When you have reached the empty nest stage or simply have too much house for your needs, downsizing has become a popular trend.
According to research by Opendoor, resizing served as the main motivation for 42% of home shoppers in 2020. With all of its appeal, couples should carefully plan to avoid the following three mistakes.
1. Miscalculating costs
After living in your house for years, it holds many priceless memories. Unfortunately, some of those memories might appear as work that the house needs. For many people, overestimating the worth of their home creates added stress and may deter them from moving forward. On the flip side, you also need to avoid underestimating the cost of a new home. A smaller home may still cost much more than expected, especially in recent years.
2. Forgetting about taxes
If you right-out own your home, it comes with tax implications. The IRS has rules regarding gains from property. Currently, couples can exclude $500,000 from taxable income while a single person can exclude $250,000. Other factors play into your taxes, including the number of years in the home.
3. Factoring in closing costs
Once you find the perfect new place to plan for retirement, the final sale comes with costs and fees. From giving the realtor a commission to paying for closing costs and title insurance, you can expect those extra charges to add up to a hefty sum.
Change often comes with hesitation, but it also provides an opportunity to build a new future. Avoiding common pitfalls may ease the process.