Finance Reasons to think twice about downsizing Despite the many advantages of downsizing, there are definitely some drawbacks to consider. Whether the following points make a difference to your decision depends largely on your personal preferences and lifestyle goals. But, at the very least, it’s important to think of them before you downsize. Moving and transaction expenses Doesn’t matter how big or small your home is – selling it is expensive. And anybody who’s done it knows that there are fees and costs that may come as a complete surprise…legal fees, transfer taxes, commissions to realtors and the like. In addition, you may need to contract professional movers to carry your furniture and personal items, or rent a storage space for items that just don’t fit into your new, smaller home. Are such costs great enough to prevent you from selling?That depends on your financial situation. But it’s a good idea to check and do a tally before you decide. Less savings than you might think A lot of people think of downsizing as the “silver bullet” of retirement planning; sell their home and put the proceeds into their RRSP or retirement account and, voila, problem solved. If you’re selling a home that’s appreciated dramatically in value since you purchased it (homeowners in Toronto and Vancouver know what we’re talking about), such a strategy could pay off exactly how you’ve imagined it. But for many others, downsizing often doesn’t generate as much as they might think. If you’re downsizing from a $300,000 home to a $200,000 home, your nest egg won’t be a whole lot bigger. Yes, absolutely, every dollar of profit means more for retirement. But after transaction costs, legal fees, sales commissions and other payments, the boost may not be as big as you originally thought. No room for guests, family, hobbies A smaller living space necessitates some compromises, particularly when it comes to how many rooms you have. Sometimes, that means forgoing a dedicated room for your favourite hobby, or that shop in the basement, or a large garage for multiple vehicles. For those with family who live in the same city, not having a second bedroom or guest suite may be no big deal. For others who regularly entertain out-of-town guests, or those who invite the kids and grandkids to come visit for the holidays, the lack of guest space may well be a downsizing deal-breaker. Different neighbourhood; different lifestyle Can you find a smaller home that suits your needs within your existing neighbourhood? Quite possibly. But it’s also possible that downsizing will require you to move to a different part of the city – to a condo downtown, for example, or to a townhome complex just off a major thoroughfare instead of the quiet cul-de-sac on which you currently live. Sometimes, that move will result in changes to your lifestyle. Perhaps visiting friends will require a lengthy commute across town. Or maybe it’s no longer practical to visit the grocery store that you love. Or maybe the doctor’s office is just a little further away than you’d like. For those who’ve lived in the same place for some time, leaving the old neighbourhood behind may be a lot more difficult than it first seems. On the other hand, if your neighbourhood has changed over the years – maybe good friends have moved, or there are fewer families than there were, or that grocery store just down the street closed its doors – perhaps moving to another part of town is exactly what you’re looking for. CSANews | WINTER 2016 | 43
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