Selling your home before retirement is a savvy way to help ensure financial security in the years to come. Using the proceeds of a sale to downsize to a smaller house or condo helps lower your living expenses once you’re no longer working for Uncle Sam. Then again, it’s important to understand the pitfalls of selling a home to avoid costly mistakes.
Don’t Overlook The Cost Of Selling A Home
One of the reasons to sell a home before retirement is to access the equity you’ve built up over the years. But you have to keep in mind that certain costs will be deducted from your equity otherwise you may overestimate the proceeds you’re expecting from the sale. These costs include:
- Agent Commissions – Commissions paid to the listing agent and the buyer’s agent are usually paid by the seller. Typically, around 6% of the sale price covers agent commissions.
- Closing Costs – Also known as “Settlement Costs,” these include taxes, the title transfer fee, attorney fees and a fee for the title company or an attorney on closing day. In states like Florida, sellers can pay as much as 9% of the sale price for closing fees.
- Home Inspection – The advantage of getting a home inspection is learning about any problems that need repair before the buyer does. Buyers usually get their own inspection to find problems they can use to negotiate a lower price.
Before you put out the “For Sale” sign, take your time and talk with your family to discuss all the pros and cons of selling.
Don’t Overestimate Or Underestimate The Value Of Your Home
If you price it too high, serious buyers will walk away and you’ll only end up lowering the price after wasting weeks or months. If you price it too low, you can lose out on the profit you deserve. Ask a real estate agent to run a comparative market analysis for your area. Or, search websites like Realtor.com and Zillow.com, to see how much homes like yours have sold for recently.
Don’t Underestimate The Cost Of Your Next Home
Even though you’re downsizing, make sure you can easily afford your next home well within your retirement budget. This is especially true if you’re planning on relocating to another state when you separate from service. Use vacation time to explore the new location and get a sense of the real estate market.
Don’t Rush Into Making Any Decisions
Before you put out the “For Sale” sign, take your time and talk with your family to discuss all the pros and cons of selling. You wouldn’t want to make a life-changing decision you may later regret.
