There’s a host of reasons for downsizing to a smaller home. You might want to pocket the savings and build upon your nest egg. Maybe you’re ready for a new adventure and eager to move to a high-rise condo in the city. Or finally—the kids have flown the coop, and you don’t need the extra bedrooms and bathrooms anymore.
1. Does it make financial sense to downsize?
Moving into a smaller home doesn’t necessarily mean you’ll be saving money.
“Besides the new mortgage, look at taxes, cost of insurance, fixes, and upgrades of the new home,” says Susan Bozinovic, a Realtor® with Century 21 Town & Country in Troy, MI.
There are also homeowners association fees to consider if you’re downsizing to a condo or townhouse. These fees include things like landscaping, maintenance of common areas, trash, and pest control.
“Consider the amount you will spend on these fees, and be mindful that HOAs tend to go up every year,” says Bozinovic.
2. What are the financial implications of selling my home?
There’s more to consider than just how much you’re going to get for selling your home. There’s also local real estate transfer taxes, loan payoffs, home warranty, commission fees, etc., which will affect your bottom line.
That’s why Wendy Gladson, a real estate consultant at Compass in Los Angeles, always does a “sellers net sheet,” so there are no surprises for her clients.
“Sellers need to be aware of how this sale affects their overall financial picture in regard to possible property tax increases or basis transfers and capital gains tax, and how that fits into their long-term financial planning,” says Gladson.
3. What am I most excited about leaving behind?
While moving into a smaller house may have clear advantages—like less cleaning and yard maintenance—it’s essential to ask yourself if you can break the ties with your larger beloved family home. Are you truly looking forward to saying goodbye to the day-to-day chores of maintaining a larger house?
Jared Wilk, senior vice president at the Shulkin Wilk Group at Compass in Wellesley, Massachusetts, says that when clients tell him they’re excited to relax while gardening or sit on the patio instead of cleaning bedrooms and bathrooms they rarely use, then they are probably ready to downsize.
4. Where will I park?
You might not give parking or a garage a second thought when buying a smaller home, but you should, says Leneiva Head, principal broker/owner of Welcome Home Realty in Antioch, TN.
If you aspire to downsize to a city where mass transit is the preferred transportation method, what will you do with your current vehicles? Will you be able to park on the street? Will you have to purchase a garage space if you choose a condo?
And there are considerations for the suburbs, too.
“What if the smaller home has a one-car garage and one-car driveway, yet you have two vehicles?” asks Head. “No big deal right? Until you realize you have to play musical chairs with your vehicles because they’re in the way of each other.”
5. What will I do with all my stuff?
Here’s a twist: “You should really think about what you want to keep instead of what you want to get rid of,” advises Head.
“Do you have a home gym, office setup, a guest room for visitors, or multiple sets of den furniture?” she asks. “Deciding what you really need to keep will help you answer the basic number of bedrooms question. This in turn helps as you decide how small the next home can truly be.”
If you decide to part with your stuff, remember to factor in storage costs.
6. Should I consider a condo instead of a smaller house?
There are pros and cons to both, says Kari Haas, a real estate agent at Windmere Real Estate in Bellevue, WA.
A smaller house can give you more space and privacy from your neighbors—but you’ll still have grass to mow. A condo is typically cheaper, has less maintenance and upkeep, but you might not save as much as you think once you factor in HOA fees.
In addition to the HOA fees, buyers should ask if they can conform to the association rules, which may dictate things like how many pets you can have or what color you can paint your door.
7. Is the floor plan practical for your needs?
When you’re downsizing, every square inch counts, so an optimal floor plan is critical to maximizing space—and your happiness. Yet you shouldn’t bypass a house you deem too small based on square footage alone.
Haas has had clients whose life plans indicated anything but downsizing, but in the end, they opted for a smaller house because of a significantly better floor plan.
8. Where do I want to move?
If you’re one of the many people who can work from home, you might be inspired to set up your home office in a new city or state. But before you pull up the homestead stakes, be sure to find out if your new neighborhood has the services and lifestyle options that are important to you, Gladson says.
If you’re still not sure you’ll jibe with the new location, you might want to rent in the area first before committing to purchasing a home, Gladson adds.
9. Am I ready to downsize?
This is a question that can only be answered once you start looking at homes, Head says.
“That’s when you’ll realize how small smaller really is. You’ll find yourself comparing what you have now to what you’ll have in the smaller home,” she says.
“The bedrooms will be smaller. You may not have multiple living spaces. You may be a lot closer to others in the home than what you’ve grown accustomed to,” says Head.
Being mentally prepared is critical, and you’ll have to be honest with yourself and assess all the factors that will affect your life, or you’ll regret your decision to downsize.
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