Every family is unique and there is no ‘one-size-fits-all’ solution. But when the kids decide to leave and you feel like you are rattling around in the family home, as hard as it is to let go, it may be time to consider downsizing. This can be a very emotional time and a big decision. You need to make sure you consider all the facts so that you can make the best decision.
The first one is how to go about it.
Do You need to sell in order to buy? Most downsizers do.
Can you buy before you sell?
Here are some considerations that might help:
The biggest benefit of buying a home, before selling your current home, is the fact that you have a suitable property lined up ready to move into. This can reduce the stress and pressure of having to find a home once your current home is sold.
This, however, can also create disappointment and heartbreak. If you are unable to purchase a new home without having to sell your current home, your purchase offer is going to have to be subject to the sale of your existing home. This could mean paying a premium price on your purchase. It makes the purchase stack on top of the sale of your existing home, adding stress.
The likely outcome might be that you end up selling your existing home for less than you had hoped for. The urgency and emotion of wanting to move to your new home causes this. This is not a good situation. If, on the other hand, you decide not to take a lower offer, this can lead to you getting “bumped” by a non-restricted buyer and you losing out on the home you’re looking to purchase. That can be devastating.
It also raises the possibility that you will be asked to include a sunset clause in your offer - and that could put you at a severe disadvantage.
The time it takes to sell your current home is unpredictable. There is no crystal ball that exists that can tell you exactly how many days it will take. Selling your current home, before buying a new home, will put you in an ideal position. A good position to negotiate on the new home you are purchasing, due to the fact you are purchasing without the ‘subject to the sale’ contingency of your current home.
One risk of selling your current home without buying a new home first is the chance of not being able to have a place to live. There are options in that scenario. A “rent-back” can sometimes be negotiated with the buyer of your current home. A “rent-back” would allow you to continue to occupy your current home for a certain number of days, weeks, or even months after settlement for an agreed rental. Another option, when selling your home, is to negotiate a longer settlement. This will give you time to find a property and both transactions can settle together.
There are options - but the answer to the question depends on your personal situation and risk profile. Our suggestion is a very simple one. “Listing your property does not mean selling.” So what you can simply do is go to our site and advertise the property for sale and simply see what comes in.
Smaller properties often cost less money, so you may find yourself with excess money. Before you make any decisions, you will need to ensure that you have a plan with how you will spend/invest the extra money. Speak to a financial advisor to ascertain the value of your existing property and any other assets. Consider if you are in a position to refinance or consolidate your loan.
Are you just looking for a smaller house or for an entire change of scenery? Consider what the objective for your move is, particularly when looking at locations. Perhaps you want to be closer to better schools, move closer to the city to gain a small backyard, or even purchase an apartment for work reasons right in the city. Location is an important question for every move and a crucial one when looking for a smaller property.
Many people sell property only once or twice in their lifetime. It can be a minefield if you get the wrong agent, the marketing does not work, the agent does not follow up and so many other pieces of the puzzle just don’t fit. However, you can always ensure this does not happen by taking it into your own hands to sell your property.
One of the most important parts of selling your property yourself is to have your price expectations close enough to where the buyers are going to see the value.
There are a handful of methods that you can use to determine the value of a home. The most respected and common method is by completing a comparative or competitive market analysis.
A competitive market analysis or as it is known – a CMA -is an in-depth evaluation of recently sold “comparable” homes in the past 0-12 months. It should also include a list of properties that are currently on offer because this will be your competition when you list for sale.
A CMA isn’t a crystal ball. It will not tell you what your property will sell for. That is what a willing and able buyer will determine and what a genuine seller will accept. However, a CMA should greatly narrow the sale price.
A professionally completed CMA will take into account many features of not only the property but also the local area and neighbourhood.
Here is a list of some of the considerations:
- Block Size
- House Size
- Number of bedrooms and bathrooms
- Improvements and extensions
- Additional living areas
- The quality of the property
- The layout
- The Outlook
- The location in terms of living conveniences.
All of these will add value and need to be taken into account. But, here is a point I would like to make about all these features. At the end of the day, it may just be one or two of these that will entice the eventual buyer and in some cases, it might not be an obvious one. As the current owner, ask yourself, what it was that attracted you to the property? That is what will likely attract the next owner. Whatever that feature is, should be highlighted in the marketing.
It is a funny thing about value – the value of anything is different for everyone. It depends on how much they desire it, how much they need it and how much demand there is for it.
Valuation is not an exacting science. For that reason, you can ask 10 qualified people to value your property and you will get 10 variations. Don’t think of the value of your property as a single figure. Think of it as a price range. That way you are less likely to be disappointed with the final outcome when you do sell.
The object of the exercise, when downsizing is to consider your objective first. If, for example, you want to sell your home, buy a smaller one and have $200,000 left over. It is the $200,000 that you need to focus on. So, you need to get a good indication of the value of your existing home first. Allow for the expenses involved in selling and buying. If using an Agent, that figure could be as high as $50,000. This is the Agency commission on the sale, solicitor costs, removal costs, stamp duty on the purchase. If you sell it yourself, you will save a big chunk of this figure. Once you have a good idea of your likely sale price, you can deduct the 200k and the estimated expenses and this will give you the figure that you cannot exceed when buying.
All the very best on your new venture.