have debt (again, good for you!) that same money put into a retirement account is going to move you towards retirement a lot faster than staying where you are.
How To Downsize Your Home
If you’ve weighed all the factors and decide that now is the right time for downsizing your home, the next step is to figure out how best to do it.
This is where the Sold.com Home Seller Quiz can really come in handy. With so much confusion and so many choices in real estate right now, having a resource that makes unbiased recommendations based on your selling situation, can really give you a leg up.
Set Your Sights On Your New Home
Once you nail down your selling method, it’s time to figure out what you want in your next home. Start by making a list of what is important to you. If you or your spouse are still working, maybe a short commute is a priority. Or maybe it’s being close to the kids and grandkids. If you’re retired, maybe moving to a better climate is top of the list.
Knowing your priorities helps to narrow down your options. Once you’ve got an idea of the area (or areas) you’re interested in, do some research to see the kinds of properties available. While you may not be as internet-savvy as your kids, most of the available online resources (Zillow, Trulia, Redfin, etc.) are very user-friendly. You can type in some of your key criteria and get lists of properties on the market that fit your needs.