When You Have to Downsize Home

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Downsizing may be the next big trend in the real estate industry - not downsizing by way of foreclosure or short sale and empty nesting, but a broader change in consumer behavior to reign in their lifestyles and get back to basics.

The recent economic travails that have taken place in the stock market, credit markets, and real estate market have combined to give consumers urgency to reevaluate their lifestyles and their homes.  As such, many homeowners are considering downsizing their homes.

There’s Light at the End of the Tunnel

There are a lot of reasons why people downsize homes in any market.  For instance, the empty nester situation.  But in this harsh recession, more serious concerns are driving downsizing behavior.  As a result, downsizing a home in these times can be uncomfortable and often stressful.

Recognizing that, downsizing can be one of the best decisions a homeowner can make if a stronger financial outlook and peace of mind are imperative to achieve.  Downsizing can reset home budgets and lifestyles to a more manageable and satisfying pace.

For homeowners facing difficult choices and considering downsizing your home based more on need than preference, the fact is that there is light at the end of the tunnel when it comes to downsizing.


Tips When Downsizing Your Home

If you have been thinking about downsizing your home, here are insights and tips to consider as you look at this process.

  • Make it count.  The downsizing has to be tangible and significant.  In order for downsizing to be effective, you have to be able to measure a substantial reduction in what it is you are trying to downsize.  If you are trying to downsize your mortgage, then make sure the reduction in your monthly bill as well as borrowed amount is substantial.  A suggestion is that the benefit needs to be at least a 20% reduction in your mortgage.  If you are trying to downsize the actual size of your home, then a 20% minimum reduction is appropriate as a guide as well.
  • Calculate how much downsizing will cost. Calculate the costs to sell your property and move.  To sell your home will inevitably incur costs such as closing fees, commissions, and other transaction-related costs.  Moving can be expensive, especially if you hire people to move for you.  A new loan on the next house will also incur additional costs.
  • Calculate the benefits of downsizing your home.  Calculate the savings in your monthly budget from a lower mortgage payment.  There is a chance that your annual tax burden will be lower as well.  Finally, with a downsized home often comes a downsizing of utility costs as it takes less electricity and gas to heat and cool the property.
  • Consider how much peace of mind is worth to you.  Though you can’t put a number to it, peace of mind may be the biggest benefit you get from downsizing your home.
  • Be realistic and clear as to what you will need in your new home in terms of size, location, and other characteristics.  Research what your home options are based on your identified needs.  
  • Don’t overdo the downsize.  Don’t go so much smaller or cheaper that you find the home is not a reasonable fit.  Make sure that the home still gives you some flexibility and you know it will work well for your future needs (albeit at a more sensible level).
  • Be sure this is really what you want to do and that this really represents the best path for you. 
  • Get the right home.  Wait out the market if necessary to get the right home for you.  It is imperative to select the next home that you can really see yourself comfortably and pleasantly being in for the long term.  It's easier to adjust when you love your new home.
  • Look for a strong ’sense of community’ in a neighborhood.  You never know when the downsizing process could help you find a neighborhood that has a greater sense of community than the one you are in now.  Talk to neighbors about how residents in a prospective neighborhood you are considering come together during holidays and other events.  A strong community can make the new downsized home something to look forward to.
  • Consider renting temporarily in order to search out that next great home.

You Won’t Miss the Amenities

You will likely find that you can do without those elegant upgrades and amenities much more easily than you imagine.  In addition, you may find that the more exquisite and costly a home is, the more work and money involved to maintain it.  So, downsizing amenities can have the effect to help simplify your lifestyle.

Downsizing is Tough But Can Be a Rewarding Experience

Again, downsizing your home can be a difficult decision and challenging process to say the least.  But it has its rewards and benefits too.  If you are thinking that you need to downsize your home, take heart that it could be the most personally and financially important decision you make.

About David Lorti

David Lorti is a professional Realtor for RE/MAX Elite in the Phoenix Real Estate market. He holds a MBA and Certified Negotiation Expert designation and his insights have been quoted in numerous news outlets. His website, LortiHomesArizona.com, and blog, LortiHomesBlog.com, offer additional market insights on Phoenix Arizona Homes.

Date: Friday, December, 19th 2008 @ 12:11:14 PM
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