In decades past, downsizing one’s residence was often viewed as a negative event. This, however, is no longer the case. Many homeowners are choosing to opt out of a large home in a traditional neighborhood and instead embrace the chance to have a new adventure by purchasing a smaller property offering the opportunity to escape the maintenance of their current home and enlarge their lifestyle. Downsizing to a sexy high-rise apartment in an eclectic urban chic location is hardly what downsizing was in your parents’ or grandparents’ day.
Many downsizers not only sell their home and purchase a smaller home in their current location to be near family but also purchase a vacation home or second home in a new and exciting destination! This enlarges not only their own lifestyle but also that of their family.
As you make plans to downsize with distinction there may be emotional decisions to make and lifestyle preferences to consider. And we can’t neglect to examine the financial ramifications of your decision. For downsizers, the financial side of the move is often the most important to sort through prior to moving on to the needs and wants in their next home.
As you begin this process you will need to answer the following questions:
- Are you looking to lower your monthly obligations and maintenance?
- What will the capital gain tax ramifications be?
- What will it cost to purchase your next home?
- How much will movers, staging and repairs cost on your current home?
- What timeline is needed to make it all happen?
- How can you accomplish all of this with minimal stress?
- And perhaps the biggest question of all: “Do I buy first or sell first?”
The answer to this question will largely depend on if you can afford to purchase your next home without selling, by either paying cash or by carrying two mortgages until your current home sells and closes.
Many downsizers would find owning two residences extremely stressful. That is why most prefer to sell first before buying or closing on their next home. Some, who have large sums of cash on hand, may choose to pay cash and move their possessions into the new home before listing their current residence.
To make a decision that is right for you, it might be best to discuss the options available to you with a professional real estate agent, talk to a lender if financing will be needed, and consult with your CPA or tax attorney.
Once you have the answers you need to make the financial choices that are right for you, you can then create a transition plan, which is comfortable and practical.
Because this is a big move it can be emotionally taxing and to make it less stressful you may want to begin the decluttering and staging of your present home well in advance.
If you feel repairs or upgrades are needed, the advice of a professional real estate agent will once again be helpful. A professional real estate agent knows exactly what should be done to a property to help maximize its value. They will also help you avoid spending money unnecessarily. Most real estate agents can provide you with referrals to stagers and other services you may need as you give your home a tune up.
Frequently Asked Questions…Answered
How can I maximize my profits from the sale of my current residence?
You’re going to want to sit with a qualified real estate agent and look at the trends, the seasons, and the salability of your property.
To maximize the profit of your current residence, you may want to consider, under the advice of your real estate professional, if you should hire someone who can stage the property and if you should do repairs or upgrades. Also consider any other changes or clean up that might make the property more modern or more attractive to a buyer. But you definitely will want to talk with your real estate professional before you do this because you could risk investing in improvements, which make little or no difference to the homebuyer.
What recommendations would you make to help my home be more attractive and more in demand to homebuyers?
When you’re choosing your next real estate agent, what I would suggest is to start out in front of the home and, as objectively as possible, do a curb-to-curb. So walk through your home, interior to exterior, and make a big list. This is a wish list of all the ideal things that could be done. And then sit down with your agent and choose those items, which are the most important to the sale of the home, and select from that list the items you are willing to do. You will need to pay your vendors but most likely your agent will assist in coordinating the repairs and staging services at no additional cost.
What should I be looking for in terms of unique marketing?
Put the burden on your agent and ask them to provide a custom marketing proposal. Agents will often tell you price is the only thing that sells a home. While price is certainly part of it, the way an agent presents your home to the market and the aggressive manner in which they contact other agents, buyers and the public to expose your home to those potential prospects can make a world of difference in the price you achieve.
Exposure equals demand and a greater demand equals a higher price. Have the agent present their custom proposal. If you feel there are items the proposal does not cover but you would like to have done, simply let them know what your requests might be. Now, if your requests are above and beyond the normal, or if they are a little out of the box in terms of expense, remember the agent is not earning anything up front. They are, in a sense, taking on the risk and expense of marketing your home. Therefore, it is not uncommon that when there are unusual items you would like to have done, you, the seller, may have to potentially front the cost for those items and the agent will pay you back all or a portion at the closing.
What questions should I be asking my CPA?
The most important thing you should do is inform your CPA or tax attorney and let them know what your plans are. With their help you can assess your capital gains. Also, choose a real estate agent who has knowledge and experience to assist in determining what questions you should be asking and who is willing to work with your CPA and tax attorney closely to ensure you maximize any possible tax savings.
What retirement communities should I consider and how would I weigh the pros and cons?
When you look at a retirement community, you really want to ask yourself what lifestyle benefits you are looking for. How active do you plan to be? What type of community location are you interested in? Is it something you can transition into more care as you might need it in the future? Retirement communities are certainly not for everyone. Some people don’t find living among retirees is as invigorating as living out in a typical neighborhood or in some other type of luxury high-rise. Some prefer to be in the mix of the population. However, some people find the services and benefits retirement communities offer to be easy and stress-free with low maintenance. Ask yourself, what is the lifestyle you are looking to achieve?
What databases, networks, or sources of quality prospects should my agent have access to?
Most seasoned veterans will have a database of peers, professional connections, past clients, and friends and family and they’ll probably be involved in professional networking groups. So ask them, “What is your reach into the community?” See what they say. And I think based on the answer, you will know right away how well connected they are.
Should I sell first, rent, and then purchase to give myself more freedom and flexibility?
This is probably an ideal method to follow if you’re looking to maximize the price of your home because there is no stress or pressure and you have the chance to hold out for a higher price. Then, if you rent, consider renting in the community and location you’re interested in to give you the opportunity to distill down your preferences and the features, benefits and location which will be ideal for you. Now of course, it is going to require the expense of a double move. However, you potentially could make up the cost of that double move by having a lot of negotiating power because you have money in the bank and you have nothing to sell when you are ready to buy. And you will want to consider the trends in your market because if you sell, and properties are rapidly escalating in price, it might not be wise to rent for a long period of time.
Do most real estate agents actively prospect to bring buyers to my home and should they?
It is a good practice that many top producers aggressively market the homes they list, not only to the real estate community but also to their database, their leads, and the areas where they think the move up buyers may be coming from. And this is really the definition of a strong marketing agent. They don’t list your home and then go to Starbucks to wait for someone else to sell it. They are an active participant in adding value by maximizing the exposure, because additional exposure equals a greater demand, which will often net you a greater price.
Where do buyers come from?
According to the National Association of Realtors, buyer leads come from other real estate agents, the internet, yard signs, websites, friends and neighbors, magazines and the newspaper with real estate agents providing the greatest number of buyer leads and the newspaper the fewest number of buyer leads.
