Downsizing Your Home

By Michael D. Gibney, CFP®, CAP®, AIF®

Wealth Manager, Principal

July 7, 2021

I recently downsized from a larger home in a New Jersey suburb to smaller quarters closer to Manhattan. Anecdotally, I noticed many times in my former neighborhood that on the same day families would post “Congrats to the Graduate!” yard signs, “For Sale” signs would often appear right next to them. My wife and I had been thinking about downsizing for years to eliminate the burden of property maintenance and simplify our living situation, but the task itself was a bit daunting.

More diminutive digs can certainly appeal to anyone seeking to embark on a simpler, more economical, or at least different lifestyle. As Simple Families founder Denaye Barahona observed in a Forbes column:

“If you have two toilets, there are only two toilets that can break. When you have five toilets, there’s a significantly higher chance of one needing repairs.”

The Stuff is Tough

Getting rid of years of accumulated items may be one of the most difficult but also most rewarding parts of moving from large to small. Personally, I found getting rid of “the stuff” to be the toughest part of the moving process. My wife and I found boxes that we had not opened since we moved into our suburban home over two decades ago. I was astounded by the amount of items we kept for sentimental value for over 22 years. We were able to purge many items by selling them via online marketplaces, hosting a yard sale (an interesting social experiment), and donating to goodwill. But, we slowly realized that much of the stuff that had meant a lot to us, was just not as endearing to others (“What? That’s all you’ll offer for that 30-year old bike that’s still in ‘great shape’”?). In the end, it felt great to purge all our excess stuff; we literally felt lighter and freer.

A 2014 Los Angeles Times piece suggested an average U.S. household contains about 300,000 things. Besides your everyday stuff, you probably have a garage, basement, spare room, and attic full of possessions, most of which neither you nor your heirs will ever want or need. This makes downsizing an opportunity and challenge. In fact, even if you’re not planning to move right away, we suggest routine clutter control. You’ll be doing yourself and your heirs a huge favor. Plus, if it took years or decades to accumulate all that stuff, expect it to take months or longer to disperse it. This can prove to be a burdensome and costly hurdle if your big home sells quickly in a hot market.

Realistic Downsizing Dreams

Even when downsizing is a good move for you, shifting from a spacious home to smaller quarters can also create emotional challenges. Here’s how grief/transition coach Amy Florian describes it in her book, “No Longer Awkward”:

“When decide to downsize their home, the entire family has to leave behind memories that sing from every wall and activities that occurred in every room.”

In other words, any big move is likely to brew a blend of bittersweet emotions, from excitement to angst. Your best course for minimizing the pain and maximizing the gain is to inject a healthy dose of realism into your plans.

Because we did not move all that far, we find ourselves returning to our old neighborhood more than we had anticipated. We return often to meet up with close friends, visit our favorite restaurants, see our doctor/veterinarian and auto mechanics. With the exception of our excess stuff, it really hasn’t felt like we’ve left anything “behind.” I imagine downsizing is more difficult for those moving out of state where the distance between the old and the new may be much greater.

What Will the Costs Really Be?

Be realistic with the dollars you dream of saving when you downsize. Bottom line, you (and your financial advisor) should crunch the numbers to arrive at optimal answers for you.  Some things to consider:

Buying and Selling: Today’s hot real estate market is great for sellers, but rough on buyers and you’re likely to do both. The pandemic has especially inflated rural property prices, as well as building and renovation costs.

Investing the Extra: How should you deploy any downsizing profit? Invest it? Apply it to a new mortgage? Both? Poor choices here can prove costly, especially over time.

Closing the Deal: Closing costs can also come as a surprise. Once we tally up all the incidentals, 7% closing costs are not unheard of.

Shrinking Pains: Expect to encounter unexpected costs after you move; such as renovations and repairs, condo or HOA fees, new furniture for a new décor, and storage costs for extra stuff.

Who Can You Turn to for a Smooth Move?

As with any big move, having the right team in place can help minimize the hassle of this typically stressful event. Building that team starts with selecting the right realtor. The realtor should be:

Fiduciary: Your realtor should accept a fiduciary duty to represent only your highest interests. (They should be your seller’s agent when you’re selling, and your exclusive buyer’s agent when you’re buying.) Avoid working directly with the other party’s agent; their interests may not align as well with yours if they’re working both ends of a deal.

Full-Time: Seek a full-time professional agent with a lifetime (versus lifestyle) career in real estate. There’s a lot to learn and know to optimally represent your best interests.

Forthright: Don’t hire someone to serve as your echo chamber. Work with an agent who will offer their best advice—even when you may not want to hear it. For example, homeowners often overestimate how much their beloved home is really worth. And if your agent recommends removing all your favorite artwork and repainting from chartreuse to beige, just do it.

You may have noticed that these qualities are similar to those qualities you seek and expect from your fiduciary financial advisor and accountant; both of whom are also essential to your ongoing plans. Whether you are mid-career, or you’re nearing or well into retirement, having fiduciary relationships to help you realize your lifetime goals can add immeasurable value to your downsizing plans, as well as other major transitions in your life.

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