Written by our local friend/client, Jim Vogel of ElderAction.org
When downsizing in retirement, it’s easy to get caught up in all the excitement of finding your perfect new home. Deciding what to do with your existing home may become an afterthought in the midst of visiting potential locations, sorting through possessions, and planning your move. Eventually, it will come time to think about selling your home. But is selling really your best option? Here are some important questions to ask yourself as you navigate this tough decision.
How Much is My Home Worth?
Knowing how much your home is worth will help you decide if selling really is a smart choice. Valuing your home is also essential for pricing it right. A good way to estimate your sale price is to find out how much other properties in your area have sold for recently. To find out what your home and nearby homes are worth, take advantage of the PennyMac home worth tool.
Remember that selling a home costs money. According to The Balance, you can expect to pay about 10 percent of your sale price in various expenses, like repair costs, transfer taxes, and real estate agent commissions.
Can I Afford to Downsize Without Selling?
If selling your home isn’t an attractive option, consider whether keeping it makes financial sense. Can you afford to downsize without your home sale proceeds? Find out exactly what you can afford to spend on a new home and set a budget so you can house hunt within your means. According to Investopedia, not knowing your price range is a common mistake that people make when shopping for homes. Consider how much you have for a down payment and ensure that your retirement income will cover the ongoing costs of both of your houses. Fortunately, you can use sites like Redfin to determine your home affordability based on factors like household income and monthly spending.
Downsizing into a new home comes with additional expenses as well. The costs of moving and furnishing your new home alone can be pretty significant. On top of this, you may also have to budget for new appliances, utility connection fees, travel expenses, and landscaping.
Is Renting a Realistic Option?
Renting out your old home may be a smart alternative to selling. However, if your goal is to pay off your new mortgage with your rental income, you will have to make a profit. Remember your rental income will have to cover all of the ongoing costs of your existing home first. Before you start marketing your empty home to potential tenants, find out how much you can charge for rent in your area. Make sure also that you can afford to have your home sit vacant for a while if you can’t find a tenant right away.
Even if renting is a good financial decision, being a landlord isn’t for everyone. You’ll be in charge of finding tenants, tracking down late rental payments, and maintaining the property. You can always hire a property manager to take care of things, but this will eat up a fair chunk out of your rental income.
Do I Have Family Willing to Care for the Home?
Downsizing seniors also have the option to pass on the family home to loved ones. If you don’t want to sell your home or rent it out to questionable tenants, leaving it in the care of family is an excellent way to hand off the maintenance responsibilities and monthly expenses. Depending on your needs, you can gift the home as an early inheritance or charge rent to your family members for staying in your house. If you trust your loved ones to take good care of your property, this is a great way to keep it in the family. For many seniors, moving on from the family home can be very emotional. If you can help it, try not to rush the decision. The last thing you want to do is sell the home now and regret it later! Try to decide what to do with your existing home before you start looking for new places to live.
Have more questions? Please don't hesitate to reach out.