We are thinking of downsizing – Is now the time?

“The housing market is hot. Is now the time to sell?”

As time marches on and life changes, there are many homeowners who are thinking that soon they may want to make a change in their home situation. Whether the house is just too big, too expensive, too much to keep up or just looking for life enhancing move, a change is likely to happen. The real estate market is still a sellers’ market and house prices are pretty much at their highest point ever.

So, therein lies the million-dollar question, is now the time to sell? This is indeed a tricky question, and the answer depends on many factors.

Below is a list of items to think about and evaluate in your decision to downsize.

Why: What is your primary reason(s) for downsizing?

Financial reasons, lifestyle enhancement reasons (closer to family & friends, warmer/colder climate, closer to hobbies and favorite places, less time spent on yard work & maintenance, etc.) or physical reasons (limitations such as requiring one-level and no stairs or the floor plan in general) all might play a part in your reasoning. What is the desired “perfect world” timing of the downsize?  Jobs, family situations and health issues are all potential factors in the decision.

Where: Where do you want to live?

Do you want to stay local or move to another area of the state, country, or world? How close will you be to your family, friends, shopping, hobbies, favorite places and medical facilities? If it is another state, do you envision trips back to your current location to visit regularly or perhaps seasonally? How much will these trips cost (or perhaps save)?

What: What are the specifics of the new home or apartment that you are looking for?

The floor plan and other specific needs and wants (such as garage, yard, parking, stairs, etc.) are all very important considerations when choosing your new home.

How much: How much will your desired new place cost?

Will you have to have a mortgage, or can you pay with cash from the sale proceeds from your current home?  Do you have a mortgage now?  What is the interest rate of your current mortgage versus your new mortgage?  Will the new monthly P&I payment be a savings over your current mortgage? Will your new home be less expensive to maintain (tax, condo fees, utilities, insurance and maintenance)?  Will it be easier to maintain?

If, instead of buying, you would like to rent, how much will it cost? 

Don’t be surprised if the rent prices are more than you thought that they would be. However, you will likely be saving on expenses such as property tax, condo fees, home insurance (renters insurance is often much cheaper), home maintenance and utilities. Also remember, you will still have the net proceeds from your home sale available to invest to offset some of the monthly expenses.

Another popular option today for those over 55 years old is an adult community that will accommodate your day-to-day living requirements from independence to needing professional assistance or long-term care. Many of these communities provide meals (dining rooms or home service), entertainment, recreation, convenient shopping and limited transportation.  Some of these communities require a lump sum payment when you move in as well as a monthly rent payment.

What extra expenses will be part of your move?

Moving can be expensive, especially if moving a distance away. Preparing the house for sale may also require a significant cash outlay. And furnishing your new home is also a cost consideration.

What are the indirect costs or savings?

What extra annual expenses will you incur on an annual basis? Will you be traveling back to your current location to visit friends and family? How often? Will family and friends be coming to visit you (this can get expensive if you are providing meals and helping with their other travel expenses). Will your new location actually save you money because it is your vacation spot or you are closer to family and friends? What are the auto insurance rates and other required expenses in your new location? Are there additional insurances necessary (i.e., flood or hurricane insurance)? How are the prices of everyday goods and services (cost of living expenses) in the new location compared to your current location? Will there be other expenses or cost savings that will result from the downsize? If you have 2 or more cars now, will you need them both after the move?

But are you ready?

Economic factors are certainly front and center in the decision matrix, but they are certainly not the most important. Downsizing is a big decision and should not be rushed no matter what the market conditions are.  The most important deciding factor comes down to this: are you ready to move?

Unless forced for some reason, if you do not feel that you are ready to move, don’t. A move should be envisioned as improving your lifestyle and decreasing your stress. If it doesn’t, it may not be time.