What’s the Best Way to Downsize Your Home?
By Martin Brown
Like so many other aspects of our lives, however, it helps to have a clear-eyed view of the financial side of such a move before you have made a commitment by making a deposit, or putting down earnest money, or taking the plunge all the way and buying that new home.
Mostly commonly we’re tempted by the idea of downsizing our home for one of these reasons. For example, if you’re looking for less care and maintenance, the concept of trading in your drafty four-bedroom Victorian home for a two bedroom condo might be the answer to your dream for less work and less expense.
An added bonus: It gives you back time to enjoy many of the things you never have the time to do.
While it can all be very tempting, you need to carefully consider all the factors involved. Here are a few:
Factor #1. Your move may take you away from city services you now enjoy.
Sometimes a downsizing move brings you closer to the center of your town or city, which generally means better access to mass transit and a wider selection of shopping options. Great, right?
However, in some cities, that means moving out further, where land values (and the homes on them) are cheaper. Nothing wrong with that—unless you’re used to sidewalks, and walkable retail districts.
Factor #2: Your home may have lost more value than you realize—which means you’ll have less to spend on your new home.
People today commonly list their home based on yesterday’s home prices. Well, this is not 2006; it’s 2008. That said, if you want a better idea of the value of your home in today’s market go to Zillow.com. There you will see recent home sales in your immediate neighborhood. If you’re going to make a downsizing move you’re going to want, in most cases, to be able to sell your home first, so knowing its value is key to making this transaction work successfully.
Factor #3: Research the costs of smaller homes in your desired location.
Once you get out there and do some honest comparison-shopping, you’ll quickly learn if this move makes financial sense for you. And if it doesn’t, that does not mean it’s totally out of the question. If you go to CNNMoney.com you can checkout their “Best Places to Live” surveys, that include average home prices. If you have the flexibility to look at other communities, this might be the perfect time to do that.
Factor #4: As I said earlier, consider all the costs that will be associated with the sale of your home.
When you put paper to pencil and compare where you are to where you’re going, do you see a real savings in property taxes, utilities, and other everyday living costs?
For example, if you’re looking at a condominium for the low maintenance and other conveniences, find out the total costs for the condo’s maintenance and assessment fees. Ask what they were five and ten years ago, so that you have a sense of how fast they’re rising. Also consider what expense you may have in refurnishing your new nest. Remember, what fit nicely in the living room and dining room of your old place may be totally impractical in your new home.
Factor #5: Don’t commit to buying a new place without first having an offer or a sale on your present place.
In a buyers market, you’re likely to find something you like at an attractive price. But finding someone to pay what you want for your current home can be another matter entirely. Granted, you may be able to put a contingency into your purchase offer saying that your contract is based on the sale of your current home. In the days of the housing bubble, such a contingency was all but impossible to get. But in these times, you may find a seller willing to accept such a clause.