If you’ve lived in your home for a long period of time, the thought of downsizing to a smaller place may seem overwhelming. You have all this “stuff” that you’ve accumulated over the years. “Stuff’ is everywhere. It’s in the attic, in the basement, and scattered throughout the house. So where do you start? How do you start the process of downsizing without feeling overwhelmed by it? Before I dive into the step by step process of downsizing, let’s look at some reasons why folks downsize which may resonate with you.
Why Do Many People Downsize?
The house is too big: If you’re an “empty nester”. You own a big house that you’ve raised your children in who are now grown and have left the nest. Or you have gone through a divorce, or have become widowed. You are left with a big house that has all this extra space that you no longer need. It’s too big to manage, too much maintenance, and it no longer fits your lifestyle.
Fund retirement: You can free up some of your home equity to put into your retirement fund.
Buy a second home: You’re at the stage in your life where you’d like to buy a second home. A place where you can go when you want to get away for a quick trip, or to have a get together with family and friends while you are there.
No longer tied to your location: The beauty of retirement is that your career no longer dictates where you live. You now have the freedom to pick and choose where you live. You can freely choose an area of the country that has more affordable housing options, low property taxes, and overall lower cost of living. This freedom can greatly help you financially.
Want to cut down on housing expenses: The rule of thumb here is that your housing expenses should not be more than 30%. When you are working that number is typically manageable, but when you retire, housing expenses of 30% or above might start to become a burden for you.
Wanting to travel more: You love to travel. But for one reason or another, you’ve put off all the trips you’ve dreamed of taking. Now you have the freedom and time to travel to all the places you’ve always wanted to visit.
Step by Step Guide
Simplify the Downsizing Process
Assess your situation:
- What are your long-term needs? Planning ahead will help with the transition of downsizing. What are your needs? Are you looking for a home that will be easier to manage as you grow older? Will you need to take care of an aging parent? Are you just looking to simplify your life? These questions will help you think about what you’ll need in the future.
- Are there any tax implications when downsizing? Individuals may qualify to exclude $250,000 from the sale of their primary residence, or $500,000 for a married couple, if you have owned your home for at least two of the last five years.
- Will downsizing help your finances? A smaller home means a smaller mortgage payment or better yet, no mortgage at all. It gives you the option to pay off debt. You’ll have less real estate taxes to pay, lower utility costs, and lower insurance costs.
Take a look at the benefits:
Less stress – you will no longer be overwhelmed by the demands of a larger home. You’ll have more time to spend enjoying your life rather than be tied down to cleaning and maintaining a big house. It will be a safer environment – moving from a two story home to a single story home eliminates stairs and the risk of falling. If you choose to move into a retirement community, you’ll meet more people with things you have in common
Now that you’ve assessed your situation, looked at the benefits of downsizing, the next step is to go through your belongings.
What do you do with all this “stuff”?
This may be something that you’ll want to tackle yourself, or you can hire someone to help you. There are many professional organizers, who can help you sort through your belongings, pack items up for you, and help you throw the unwanted items away. However, if you do decide to do this yourself. The easiest way is to take on one room at a time, and sort your belongings into 4 categories:
- Keep: These are items you’ll use regularly in your next home, your necessities. They also include items that you cannot live without, for example: your treasured family photos, and wedding video. These are items that you’ll know you have a place for in your next home.
- Giveaway or Rehome: These can be sentimental items that you will not have room for in your next place. You may want to hand them down to keep in your family. Or rehome items that you have duplicates of to friends and family.
- Sell: If you have valuable pieces of furniture, vintage items, china and glassware. You may want to consider having an estate sale. Every company is different as far as their pricing, so it’s best to talk to at least three companies to decide which one will work best for you. You can also look into selling items on facebook marketplace, yard sales, or a consignment shop.
- Trash: Items that you truly do not need. Items that don’t have a second life, or that do not fall into any of the three other categories can be thrown away.
Prepare your house
When it comes time to sell your house, you’ll have two options. You can either sell your home as-is, or make the necessary repairs and updates to sell for top dollar. Let me go over the pros and cons of selling your home as-is.
The Pros of Selling Your Home As-Is:
- Time saving: You may want to sell quickly and move on with your life. You’re not interested in spending the time to fix up the house. You don’t want to be bothered with staging your house, and having open houses. All you want is a quick and easy sale.
- Money saving: You may not have the extra cash to spend on making the improvements to your home. And after talking to your real estate agent you decided that the difference between your current value and your after repair value isn’t going to bring you that much more to your bottom line. You’re not willing to add extra debt for a few dollars more
The Cons of Selling Your Home As-Is:
- Fewer offers: When your house first goes on the market, you may attract several buyers since your home is priced less than move-in ready homes. But soon after you’ll get less activity because homebuyers in today’s market want a home that is move-in ready. So what you are left with are either real estate investors or house flippers looking to buy your home.
- Lower profit: When homebuyers see that your home needs repairs, they’ll take those repairs into consideration and offer you less for your home. The same applies if a real estate investor or house flipper offers to buy your house. Homebuyers tend to offer less on a house that needs repairs.
It’s important to weigh the pros and cons of selling your home as-is. The question is: Do you want to spend the time and money to make the repairs on your home or, do you just want to sell as-is so you can move on to the next chapter in your life? The ultimate decision is yours.
Downsizing your home can seem scary. Change is scary. It can affect you both physically and emotionally. However, by breaking down each process into steps, it will not only help you emotionally, but it will help you simplify the process and get you on the road quicker to start your next chapter in life.
Additional Downsizing Resources:
Best Moving Companies for Long-Distance Moves – this article helps remove all the stress there is in finding a reputable moving company. It reviews all the major moving companies for you and also gives a list of things to consider when looking for a moving company.
Great Tips For Buying Your Retirement Home – this article gives you some great tips for buying a retirement home. The many things to consider and how to find one that fits your budget and lifestyle.
Downsizing Tips for Seniors – this article will give you the tips to help you make the moving experience less stressful for you. It lays out the best way that seniors can approach downsizing.
How To Safely Senior Proof Your Home – do you have an aging parent who lives with you? This article shares great tips on how you can senior proof your home so you can create a safe environment for them.