Downsizing for retirement? These are some must-know tips!
A recent survey found that more than 60% of retirees are considering downsizing their homes. But why is this trend so popular? You worked so hard for that home, and now you are selling it?
Yes, this is the idea, and there are a few advantages that motivate so many people to do so. You can finally have that carefree retirement life filled with bobbies, travel, and spending time with loved ones.
All of this is because downsizing for retirement can be a strategic move to free up capital. Also, you will simplify your life and reduce your financial burden. It is much easier and cheaper to take care of a smaller home compared to a more spacious one.
But before you put that “For Sale” sign in the yard, there are some things you need to consider. Here are some essentials you should be aware of when you start downsizing for retirement.
1. You have to understand the housing market
Understanding the housing market might be an exciting step that will open some doors for you, but remember that you also have to navigate this process strategically and be careful to avoid common mistakes.
What about buyer demand? Who is your target? You need to know if you are working with a strong seller’s market or a buyer’s market. Both of these can allow you to make different moves that will give you an advantage. If the seller’s market is strong, you will be able to negotiate a higher selling price, for example.
Right now, the demand for properties is high and the mortgage rates are down, all of this after they were at their peak in October 2023. This means that marketing conditions are not the best, and it may be hard to sell your current property for a good price and, even more, find a new house that matches all of your standards.
The best thing you can do when you start downsizing for retirement is to research the local market and keep in mind that downsizing right now can be more expensive than you expect. And here we don’t talk only about the prices, but also about the taxes.
2. Work with a real estate agent
So you want to begin the process of downsizing for retirement? This is great, but what do you think about the idea of working with a real estate agent? Many people advise those who want to sell and buy properties to never hire real estate agents because they will have to pay the commission, and in this way, they will lose a percent of the money.
Selling your existing home and then immediately finding a new one to buy can be an overwhelming process. Being alone in all of this can actually make you lose money. When you work with an expert, you can be sure you are in good hands. Real estate agents understand the market, and this knowledge is critical when you want to score a good deal.
Also, real estate agents have connections, and they are experts at showcasing your property in the best manner possible, from professional photography to online advertising and virtual tours.
You probably are not able to do something like this on your own, and this is why we believe it is a great idea that when you plan downsizing for retirement, you hire a person who knows what they are doing. It is their job after all, and that percentage of money you are going to give them will be worth it.
3. Earlier is always better than later
Downsizing for retirement can be a liberating move that will simplify your life and help you save some money, but there is another thing you need to be careful about, and that is timing. You need to be proactive, and by that, we want to say that you should start early. It is not a good idea to wait until you are 80 years old, and we are here to tell you why.
First of all, according to relocation specialists, the success rate of downsizing for retirement is much higher when it is a choice and not a necessity. Waiting too long until this becomes a necessity will transform the whole process into a task that will be conducted under pressure and will physically and emotionally drain you.
Also, according to numerous studies, adapting to a new living space takes time, and this is easier to do when you are younger. The older you get, the more uncomfortable it will be for you to adapt to a new home. This means new routines, a new community to integrate into, and brand-new surroundings.
4. Lighten your load before moving out
When you start downsizing for retirement, you are looking for a smaller home. This is a great opportunity for you to declutter because you will only be able to move into the new home with some of the stuff you have. There will be no space for all of that, so it is your chance to shed unnecessary possessions.
First of all, decluttering before downsizing for retirement is a good idea since it will be easier for you to move without having to carry boxes that are overflowing with unused items. Less stuff equals fewer boxes, which means less physical effort and reduced moving costs.
When you move to a new home, the fact that you have only the essentials with you will create a fresh and comfortable living environment. You don’t need to carry all the useless stuff with you, and it will be your chance to design the new space however you want because you will finally have the space to do so.
If decluttering before downsizing for retirement seems like an impossible and overwhelming task, you don’t need to be afraid to ask for help. There are many professional services available, and the experts can be there to help you with every step of decluttering and downsizing. This will make the whole transition smoother, and you can be sure it will be stress-free.
5. Negotiate the commission rate
When you are downsizing for retirement, you need to be aware that this is a financial decision. Even if you sell your house, you still want to maximize your profit so you can invest more in your future and your future home. After all, you do all of this because you want to have a comfortable retirement, right?
Usually, the commissions range from 5% to 6% of the selling price, and even if, at first glance, this doesn’t seem like much, it is actually a pretty big part of your profit. If you manage to negotiate a smaller commission, even if it is one percent, this means more money for your retirement nest egg.
There was a recent lawsuit against the National Association of Realtors (NAR), and it challenged fixed commission rates. As a result, competition is encouraged, and there is more room for negotiation.
But remember that a low commission rate is not the only thing you will consider when selecting a real estate agent to work with. You need someone who is competent and knows the market. When you negotiate the commission rate, you will need to adjust it to reflect the quality of the service.
If you want to be more informed when you need to make various decisions during retirement, this book might help you: Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success
You should also read: 7 Effective Methods to Supersize Your Nest Egg After Age 50
