According to one study, nearly half of Canadians have no plans of downsizing their home. Meanwhile, 34% intend to do it eventually while 18% already have.
Downsizing is usually considered after retirement. Or, in times like these, when things are tough financially. The idea of getting a large lump sum will appeal to anyone, even at the sacrifice of their longtime sanctuary — or their childhood home.
What is Downsizing and Why Do People Do It?
Downsizing most commonly refers to purchasing a smaller home after selling a large one.
- Financial reasons for downsizing are to cut down on the mortgage or to get rid of it and other debt totally.
- You might also just want to put the money towards retirement. Or perhaps your monthly bills needn’t be as high because of your large home.
- Persons also undergo physical downsizing because their house no longer suits their lifestyle or family arrangement.
- New empty nesters or persons who simply have gotten tired of maintenance might also want to downsize.
- Maybe it’s no longer safe for you to go up or down your stairs due to old age or health issues, or you want to be closer to family and friends.
1. Understand the Costs of Downsizing
Downsizing has a lot of benefits, but there are also quite a few setbacks you need to look out for. Luckily, only 9% of homeowners regret downsizing, so once you’re aware, you should be among the majority who don’t.
Anticipate the hidden financial costs of downsizing:
- Real Estate fees
- Land transfer taxes
- Condo fees (if applicable)
- Administration fees
- Home appraisal
- Legal fees
- Moving expenses
- Furnishing and upgrades for new home
Expect emotional costs to downsizing
Most likely, moving to a smaller home will mean that you’ll have to part with some of your belongings as they might no longer fit your new living space. The decision of what to keep and what to throw out is often challenging.
Of course, if you’re able, you could look into storage unit rentals so you won’t have to give up anything. Or, at least, you won’t have to give up those things that matter the most.
However, if you’re downsizing from a home you’ve lived in for a long time, there’s simply no way to get around the loss of memories that were made there. All the life events that took place will now only be in pictures.
Understand All the Practical Costs
Downsizing might also mean sacrificing a good neighbourhood. Or, at least, one you’ve come to know and love. You’ll no longer enjoy your favourite swimming park or see familiar faces.
If you end up moving to a more rural area — which is common for cheaper homes — you also won’t have easy access to cinemas, museums, and amenities you would normally frequent.
2. Get the Most Out of Your Sale
If you understand the costs of downsizing and still want to push through, here’s how you can come out on the winning side of the sale:
- Know that staging your home is not always required. House or condominium staging is typically a good investment, but if you’re looking to save about $4,000, this might be the area to do so.
- Adopt the buyer’s perspective. Before putting your home up for sale, look at it objectively and be blunt about things a potential buyer might not like. Additionally, make the necessary cosmetic upgrades, changes, and repairs so you don’t lose a good sale.
- Sell at the right time — and at the right price. If you have a swimming pool, summer might be the ideal time to list your property initially. In certain locations, each city has a “best time” to sell. Research and plan to suit your needs. When you do finally decide to list, be reasonable, otherwise, your house may go stale and end up with a heavily diminished value.
- Get the right people to do the job. There are many real estate agents and companies out there, but not all of them are the right fit for you. Stack up your options for agents, advisors, maintenance managers, insurance brokers, and tax advisors as needed.
- Don’t settle. It might take some time to get a sale for the price you want. If this happens, don’t automatically agree when your estate agent suggests you markdown your home. Decide if you want to change your agent, or consider other options.
3. Keep Your Downsizing Options Open
While selling your home will offer a lump sum all at once, it’s important to keep in mind the costs mentioned above. You might want to entertain the idea of renting your home instead.
By converting your home to an investment property, you could enjoy potential savings of around 30% or more. Costs like new furnishings and moving to a new home can be avoided, but they’re more controllable than, say, agent fees (especially if you choose the right company).
A second alternative might be to abandon downsizing altogether and upsize instead. Your local bank might offer a reverse mortgage option suitable for your needs. There are positives and negatives to this choice, however, so make sure you look into it with great care.
Conclusion
Whether you’re downsizing, upsizing, or staying right where you are, it’s essential to understand the key elements to a move and other forms of estate planning.
Relocate Stress Free is here to help you have a smoother ride for all of it. Reach out to us for your next move, and know that you’re in the hands of trusted, experienced professionals.