Home is where the heart is, but your love for your home can hurt your chances of selling it in retirement. After all, there are a lot of emotions attached to a home, especially if you were married in it or raised a family there. Emotion often makes people attach a high value to their property, not taking into account its age and condition.
An overvalued home – you can tell you made that mistake if it languishes on the market – can be particularly troublesome for retirees looking to downsize into a smaller or cheaper property as quickly and efficiently as possible. (For more, see Downsize Your Home to Downsize Expenses.)
According to Quicken Loans Home Price Perception Index, appraised values in February were 1.99% less than the amounts that homeowners estimated. That’s a slight widening of the gap since January and the first time in six month this has happened. The discrepancy between the appraised value and homeowners’ expectations was worst in Philadelphia, where appraised values were 3.64% lower than expectations.
When selling a home, price is almost everything. Listing at a fair and realistic price is the clearest path to a speedy sale and won’t result in you taking drastic measures down the road. The longer the house stays on the market, the more money you’ll be shelling out to maintain it and cover expenses, such as the mortgage, homeowner’s insurance and taxes. It also means that the likely outcome is a reduction in the asking price. Once that happens, buyers smell blood and begin to make low-ball offers.
The best way to get an accurate price is to work with a real estate agent who is well versed in the local market and can show you prices for which similar houses in your neighborhood sold. If you don’t want to use a realtor, hire an appraiser to value your home accurately before listing it. According to Realtor.com an appraisal should cost you on average $300 to $400. (For more, see Top 4 Things That Determine a Home’s Value.)
Are Renovations Worth It?
Pricing your home correctly isn’t the only thing to think about. You have to weigh the costs vs. benefits of doing renovations before selling. Remodeling costs money; depending on the state of the home it may not be worth it. (For more, see Home Renovations That Don’t Pay.)
Real estate media firm Hanley Wood’s 2016 Cost vs. Value Report found that remodeling a high-end kitchen will cost close to $60,000, with an average 64.9% return on the investment. A bathroom overhaul will cost $17,908 and get you 65.7%. Replacing the vinyl siding will set you back $12,341, with a return on the investment of 73.2%. For a retiree who is looking to downsize, shelling out $60,000 for a new kitchen isn’t likely to increase the value of the home by more than the investment. If the house is in disrepair and needs a complete gut, it’s not going to attract move-in-ready buyers. Investors or flippers are the more likely candidates, so why spend the money to remodel if they are only going to come in and tear it down? (For more, see Will Your Home Remodel Pay Off?)
If your home is in generally good condition, with only the bathroom or kitchen needing an upgrade, spending a little money to modernize may be worth it. However, be mindful of what you are spending on materials. Granite countertops may look great, but if buyers aren’t expecting them the money would have been better spent elsewhere. Your goal is to get the most profit from a sale without overspending.
Boosting Curb Appeal
Many buyers make their decision on a home before they walk through the front door. For retirees who can’t afford to, don’t want to or don’t need to renovate, improving curb appeal can go a long way toward attracting interested buyers. That doesn’t mean ripping up the old grass and putting down new sod or replacing the siding with brand-new materials, but it does mean keeping the lawn neat and making sure that the weeds are gone, the shrubs are maintained, there's no peeling paint anywhere, and the front door, light fixture, mailbox and home numbers are modernized. (For more, see Landscaping on a Budget.)
The Bottom Line
Selling a home to downsize living expenses can be a smart move when you’re retired, but in order to make the most from your effort you need to price it right. Be careful not to spend money on renovations that aren’t going to proportionately boost your sale price. Ultimately, you must emotionally detach yourself from your home and view it as a business asset and not the place where you raised your kids and spoiled your grandchildren.