Thinking About Downsizing?
There are many reasons to downsize housing in or prior to retirement, from reducing expenses on utilities, maintenance and real estate taxes to health and safety concerns. Maybe you want to move closer to family members or enjoy life in a location or climate that wasn’t an option during your working years. Whatever the reason, it pays to be cognizant of the costs associated with downsizing, especially if your primary goal is to save money.
While it can be hard to anticipate all of the small expenses that come with a move, with thoughtful planning you can save big in the long run. Maybe you’ve experienced the home-selling process before, but like many retirees, it may have been years or decades since your last move. That makes it important to do some research on housing prices where you live now and where you intend to move, along with the costs associated with moving all of your stuff.
According to the American Moving and Storage Association, the average cost of an interstate household move is about $4,300 and the average cost of a local or intrastate move is about $2,300.1Since shipment weight is a major factor in calculating moving costs, it pays to pare down furniture and possessions well ahead of your move. Keep in mind that by downsizing, it’s likely that your new home may not have room for all of your current possessions anyway.
If you choose to hire a real estate agent or broker to sell your property, you can expect their commission to be 5-6% of the sale cost, on average.2 However, working closely with a licensed real estate agent who specializes in your area or neighborhood can be beneficial for many reasons. In addition to providing information on comparable sales in your area, he or she can provide practical advice to help you obtain the highest dollar value for your home, including advising on whether upgrades are necessary to compete with other sellers and which improvements may provide the biggest bang for your buck.
Having an agent market your home online and through his or her professional network can also result in greater visibility and a potentially faster sale. Whether you choose to work with a real estate agent or sell the home yourself, be sure to take into account the extra fees and expenses associated with selling a home, including:
- Closing costs.Buyers may ask you to take care of closing costs, which include property taxes, attorney fees, and other miscellaneous fees.
- Mortgage payoff.Does your loan impose a penalty for paying off the mortgage early? If so, that’s an extra expense you may not have counted on.
- Inspections and home repairs.Most buyers hire a professional to perform a home inspection prior to closing. So, be prepared to negotiate or pay for certain structural, electrical, plumbing or other issues that may come up. It can pay to take care of any needed repairs in advance of putting your house on the market, saving you time, stress and last-minute costs days before closing.
If you have questions about whether downsizing makes good financial sense for you, give us a call to schedule time to talk about your needs and goals.
These are the views of Katie Williams, a freelance financial writer and news commentator, not the named Representative or the Broker/Dealer, and should not be construed as investment advice or a recommendation. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If expert assistance is needed in these areas, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor prior to making any investment decisions.