Timing is everything - except when it isn't...

When should you downsize your home? It’s that timing thing…

When should you downsize your home? As a real estate agent, I get asked this quest a lot. My usual answer is that it depends. Let’s start out by saying that everyone’s situation is unique and that there is no truly perfect time to downsize.

Good reasons to downsize…

  • You no longer need your excess space.
  • You like all the space that you have, but find that you only make use of it on special occasions.
  • You don’t want all the extra work a house entails including repairs, cleaning, and yard maintenance.
  • Property taxes and maintenance costs are going up faster than your income.
  • You are planning to retire and want (or need)  to reduce your overhead.
  • You are starting a new business or changing careers and want (or need) to reduce your overhead.
  • You are a senior citizen looking to live on only 1-2 floors.
  • You want a different lifestyle (for example, you want a more urban lifestyle).

These are all sound reasons to consider downsizing your home. A great deal of money can be saved on the outlay alone. That savings can be used to travel or start a business, or it can make you more secure and comfortable as you grow older.

Waiting too long to downsize your home…

Having said all of the above, the one thing I have noticed is that when it comes to downsizing, people tend to wait too long. I think this is part of human nature. When you upsize, the lack of space is usually driving the decision. Most upsizing home-buyers know that they will be a lot more comfortable once they are enjoying their larger digs. Psychologically, downsizing can feel an awful lot like a contraction of lifestyle. We will have less of whatever it was that we had before. So we hesitate. And we put it off for as long as we possibly can.

Below are some of the main reasons people put off downsizing:

Sticker shock:

Sticker Shock - that condo may cost more than you think...The biggest issue for many downsizers is that they really have to change their lifestyles significantly if they want to bank major money from the sale of their home. If they want to stay local, a tweak, even a major one, will not do the job.

As I stated in my previous post about the financial reasons for downsizing, most potential downsizers are looking to bank big bucks from their home sale. Most are hoping that cutting their square footage by about 1/3 will do the trick. This minimizes the lifestyle change.  But if you want to stay local, this is probably not happening.

This type of downsizer is usually an empty-nester. In my neck of the woods, most of these home sellers live in lovely but dated homes. They also usually have their hearts set one of the few new local developments. These are state-of-the-art and chock-o-block with amenities which come at a price. Downsizer’s get sticker shock when they find that to get the amenities they want, they have to downsize 50% or more in terms of size.

This one issue can take the wind out of the most enthusiastic downsizer’s sails. As a real estate agent, I have seen so may gung-ho downsizers do a 180-degree turn. They decide to stay put and hope that their home starts to appreciate at a faster clip. The idea being that if their home goes up in value, the lifestyle they want will be more attainable.

Unfortunately, waiting for a home value to increase is nearly always a mistake. If the value of your home is increasing, so is the cost of the lifestyle you are hoping to buy into. You are chasing a moving target which will cancel out any appreciation you will get from waiting.  

Fear of lifestyle changes:

Things are going to change when you downsize. The big family get-togethers where you are seating 20 people for a holiday meal with half the family sleeping over will probably not be doable. The big backyard that is barbecue central through the summer months is going to be a thing of the past if you move to a condo.

These changes are going to be part of any major lifestyle change. But what most downsizers find, once they’ve taken the plunge, is that they are relieved of the burdens of sustaining such an expensive and time-consuming lifestyle.

Many people also find that as the old traditions have to change, new family traditions take their place. Another relative will step up and take on the family get-togethers. A community barbecue area in your condo complex helps you make new friends and connects you to your new neighborhood. These things have a way of working themselves out. However, this is something that most people can only see in the rear-view mirror.

Sentimental attachment to the family home…

Comfort Zone vs Downsizing GoalsProfessionally, I see a great deal of when there is more than one decision maker involved.  One decision maker is just itching to get out from under the expense of the large house while the other partner is being pushed into the process by their partner.

Generally, this comes down to sentiment. One owner has a much stronger sentimental attachment to the current home than the other. This kind of deep attachment is a very difficult hurdle to overcome. There is a simple bottom line here. As long as there is enough money to sustain the lifestyle, and one decision maker is reluctant,  no one is moving anywhere.

For those who are very attached to their homes, but need to move, I understand your feelings because I’ve been there with a family home that was in my family for 60 years. When my mother died at a very young age, I had to let go of a home that 3 generations of my family had lived in. But avoiding a downsizing that can free up money for your future security is not a good idea. Previous generations had more financial wiggle room for such things. Unfortunately, those of us who are either late boomers or from gen-x do not.

So – when should you downsize your home?

Becuase of all the above reasons, people tend to try to “time” their downsizing experience in one of two primary ways:

  • To maximize what the money they can bank from the sale of one home and the purchase of a smaller home
  • To stay and enjoy their large homes up to the last second they are able to financially and physically

Timing the move to maximize the money you can bank from both transactions…

The first goal is very difficult to achieve under any circumstances.  If the move is a local one, it’s almost impossible. Real estate is location driven. With very few exceptions, housing markets in the same location tend to move in the same general direction.

You can try to time the market if you are moving to a new location. But will work only if the price points at these two locations are significantly different. If you are selling in an expensive market and buying into a cheaper market, this can work if you sell your home near the top of the market.

The most effective way to maximize what you can bank is to sell your home while the market is strong. Move to a rental and wait for the next market correction to buy your new home. This can work if rents are not exorbitant and if you are selling near a market top. You also have to allow for the fact that moving is not cheap, and this involves an additional move.

Timing a move to stay in the family home for as long as possible…

In many cases, this belongs under the heading of those who wait too long to move.  If you are downsizing for retirement, it is far better to make this move while you are still mobile and physically strong. It only gets harder as you age. The same can be said for waiting until the financial burden is too great. It is far better to get the move done before these issues rear their heads. Moving is both physically demanding and expensive. Most people are very glad they decided to downsize before the absolutely had to.

Having said that, I just recently worked with a couple who are over 80 years of age. They managed to accomplish a downsizing very effectively. However, the wife was a master of organization. She could organize and organizer! Also, there was a lot of family support. We were also fortunate that the market was very much with them. So, of course, it can be done. But do you really want to wait that long? Do you really want to take that chance?

At the end of the day, most people feel liberated once they have taken the plunge. Once the burden of maintaining and caring for that big home is gone, we feel lighter, freer to do the things we want and need to do. So, trying to perfectly time the market, or exactly pinpoint the precise time to move is probably an exercise in futility. Remember that the faster you are free from the burden of your large family home, the sooner you can enjoy your new life.

Selling a home with high upkeep can set your free to do the things you want!
Selling a home with high upkeep can set your free to do the things you want!

The answer to the question of when should you downsize your home is when you are ready and need or want to move. Do your homework. Figure out where you want to move to and why. Then make your plans accordingly. But do not wait for some magic moment when all the “signs” point to “go”. Slow and steady steps win the race, but don’t confuse that with procrastination.

For further reading, I suggest Bill Gassett’s article, How to know when it’s time to downsize your home is an excellent resource.

 

© 2018 – RGHicks – https://www.downsizingup.com – All rights reserved.

 

 

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