By John Baer, SRES, SRS
Westchester County is clearly one of the most expensive areas of the country to maintain a single family home. And, for retirees with limited annual income, it becomes a major consideration how much sense it makes to pay for maintenance which according to US News and World Report is between 1% and 4% of the home’s value annually. And, which tends to increase as your home ages. Consequently, if the value of your home is $600,000, that is at least $6000 in maintenance expenses annually. If your home is worth $1 million, that’s at least $10,000 annually. Why so expensive? Well, as part of this annual expense homeowners are paying for homeowners insurance, the rates of which according to CNN Money, have climbed 69% over the past decade. Also included in these expenses are heating costs and cooling costs, household furnishings such as textiles, furniture and home appliances – big and small, appliance repairs, HVAC repairs, lawn care and services, housekeeping services, pest control services, plumbing and electrician expenses, roof repair and replacement as your home ages.
Another major expense of homeownership in Westchester County are the property taxes. According to Zillow, in 2015 the median residential property tax bill in Westchester County was $13,842, the highest in the nation. The amount that one pays obviously differs from community to community. In Scarsdale and Rye taxes can be as much as 10 times what up-County Westchester taxes are.
Given these considerable expenses, retirees should ask themselves such questions as how much of the home in which they live do they actually use? For example, in a four or five bedroom home, how many of those bedrooms do they regularly use
Often there is a desire to hold on to a large home where children were raised so that the children and grandchildren can come back and visit. But is this truly a good reason to hold on to your home if those visits are only once or twice a year? Many people today are going into retirement without enough money saved. To avoid being caught in a future housing crisis, selling while the market is healthy might be wise.
There are, of course, plenty of reasons for delaying the sale of home emotionally, it’s hard to let go of a home filled with memories. Decluttering in preparation for a sale can be a major hassle. And there are a few cases, but not many, where the financial savings of moving to a smaller home may be very insignificant.
The financial benefit of downsizing is not the only consideration retirees should make. By moving to a condo, co-op, or a rental retirees will eliminate the burden of maintaining and repairing the home.
Retirees planning to downsize need to be cautious of the following: 1) Overestimating what your current home is. 2) Underestimating what a new home will cost you.. 3) ignoring the tax implications. Currently IRS allows most couples to exclude up to $500,000 in gains from the sale of their home from their taxable income. A single individual can generally exclude up to $250,000. The rules also take into account how long you owned and lived in the home. To better understand all of the ins and outs, I suggest you read the IRS publication 523, “Selling Your Home.” 4) Forgetting about closing costs. These include legal fees, recording fees, title insurance and a long list of miscellaneous other charges. And in Westchester a seller should anticipate paying real estate commissions as high as 5%, and sometimes higher.
John E. Baer, SRES, SRS is a NYS licensed real estate salesperson associated with Berkshire Hathaway HomeServices Westchester Properties of Scarsdale and Larchmont. He can be reached for questions at 914/600-6086 or at 914/844-2059. His website is www.WestchesterHomes.info.