Things To Consider Before Downsizing Your Home
For some, it’s a welcome and exciting thing to look forward to. For others, it’s something you’d rather not even think about, let alone actually do. Not to mention, you and your spouse may not even be on the same page with it.
Downsizing can be an emotional decision and process. It helps to take an objective look at it before you make any decisions. This booklet isn’t intended to encourage or discourage you from downsizing; it’s to help you give it appropriate thought and planning.
There’s no “right” or “perfect” time for everyone to downsize. Everyone’s life, lifestyle, and financial picture are different. But one of the most common mistakes people make is to not downsize soon enough.
For some, the decision to downsize — and the process of doing so — can take some time. So, while you may not be ready to downsize right now, starting to think it through and making a plan is one of the smartest things you can do.
If you’ve already made the decision to downsize, this booklet will help you get where you want more smoothly, thoughtfully, and quickly.
I hope you find this booklet helpful and that it addresses any thoughts, concerns, and questions you may have. But if it doesn’t, please feel free to reach out to me directly by phone, text, or email, and I’ll be happy to answer any questions you have.
Less Is More In Many Cases
When people hear the word “downsizing,” they often associate it with older people, retirees, empty nesters, or people headed into assisted living or nursing homes. While those are certainly people who are likely to consider downsizing, they’re not the only ones.
More and more people are seeking less house to call home. Housing has become more and more costly, and the upkeep, maintenance, and bills are more costly the bigger the house is.
But it’s not just something that people do for the cost benefits…
People are doing it because it’s becoming “cool” and desirable to do. Just look at the “tiny house” movement. Although it’s an extreme example (most people can’t and won’t fit themselves into such a tiny space), luckily there are plenty of alternatives to choose from.
What’s so appealing about this to so many people?
Freedom. Less to worry about. Less on their minds. Less costs. Lower property taxes. More liquidity and money to do things they love or want to do.
The point is this: While many people look at downsizing as something sad or negative, it doesn’t have to be. Certainly you have some emotions and memories attached to your house, but don’t overlook the life, lifestyle, and memories you’ll be able to create in your next home.
So if you’re on the fence about downsizing, spend some time considering the possibilities and your future…
Think through whether you need the amount of house you currently own.
- Consider how much of your house you currently use versus how much you don’t.
- Spend some time truly thinking about what you want and need in your next home
What’re You Working With?
Throughout the ages, one of the benefits touted of owning a home is that you’ll build wealth. Presumably, you bought your house some years ago, the value went up, and you paid down the mortgage over time. Ideally, you should have some money to work with once you sell your home.
As far as buying your next home, figuring what you can afford likely has a lot to do with how much your current house is worth and how much you still owe (if anything).
Most people have a general idea about how much their house is worth. Sometimes it’s from seeing or hearing through the grapevine what other places in the area have sold for. Sometimes it’s from taking a look at a website that claims to give you the value of your house.
The main problem with the grapevine is that it’s often a bit exaggerated by people. Or it can be misleading because you don’t know the entire story about a particular house or the market itself. Not to mention, people are often biased toward their own house.
Online valuations are typically highly inaccurate. If you read the disclaimers on any site that gives them, you’ll see they don’t even claim to be accurate most of the time.
So, the first thing you should do is get a thorough, accurate comparative market analysis (CMA) done by a local real estate agent or an appraisal from a real estate appraiser. You might want to lean toward getting a CMA from an agent since many agents will do them for free, while an appraiser will charge several hundred dollars. Plus, agents tend to have more of a feel for the actual market beyond just the data. They get what the market is doing and what people in the market are doing, while an appraiser tends to just look at the numbers.
You may also want to ask the agent to do a “net” sheet for you. That way you can account for all the costs and debts that will need to be paid, and it’ll show you how much you’ll net from the sale. Once you have this information, then you can truly start researching and planning on what your options are.
Before You Spend A Dime…
Now that you have an accurate idea about how much you’ll have to work with, there are a few more people you may want to chat with before you spend a dime of that money — and before you even list your house for sale.
If you don’t already have an accountant, a financial planner, and perhaps even an attorney who helps with estate planning, you should strongly consider doing so before you make any firm decisions.
- An accountant can help you assess any tax implications, obligations, and benefits you may be able to take advantage of.
- A financial planner can help you assess how much of your money you should spend on housing and perhaps even help you decide whether it makes more sense for you to rent something or buy it and whether to pay cash or finance it. He or she can also help you allocate the proceeds from the sale of your house to achieve what you’d like to in the future (beyond just your housing needs).
- An attorney who specializes in handling estates is becoming more and more crucial for people. The further ahead you start planning your estate, the better off you and your heirs will be. The laws change frequently, and they vary from state to state, and many people lose quite a bit of their wealth due to poor or a lack of planning.
If you have professionals in these fields that you already know, trust, and work with, make sure to consult them. If not, make sure to find ones to consult with by asking friends and family for referrals or by doing some research online. Or, feel free to ask me and I will be happy to provide some names for you!
While this might seem like a lot of people to turn to and have to pay for advice, the time and money you spend on these professionals can really pay off by helping to ensure you don’t lose any of the wealth you’ve created for yourself.
Time For Timing
Before you put your house on the market, you should spend a little time thinking about coordinating the timing of your sale and moving on to your next home.
The first thing you should think about is whether or not you need to sell your house in order to buy another place. If you’ve owned your house for many years and have little or no mortgage, you may not have to sell your house in order to look for, and commit to, another housing arrangement.
On the other hand, if you still have a mortgage and are watching your cash flow, you may need to sell your house in order to fund your move.
If you’ll be obtaining a mortgage to fund the purchase of your next home, make sure you speak with a lender and see what loan programs you qualify for. Depending upon your financials, you may be approved to buy a place without having to sell first.
However, many people have to sell their current house in order to qualify for a new loan. Just check to see where you stand if you will be getting a mortgage.
The next thing you should look into is the availability of the type of home you’re looking for.
For instance, if you want a single-story ranch style house and there are plenty of them in the area you want to move to, you really don’t have much to worry about when you’re ready to move. However, if very few ranches are on the market in the area that you want to live, you need to put yourself in position to jump on one as soon as it hits the market.
If you’re considering a 55+ community or an assisted living development, there can sometimes be a waitlist to get in. So make sure you check out any developments you may be interested in and get on the list.
If you plan on renting, take a look at the rental market. Some areas have plenty of rentals, while some areas have a scarcity. Are there plenty of rentals in the area you want to live in? Are they the type of home you want or need?
Finally, get a feel for how long your current house will take to sell.
If you already have gotten a CMA from a real estate agent, like we spoke about in the section called “What’re You Working With?” then you probably have a good idea about how long your house will take to sell. If not, that’s the best way to figure it out. So make sure to speak with a local real estate agent who’s good at analyzing the market and has experience advising how to time your sale with your purchase.
Speaking Of Scarcity…
Hopefully the research you do will be in your favor and will show that you have plenty of options waiting for you.
But just thinking about the chance that there may not be a lot of options for you to choose from and that you’ll have to jump on any opportunity that comes up may have made you feel anxious. Here’s the silver lining to that feeling you may have gotten: That may also be how the potential buyers for your current house feel.
For years, economists and housing analysts have been predicting a flood of homes hitting the market due to the baby boomers getting to an age where they would be downsizing at the same time. So far, that flood hasn’t occurred in most areas.
People aren’t retiring or downsizing at ages that were predicted. Many people work longer than anticipated and often don’t retire at all. Expected life spans are increasing, and people are often healthier and more vibrant than past generations as they get older. Some people like where they are living and perhaps have family in the area still, so they see no need to move.
Whatever the reasons, all the homes many people in the younger generations aspire to are still occupied by people in the older generations. Their move-up houses aren’t being sold and moved out of for them to buy and move into.
In terms of simple supply and demand, if there are less move-up homes available, scarcity is created, which allows for higher values and sales prices.
Obviously this entirely depends upon the local market. Despite what you may see on TV, hear on the radio, or read online or in a magazine, housing trends and property values are extremely local. Most of what you may see or hear is broad and general, and it tends to look at things on a national level. So make sure to ask your agent to give you an idea of how scarce your home is.
If you’re on the fence about whether you want to downsize now or perhaps wait a while longer, make sure to take all of this into consideration. If there are few move-up homes available in your market currently due to the fact that many Baby Boomers are still staying in their houses, you may want to consider capitalizing on this and selling your house before everyone else does as well.
Take A Hike!
Lots of people dream of retiring to an area they fell in love with in their travels. Some people want to move to where their children, family members, or friends moved to. Maybe it’s just a warmer climate you want to get to or an area with a lower cost of living.
Whatever drives you to want to move to an area, if it’s not an area you’ve lived in, you should take a drive, plane, or hike on out there and spend some time there. Pretend you live there for a while before just selling your current house and moving yourself all the way there, only to find you don’t like it as much as you hoped and anticipated.
If you can only spare the time and money for a week, make it a week. But if you can swing a few weeks to a month, all the better.
Of course you can rent a hotel room in the area for a few weeks, or you can stay with family or friends in the area. But for the most authentic experience, you may want to look into renting a house or apartment off of a site like airbnb.com or vrbo.com. (These are not endorsements…just giving you a couple of ideas.) Spending time living on your own in a home in the area is something that you couldn’t easily do even a few years ago. It’s becoming more and more common and easy to do, and it’s a great way to get a feel for what it would be like to live in the area.
While you’re there, try and live the way you picture yourself living. Get up at the time you envision. Have a breakfast that you picture having. Go exercise. Go shopping. See friends or family. Meet new people. Or just hang out at home alone. The point is, don’t treat it like a vacation; treat it like it’s already home.
But also spend some time doing research while you’re there, and look at some homes. You can do a lot of looking at real estate online nowadays, but there’s no substitute for actually walking into a home and seeing it in person. A picture can say a thousand words…but the words could be exaggerated or outright lies.
So make sure you take a hike to see if you like the area, lifestyle, and homes where you hope to call home soon.
When you decide to sell, it’s pretty common for someone you know to say they’d like to buy the house. It might be a son or daughter, a grandchild, a niece, nephew, cousin, neighbor, or someone any of those people sorta know.
So don’t be surprised if someone you either know, or sorta know, says they’d like to buy your house.
This can be great. If it works out… Unfortunately, it often doesn’t.
While there are many reasons it might not work out, here are the most common issues you might face:
- The person who’s interested can’t actually afford to buy the house. They expect too much of a deal.
- The timing isn’t right.
- After consideration, they just don’t want to buy the house for some reason. They would love to, but they feel the house needs too much work.
- Other family members feel angry if the person is getting a good deal and they aren’t or feel it’s taking away from what is “theirs” in terms of future inheritance.
The list could go on and on. It really depends upon who you have in your life and what their lives are like. But the point is that while it’s common for you to hear, feel, or think someone you know wants first dibs on the house, there’s a good chance they won’t do anything with their dibs.
Here are a few tips for increasing the odds of it happening (and happening as smoothly as possible):
- Determine the amount you’re willing to accept for your house from someone you know versus if it were on the open market. (Most likely you’ll have to, or want to, give them a better deal.)
- Communicate with everyone who may be affected by the sale, and let them know how they’re being taken into consideration. (For instance, the relative who gets the better deal doesn’t get as much as others in the will.)
Pro tip: On a related but opposite note, it’s also common to think or feel like someone in your family should want to buy your house. For example, some people feel like one of their children should want to buy the house and keep it in the family or raise their own family there. But sometimes the house or location isn’t ideal for the child and their family for whatever reason. Don’t get too hung up on the hope of someone in your family buying your house. Certainly feel free to put the offer out there, but be careful not to make anyone feel pressured or guilty. And don’t put off your plans forever hoping they’ll eventually change their mind. Make the proposal, but then move on if they aren’t sincerely interested.
When you’re selling a house, you want to make sure it shows as well as possible in order to get the best possible price in the shortest amount of time.
To achieve this, one of the most important things to do before putting it on the market is to declutter. Most people simply have more stuff than they need or use, and people get used to their own clutter.
Clutter doesn’t mean it’s useless stuff that you need to throw away though. Sure, you should use the opportunity to go through everything you own and get rid of anything you don’t want or need. (Especially when you’re downsizing since you’ll have less room to keep unnecessary things.) But there are probably some things you want to keep that take up too much space and would prevent your house from showing as nicely as it would otherwise.
So, go room by room, closet by closet, drawer by drawer. Don’t strip the house down so much that it looks vacant. Keep the essentials and “stage” your house to look as good as possible. But do:
- Pack up the things you don’t need on a daily basis while you sell your house. You’ll be getting a head start on packing and moving.
- Rent a storage unit and store the stuff you want to keep.
- If you’re on the fence about getting rid of something, throw it in storage for now. But if you don’t miss it or need it that whole time, it’s probably a good sign that you don’t need to re-clutter your new home with it once you’re moving in. Use this as a good way to gradually part with things.
- Make a list or tag everything in the house that you don’t want, need, or won’t have room for, and have your family and friends come over to see if they want any of it. (Like the piano or grandfather clock that’s been passed down for generations or the kids’ stuff they never took with them when they moved out.)
- Have a yard sale or sell things online that don’t make the cut for you to keep or that nobody else in the family wants.
- Hire a company or rent a dumpster, and get rid of anything that you aren’t keeping or that nobody wants.
One of the more common things real estate agents hear from people considering selling their house is that they are debating updating their house. Debating that is a smart move.
Many people think that updating a house before selling it is a smart thing to do. In a sense, it is. It’ll most likely increase the value, and it will most likely help the house sell more quickly.
But the problem is, updating the house may not increase the value as much as it even costs to update. So updating your house may not actually make any monetary sense. It could literally lose you money.
That being said, if your house is too outdated, it could get in the way of the house selling at all. Or it could cause you to sell for less than you could have with some updates.
I know that sounds wishy-washy and like non-advice…because it is both of those things. The truth is, there’s no absolute answer or advice that can be given. It depends entirely upon the real estate market you’re in and what else the buyers in the market have to choose from. It also depends upon your personal situation and whether it makes sense for you to do financially. It takes some analysis and thought to make the best decision.
So, the best thing to do is speak with a real estate agent and ask for his or her advice on what you should and shouldn’t do in terms of updating… based upon your house, your current real estate market, and taking your personal situation into consideration.
Take It Or Leave It!
While many buyers may love an updated house, there are still plenty of buyers who will buy a house that needs updating. So don’t sweat it if you decide not to update your house; there will be a buyer for it. And if you’ve accurately analyzed the market, costs to renovate, and potential return on investment, you’ll likely net more than if you spent the time and money on updating anyway.
But one stance you may want to avoid is an attitude of “I’m selling my house as-is! I’m not fixing anything. The buyer can take it or leave it as far as I’m concerned!” While the words may not come out exactly as quoted, it’s a sentiment many homeowners utter when selling their house.
While it’d be ideal to find a buyer that gives you the highest possible price and doesn’t squabble with you over anything that needs to be replaced or repaired, your buyer will probably mention at least a few items that need to be addressed.
Many homeowners live with issues that they’re able to ignore, or are unaware of, until a home inspector catches them. And they figure that if they could live with the problem, then the new owner can too…or they can take care of it themselves if it bothers them that much. Owners often feel that the buyer is already “getting a good deal on the house” and don’t want to spend any money to fix anything.
Taking that stance can cost you a great buyer, and it can ultimately lose you money. If one buyer wants things replaced, repaired, or credited, it’s likely that any other buyer will as well — and if not for the same issues, then others, or even more issues on top of what the previous buyer found. So, it’s usually better for you to assess whether it makes more sense to agree to have the repairs made or give a credit toward the repair than it is to tell the buyer to take it or leave it.
You basically have two choices…
- Take care of any necessary repairs or replacements before you put the house on the market.
- Let it ride, see what the home inspection reveals (and what the buyer asks for), and deal with it by getting the repairs done or negotiating a credit.
Neither decision is always the “right” approach. It depends upon:
- The current real estate market you are in. The repairs your house needs.
- Your personal financial situation. Your personal perspective.
However, in order to make the best, most informed decision, it’s a smart idea to ask your real estate agent for his or her advice on how you should approach it. You can always take the advice or leave it! It’s up to you.
Times Have Changed
Just because you’re downsizing doesn’t necessarily mean you haven’t bought or sold a house recently, but for many people that’s the case. So, there’s a good chance that you bought your house decades ago.
Even if the last time you bought or sold a house was as recent as the early 2000s, the way houses are bought and sold has changed considerably since then.
Well, the process of buying and selling hasn’t entirely changed, but the way houses are marketed and how buyers look for houses sure has. The Internet is now the most important and useful tool to real estate agents, homeowners, and home buyers.
Not that long ago, anyone looking for a house to buy had to contact a real estate agent for access to everything that was on the market. Then they were only able to see one exterior picture (which was often in black and white). Now pretty much every house on the market can be found online, and a buyer can see not just the outside but the inside as well.
There’s no single, universal, or “best” marketing plan — every real estate agent has their own approach. But make sure you hire an agent who utilizes the latest technology and marketing tactics available. If the real estate agent you used 20 or 30 years ago is still in the business and you want to work with him or her again, make sure they’ve adopted all of the best current practices for selling houses.
Hire A Downsizing Specialist
A good marketing plan, utilizing the best current practices, isn’t the only thing that your real estate agent should have…
There are a lot of licensed real estate agents, and many agents can list a house, market it, and get it sold.
Finding one that can list your house, market it, and get it sold for the highest possible price and as quickly as possible is another thing altogether. Some agents are certainly better than others.
But just because an agent may display the ability to do that doesn’t mean they are the best choice for you.
Certainly, you want to find and hire an agent who can and will get your house sold for as much as possible and as quickly as possible. But you should also look for one who has experience helping people who are downsizing.
There are certain things that an agent needs to think about, prepare for, handle, avoid, and execute well on any sale. But when a client is downsizing, it often takes more thought, attention to detail, and care. Ultimately, the agent is helping a client make a huge life transition and handling what may be the largest asset of their net worth, which the client will be using to fund their future. It’s both an important business transaction to manage well and an important personal and emotional event he or she needs to be able to help the client deal with.
So, find and hire an agent who does not dismiss the importance of a downsizing move and just chalks it up to any other house sale. It isn’t.
Connect The Dots
As we’ve discussed earlier on in this booklet, many people move out of the area when downsizing, so working with the same agent to sell your house and to buy or rent your next one may not be possible.
If you are moving out of the area, we also already discussed the importance of spending time in the areas that interest you and to look at homes in the area while you’re there. What a lot of people do when they start looking at real estate is to work with an agent they meet online while calling or emailing about listings they see. It isn’t so much that they sought out the best agent in the area as it is that they just stumble into a relationship. this can sometimes be good, but other times it can be really bad!
If you know an agent in the area you are considering moving to or get a recommendation from someone you know and trust in the area, that’s usually better than just stumbling into one.
But what might be an even better decision is to ask the agent you’re working with (on the sale of your current house) to do some research and find the best agent for you in that area. Many agents have better ways of researching and finding the best agent than people that are not in the industry.
There are a lot of moving parts (no pun intended) to moving from one area to another, whether you’re downsizing or not. And having the agents you’re working with in communication with each other will help you make the smoothest move possible.
So, if you’re moving out of the area, make sure to spend some time finding the best agent in that area to help you buy or rent a home. If you already have an agent in each area that you know and trust, make sure to introduce them to each other and have them communicate and coordinate with each other during the process. If you don’t have an agent you know and trust in an area, ask the agent you’re working with on your sale to recommend one in the other area.
If This Was Helpful…
Thanks again for requesting this booklet! I hope you found it thoughtful, informative, and helpful.
If you found this booklet about downsizing helpful, then you might want to also read my booklet “The Ultimate Home Seller’s Guide.” While this booklet addresses aspects you should consider specifically related to downsizing, my seller’s guide gets into what you should expect from start to finish when selling a house, and it will help you sell your house for as much as possible and as quickly as possible.
If you also plan on buying another home, you should also request and read a copy of my booklet “The Ultimate Buyer’s Guide.” That one will help you find the best home for your wants and needs and get it at the best possible price.
Of course, just like this booklet, both of these booklets are free, and there’s no obligation. All you have to do is ask, and I’ll send you copies of whichever ones you want. (You can either send me an email or give me a call.)
If you have any questions at all, please feel free to reach out and ask. I’d love the chance to work with you when you’re ready to get moving!
Our team is dedicated to putting our experience and local knowledge of the Grand Valley to work for you in all steps of your Grand Junction real estate transaction, from start to finish. Find out why Back To Basics Realty is one of the most respected teams for buying and selling in Colorado.
We deliver the very best in Grand Junction real estate because you deserve no less.