The general feeling among homeowners as they close in on retirement is whether or not they want to sell, presumably to downsize to something more affordable. Some folks may be considering something a little more freeing, possibly even considering the option of renting. And while both of those options can be tempting, you may find that flying in the face of this dream is the reality that staying put may be the best option in the short-term.
In the not-too-recent past, you could expect the equity in your house to provide not only a portion of your future retirement nest egg but also the distinct possibility that you had enough to move, possibly even to another location and have your new home paid-for. Not that those dreams are necessarily dashed completely. In fact, if you currently own your home (I must say that calling a home with a thirty-year mortgage as something you own has always struck me as ironic.), you might still be able to do what you had planned.
But some things have changed. Let’s start with the dream of moving to downsize. In most areas of the country, with a few notable exceptions, home prices have stabilized and have even begun to modestly recover. And modest may be all you are going to get for the next several years. So lower you expectations of your own home’s worth and realize that the new house you may be looking at also has been subjected to the same fair market forces.
If you are considering downsizing to avoid higher local property taxes, the switch may eventually catch up with in your new community. The downturn was an equal-opportunity recession with similar financial and economic effects hampering communities across the country in much the same way. So if you think you are running from the problem, think again. Taxes are going to rise on the state and local level as communities seek to balance budgets. Some communities have ceilings on how much taxes can rise in a given year and within some of those communities, the differences it what the taxes are can be staggering.
If your reasons for downsizing are tied to a need to be closer to your family or because you feel as though you might need some assistance with your current lifestyle, then what you need to consider is how much in the way of improvements you need to do to get the best possible price.
The current trend towards remodeling has shifted greatly as well. Even if you are planning on staying in the house rather than prepping it for resale, the goal should be to do it as inexpensively as possible with the broadest appeal to the potential buyer. Huge over-the-top remodels are now what even the most affluent remodelers are doing, looking out their front window at a world where moving up is not as easy as it was, they are making the current abode more liveable.
The subject of renting vs. buying has come up a lot lately and future, close-at-hand retirees may be considering the liberating notion of the idea. To discuss whether this is a good idea or not, more than a few economists have tackled the numbers problem and mostly decided that the trade-off is about the same. They believe that the market has fairly priced housing, whether you are entertaining the idea of selling or renting, the trade-offs are quite similar.
There are some sites that help you determine whether or not a remodel is the best move (many act as fronts for contractors who are affiliated and try to vet potential customers from information seekers). The bottom line: it probably is. Just keep in mind that you will need to focus on the big issues first, the problems that could have been dealt with in the sales price process of bargaining in the past will no longer work. You need every equity dollar possible.
If the house is in relatively good shape (has a roof that will pass inspection in the next ten-years, has a fully functioning sewer system, etc.), then focus on the little things first like insulation (attics, new windows, new doors), appliances and counter tops (often can be done without an entire demolition) and smaller projects like wiring, lights or new floors. Be sure to permit any project and be sure to consider the lead paint levels in your home.
Most Americans who are above-water on their mortgages are staying put – for the time being. Perhaps, even if you have no mortgage, you might be considering the same thing – for the time being. These days, a small project will net you a nicer pay-off when things do recover more and if they don’t, if for some reason we hit an economic plateau, they you will at least have a comfortable place to lay your head.
To find out more about these new remodeling rules, read the WSJ article by M.P.McQueen.
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