Downsizers' Dilemmas & Solutions: Part Two [sponsored]
In my last blog post I wrote about different ways to help downsizers who have lived in their home for decades get past the most common obstacle- breaking through the tax bind. I outlined the possibility, that with your qualified tax advisor’s advice, you may be able to take advantage of some great pro-downsizing rules which are currently in place.
The next three dilemmas that are common to many sellers, but especially to downsizers include:
- Selling while you live in your home or moving out?
- Selling First or Buying First? How to buy when you need the proceeds of sale from your current home to fund it?
- Selling Privately in an off-market sale or going on the MLS with full market exposure?
Selling Owner Occupied vs Moving Out. It’s true that homes which are empty and staged tend to sell faster and benefit from more buyers competition. . However, moving out is not always an option. The main issue in selling an owner-occupied home is not about arranging the showings – rather it’s more about repairs and staging. In my experience, just doing a significant refreshing of a lived-in home can sometimes be enough. While refinishing floors usually requires moving out, extensive de-cluttering, replacing the carpet, and painting the interiors are often enough to really help buyers re-imagine the property as their next home. This is key!
If you choose to stage your home, it can take things up to the next level: when properly done, it creates a strong aspirational, emotional pull. Stagers who create orderly, well-designed, and sophisticated but welcoming interiors, can make a big difference in the bottom line.
Some of my colleagues in San Francisco actually arrange for their clients to move into an Air B&B or VRBO short-term rental to facilitate the sale. They say that it makes enough of a difference in the sale price to make it worthwhile. However, if that’s not for you, getting your Realtor’s suggestions and a stager’s bid for partial staging can be a great alternative option for many downsizers who prefer or need to live in their home while it is on the market.
Selling first or buying first? If you want to secure your next home before selling, as most downsizers hope to do, there are three bridge financing options to make that possible. The most common are private loans secured by the value of the owner’s investment portfolio. Once the property is sold, the private purchase loan is paid off with the proceeds from the sale. Cross-collateralized loans are a little newer in the market place and can work well if you’re not on a very quick-close timeline. CC loans involve one loan for both properties, with the purchase side functioning just like a regular purchase loan, secured by both the old and the new home. If there is already a loan in place on that home, refinancing is part of the process. A third option is a reverse mortgage which is worth considering now that they’ve been so thoroughly redesigned. Regulated by HUD, the new RM product is designed for downsizers with equity who need liquidity for any reason, whether it’s to stay in their home, to make repairs, or to pull out the cash needed to purchase a new home. RM allows the borrower can sell their current home and thereafter change the reverse mortgage over to the new home.
There is one other alternative that does not have anything to do with financing at all, the “contingent on other property” sale. I’ve successfully completed several of these and they can work out very well under the right circumstances.
Private Sale or Public/MLS Listing? Most professionals will tell you that exposing your property to the market widely usually results in the highest price. It’s the surest way to take advantage of the low supply/high demand Marin market by allowing competition to drive the price of your home. However, there are several good reasons that Sellers may choose to opt for a private sale and it can bring forth some very competitive offers if your Realtor does the private marketing well. Health issues and security concerns are the two most common reasons to attempt a private sale. Some Sellers hate the idea of thousands of people being able to access interior views of their home online, or having unqualified buyers traipse through open houses at will. Your Realtor can actually moderate that kind of exposure even in a public MLS sale. They can also just market it quietly, keeping it off the MLS and the web, yet still invite the entire Marin Association of Realtors to off-market showings. While either option can yield successful results, the only caveat to consider with a private off market approach is that when a friend or neighbor wants to purchase your home privately, it can take some serious analysis and work to figure out the true market value of the home- without exposing it to the market at all, even if just with the limited private sale marketing your Realtor can do, the risk of selling below market is considerable.
Whatever your considerations are as you look to downsize, there is no better way to navigate these common dilemmas and make solid, sound decisions than working with an experienced local Realtor.
In the meantime, feel free to contact me:
McGuire Real Estate, Mill Valley office