When a homeowner decides it may be time to downsize, it’s important you make it a right size. That’s more complicated than it sounds. The kids have grown up, you’re looking towards retirement– it makes sense to move to a smaller place. Here are four things you need to think about so that you don’t just downsize, you right size.
Why do you want to downsize?
Before you start looking at residential properties, before you list your house, before you do anything—answer this question: why? Why do you want to move into a smaller house? Are your reasons financial? Do you want to save money or bolster a retirement account? Is it more about lifestyle? Do you want to be closer to family or activities you enjoy? Maybe you’re just sick of the maintenance a big yard or old house require. Answering the “why” is crucial to right sizing.
What are your deal breakers?
Even the best deal on a smaller, less expensive home that doesn’t satisfy the why’s on your list, is not a good deal. Kentucky is a great example. It is a beautiful state with an incredibly low cost of living. There are areas where $100,000 will buy you a house with columns on an acre. An ever-growing number of retirees are choosing to live their golden years in Kentucky. This is great, if your primary “why” is to save money. But what if another major why is to spend more time with children and grandchildren and they all live in Arizona? Now you have a lower cost of living, but you’re nowhere near family and getting to them will be expensive.
Really analyze what boxes need to be checked. For some, right sizing means relocating to a smaller urban home that allows walkability to restaurants, entertainment, shopping and other amenities. For others, right sizing means replacing the large rambling yard and house with a modern condo on a golf course, nowhere near any grandchildren. No judgement from us, but the take away here is that to make a downsize the rightsize, all your goals, wants and whys need to be taken into consideration.
What makes sense financially?
Bill and Sharon waited about three days into their retirement before selling their home of 30 years, buying a very small condo and then a super deluxe RV, complete with a chandelier and wallpaper. This was the dream: get rid of most of their earthly belongings, downsize to a simple condo, and hit the road in their luxurious RV, to see the whole country.
The real estate market was not in great shape when they sold their home, so they didn’t make what they could have in a stronger market. Almost all the cash earned off their house went to buy the condo and huge RV. The romance with the road lasted about 12 months. Their travels were at first fun, but RV parking, emptying sewage tanks and paying the cost of fuel, eventually dulled the shine of their original vision.
They returned home to their condo and looked to sell the RV, realizing life on the road was not for them. Only, the RV didn’t have nearly the resale value they hoped it would. In fact, they were lucky to sell it all—despite the fancy chandelier. With most of the profit they made on their house gone with the RV, all Bill and Sharon really had was a small condo and none of the amenities they enjoyed before. Somehow, downsizing had cost them a lot more money and left them with much less than they anticipated.
Bill and Sharon failed to consider all the potential financial ramifications of their decision: selling in a weak market, higher than expected expenses of RV living, and the steep depreciation of their RV. Downsizing proved not to be right sizing because they looked only at how to get on the road, not what would happen when they got off.
As you’re trying to decide where to move and what to move into, try to think four steps ahead. Will stairs be viable in 10 years or do you need a single level home? Do you need a chef’s kitchen or are you retiring from cooking too? Do you want room for guests? (Again, no judgement if the answer is “no.”) Don’t just think of what you need right now. Consider what you will want and need 10 years from now.
Ruth moved into an adult community, excited by the beautiful pool and regular bingo. She could not wait to have her daughter and grandchildren out for the summer to enjoy all the amenities. The problem is, Ruth didn’t read her contract carefully. It stipulated that guests can only stay a maximum of two weeks— far short of the eight weeks she had planned. Her downsize plan quickly drifted away from a right size.
Do the rightsize thing
Smaller is not necessarily better if you don’t carefully evaluate your needs in making the move to downsize. Doing the right size thing isn’t difficult, but it requires a frank evaluation and due diligence. At Landmark Title Agency, we work with both residential and commercial brokers, along with their client to provide escrow and title services. If you have any questions or need assistance, please contact our office at (602) 768-2800 or visit us at our website.