After working with literally hundreds of clients over the past decade who wish to “downsize”, I have drawn some conclusions and established some “coaching” perspectives in order to assist my clients through the process. By the way, it should definitely be a step process since one size does not fit all and the notion to “downsize” means different things to different people.
In general, when people get into the over 55 “zone”, they are or soon will be empty-nesters and thoughts/plans of retirement start to unseat college tuition, wedding costs, etc. as the hot topic of discussion That’s not to say they are completely done with those aspects of life but statistically they are evolving out of one phase and into another. This leads to a number of questions.
• Do I still need this big house?
• Do I want to continue the current costs: upkeep, mortgage and tax payments?
• What kind of life style do I want moving forward?
• Are there physical needs that should be planned for?
• When do I plan to retire?
• Do I want/need to stay local or can I head to the ocean, ski area, Lake, metro area of choice?
• Do I want a condo or a house?
• Is an >55 community right for me?
• What will my projected financial situation allow me to do – what should/can I spend.
These are just some of the key issues and each family has others that might overlay on top of what’s listed here. One fact I have learned is that downsizing does not mean cheaper... or even necessarily smaller. It certainly can be but often it is not. So this is one of the first areas that needs to be probed. n
How much can I afford – This is a key piece of information and you should define what you want in general terms, where you may wish to purchase and the type of property involved. Buried in this question is... do I want to live in a condo or a house and other dynamics that may effect how much you spend.
- Set Expectations. If for 30 years you have lived in a rural area where you had certain freedoms: space, outdoor Jacuzzis, gardens, outdoor living spaces etc. buying a townhouse type property might feel quite restrictive.
- Consider the overall value proposition to YOU. A condo will invariably have a HOA (Home Owners Association) which means HOA dues and regulations. Vet both thoroughly...! Look at the HOA documentation to see how restrictive it will be. If you thought, there was a nice place for a little garden…make sure it is allowed. Will they allow a Jacuzzi on the spacious deck in the back yard...? Check out any restrictions.
- Next is the fee structure. There will be a monthly dues payment. This can be very high depending on the property. Is it supporting pools, tennis courts, and clubhouses as well as the landscaping and exterior maintenance? This could be an extra $400-500+ per month depending on where you buy. This may not be an issue but for some it might impact your purchasing power since mortgage lenders will add this onto the mortgage payment along with taxes/Insurance to determine your debt ratios. What you get approved for might not translate into purchasing power for a condo. So just be aware of the ramifications of HOA dues.
- When considering a condo make sure you fully review the HOA and Condo documents so you have a good working knowledge of the financial soundness of the condo community. Also, make sure to ask about pending assessments. While the HOA fee may be OK for your budget, don’t get surprised by a sudden $1500 assessment per condo for a new pool or to mitigate a roofing issue in the condo complex – there are many versions of this theme. Don’t assume someone will volunteer this information either. Make sure your buyer agent is on top of this.
- Generally, HOA fees cover doing things – like lawn, landscape maintenance, snow plowing, garbage removal, road maintenance and other activities you are probably trying to avoid so that’s a good thing. If you don’t really value these benefits and you just want a newer home on one floor…a ranch house may be your ticket. You still have to do the maintenance but the living is now on one floor and you still have the freedom of home ownership. Might also be less grass to cut and a more modern/lower maintenance structure than your 30-year-old home.
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Over 55…! If you decide that condo living is for you and that an over 55 community has certain attractions, then that’s a good choice for you. A couple of suggestions:
- Talk to people who live there and get a feel for the place. If you are late 50’s or early 60’s you may be looking for a place that has people of a similar age, activity level and similar social requirements.
- If you do not take this important step, you could buy a place where the average age is 75+ and nowhere near as active as you anticipated. Some very popular condo communities that have been around for 15-20+ years have low sales turnover. Thus, those 55 plus buyers that bought 15-20 years ago are now 75+. This is not a bad thing…I hope to be one of those 75+ people someday (!) but if you were expecting a place with high energy and social interaction … that may not be the place for you. So check it out !
Selling your home!
Depending on the time you have been in your current home, this can be traumatic for a number of reasons. You may have been there for 30 years and just can’t overcome the reluctance for change. The kids grew up in that home…it was at the core of what you were all about. Additionally, you may be headed to another state thus leaving friends, family and neighbors behind. It is an emotional decision and an emotional time for everyone.
- This all points to finding a seasoned Listing Agent that not only knows the ropes but has a cadre of resources available to assist you in whatever needs to be done to assure top dollar for your coveted asset.
- Get an accurate assessment of your home’s worth. This is a key part to your financial plan. Discuss market trends, recent home sales in the area. Create a plan to present your home in the best possibly way. Establish your desired time lines.
- There may be a need to do repairs to your home, paint & replace things, eliminate clutter, stage the home to optimize presentation. Your listing agent has access to all these resources and can make the process easier and reduce stress!
- What to take and what to part with. Always a tough decision. No doubt there is a lifetime of forgotten treasures in your attic. This will be a challenge. One perspective…as an “empty-nester” and potential “downsizer”, you are no longer required to be the curator of other peoples “stuff”. Easier said than done but it is a necessary family discussion
- There may be unwanted gardening and lawn equipment, snow blowers, appliances, toys in the attic and tons of furniture, since you plan to get appropriate “Florida” furniture for that great new condo in the sunshine state. The logistics can be unnerving.
- There are resources who can help with this. Your listing agent should have business partners that do “estate sales”. This is a great way to recover some significant money if there is a lot furniture and other quality household items that are unclaimed by family and not part of the move.
- Having the right team working for you will reap many, dividends in peace of mind, reduced stress while giving you the confidence that things are working out as planned. You will have more time to spend planning the “new” home and making it just the way you dreamed it could be.
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