Get real on housing costs
One way to avoid such surprises is to thoroughly check out the housing market before putting out the “For Sale” sign. Older homeowners should consult with several real estate agents and appraisers to get a realistic picture of what their house might sell for and what smaller homes might cost.
This is particularly important to do right now. Though local markets differ, empty nesters hoping to make a killing on the sale of the family home may be disappointed. Rising mortgage rates and a declining stock market are making it more difficult for younger home seekers with families to afford the down payment and monthly payments for a large, pricey home, said Kari Haas, a real estate broker in Bellevue who helped the Kisses sell their house.
Ms. Haas said many older homeowners had delayed downsizing during the worst of the pandemic, and homes were now lingering on the market. Also, she said, sale prices have dropped since earlier this year, when mortgage rates began to rise. At the same time, she said, older buyers are competing with younger buyers for less expensive, smaller homes. “There are not a lot of smaller ramblers and single-level townhouses to go to,” Ms. Haas said.
In addition to determining sales prices, homeowners could figure out possible savings by comparing the expenses expected at a new place with those at their current place, experts say.
One often overlooked line item for sellers: closing costs, which could reach between 8 percent and 10 percent of the sales price, according to the real estate website Zillow. Those typically include a 6 percent real estate agent commission, though sellers could try to negotiate a reduction to that charge. Moving costs and home staging, such as new paint, floors or remodeling, will also eat into profits.
Mike Robinson, a real estate agent in Peachtree City, Ga., outside Atlanta, said home buyers who planned to move into condominiums or independent homes in planned 55-plus retirement communities also needed to budget for monthly fees. These homeowners association fees pay for security, grounds maintenance and amenities such as pools and fitness rooms. They are generally not tax-deductible and can range from $100 to more than $1,000 a month.