Will your castle make you secure in your sunset years?
For many homeowners that’s the plan. Sell the big house after the kids are gone, “downsize” to a cheaper one and live on the extra cash. But that has become harder to do.
Homes just aren’t fetching as much as they did a few years ago, thanks to the burst housing bubble. That means the math isn’t working out for some people, while others may be holding out for higher prices. Many people are postponing retirement, delaying a downsizing that would involve a major relocation.
Of course, this may be a good time to buy a smaller home, as their prices have fallen as well, but many people are leery of making big financial moves when the economy is shaky.
Two groups should take a new look at their downsizing plans in light of today’s conditions: those in or near retirement; and everyone else.
Those preparing to downsize soon should study the entire cost of the move, not just compare the prices of the old and new homes.You’re likely to pay a 6% real estate agent’s commission on the sale and incur various repair and legal costs. Legal fees, appraisal, title insurance, inspection and other costs can add thousands to the cost of purchasing the new home, even if you pay cash.
And then there is the moving company, costs of retitling vehicles if you change states, travel costs during the house hunt and many other incidentals. A new home often needs painting, new furniture and landscaping to make it just right.
If the downsizing still leaves you with substantial cash in your pocket, it may well make sense, especially if moving will take you to a better location or provide other benefits.
But if the motive is purely financial and doesn’t free up much cash, it might make more sense to stay in the bigger home a bit longer.