Senior citizens have many incentives to downsizing their home. A smaller place is cheaper and requires less maintenance. Data from 2017 shows 46 percent of senior citizens between the ages of 55 and 75 sold their home with the intention to downsize. Whatever your reason for wanting a smaller home, it’s good to educate yourself on what you can expect from the market, and what your options are based on your financial situation.
Buying New, Smaller Home
Coming up with a budget will you an objective view of your finances so you can determine how much you can afford to spend on a new home. Make a list of any outstanding debts, figure out your net income, and try to save up for a deposit on a new home. Examine areas in your life where you can spend less, such as eating out or shopping in certain categories. Explore real estate markets in the locations you’d like to move to so you can figure out what you can expect to pay. Moving from a suburb to a waterfront property isn’t the same as buying a smaller home. You won’t know what you can spend unless you can see the big picture.
Selling Your Home
Selling your home makes sense for several reasons. The sudden influx of cash will allow you to buy your next property with less hassle. There are several financial obligations to deal with that you must consider. Older homes require repairs or upgrades in order to attract buyers.
Hiring inspectors, real estate agents, and contractors will cause your finances to temporarily take a hit. Closing costs are also another line item you have to look at. Investopedia says that the average cost in the US is $4,876. You still stand to make a profit if you sell your home prior to downsizing, as long as you find reliable help.
Renting Your Home
Not everyone wants to sell their home because they’ve chosen to downsize. Renting your home is a great option when done right. Think of your old home as an asset that creates revenue you can use to make up for the costs of moving, pay your current mortgage, and take care of other expenses. If you live in a depressed market, you can rent your home as you wait for the house to increase in value before selling it.
Remember that being a landlord is also a responsibility, so factor in the costs of hiring experts in the event that something may need to be fixed. Consulting with an attorney will also help you understand how to write fair contracts, figure out your rights, and learn how to better serve your tenants while preventing potential complications.
Keep in the Family
Not everyone who decides to downsize wants to sell or rent. It’s natural to want to keep your home in the family so they can enjoy it and have a place to get together.
Transferring your home’s title to your child requires counseling from experts. This is often ill-advised because your child may go bankrupt or deal with a lawsuit that could cause them to lose the home. This process is most successful when your children or grandchildren are involved in the decision. Does your family even want to keep the home?
Explain to them that keeping a home implies ownership and requires investment. Your family will have to pay property taxes and put up money to maintain the property. Explore the possibility of keeping your home in a trust, and allow your family members involved in this plan to come up with conditions under which they may sell the house if wanted or needed. Given the emotional nature of keeping a home in your family, get all agreements down on paper.
Downsizing can be a confounding process. Thankfully there’s an option that works for everyone, and there are many experts and specialists willing to help you find the best one for you.
Written for Wegner Realty by: Jim Vogel of elderaction.org