It definitely pays to own a home before you hit your golden years. According to a paper published in February 2023, about 80% of Americans age 60 and older are homeowners, with real estate wealth accounting for about 48% of their median net worth from Vanguard. And leveraging your home equity can provide a lucrative path to retirement (Check out the best HELOC rates you can get right now here) – especially if you move somewhere cheaper. About 60% of migrating retirees move to less expensive places — typically withdrawing $100,000 in home equity in the process.
Where you bought your home is very important. Retirees leaving their primary residence on the West Coast (Washington, Oregon and California) will most likely be able to maximize the home equity they have built and then retire and relocate. Similarly, retirees in the Northeast (New York, Massachusetts, New Jersey, Maryland and Washington DC) are also well positioned to get cash out of a home sale, the Vanguard report shows.
This data shows that where you live now matters if you plan to rely on home equity to fund retirement. In fact, selling a home and making a living “is very profitable for coastal residents moving inland to the Midwest,” while it may not be the case for others, says certified financial planner Derieck Hodges.
|Most lucrative states for older Americans to sell their home in||Average ratio of extracted home equity and target home price|
Hodges adds: “Since the pandemic, rents have escalated and the value of homes to buy has also increased, leaving many homeowners downsizing but not saving as much money after paying the moving costs and closing costs when selling their home have. ”
|The least lucrative states for older Americans to sell their home in||Average ratio of extracted home equity and target home price|
This is how you get the maximum value out of your house when you sell it
“One of the best things a retiree can do to get maximum value from their home is to make sure it’s in good condition when they sell it,” says Jacob Channel, senior economist at LendingTree. For those who have lived in their home for a long time without making any significant changes, it is not uncommon to find yourself in a situation where your home appears dated or run-down. “You don’t have to gut your home, but updating your kitchen, replacing a worn carpet in a high-traffic part of the home, or even painting and fixing creaking doors can make a world of difference to potential buyers, not just helping you sell yours.” house faster, but you also get a bigger deal,” says Channel.
Additionally, Holden Lewis, home and mortgage expert at NerdWallet, says that after you’ve lived in a house for many years, you stop noticing the things that would bother a buyer, like scrapes on baseboards or toilet handles that need shaking . “Ask a neutral person… to go through the house and identify all the little things that might put off buyers. Make sure the home’s major systems are working and don’t need to be replaced. That includes plumbing, the roof, heating and air conditioning, the electrical system and the water heater,” says Lewis.
For her part, Clare Trapasso, senior news editor at Realtor.com, says this year’s homebuyers are really looking for move-in-ready homes that are well located and attractive. “These homes are still being sold with multiple offers, sometimes above the asking price, depending on the market,” says Trapasso.
Essentially, it is important for sellers to put themselves in the shoes of a buyer. “When buyers walk through a home, their first inclination is to discount the home for items that need repair or updating. I do not believe in substituting items to sell to someone who will ultimately replace them to their own liking, but do advise my customers to ensure items that are easily identifiable to a shopper’s eye are fresh and hip are working,” says real estate agent Morgan Trent of the Aaron Kirman Group at Christie’s International Real Estate.
Experts say that before selling their home, retirees should watch the real estate market for up to 24 to 36 months before pulling the trigger. “If the market has taught us all one thing over the past few years, it’s that it can be very volatile and the value of many Americans’ most valuable assets can fluctuate wildly in a matter of months. While there are a number of variables that make up aggregate demand in any housing market, it’s imperative that sellers do their job and understand the market they’re in,” says Trent.
If you’re looking to sell, Lewis says it’s essential to consult tax professionals to gain access to accumulated equity, as capital gains taxes could affect the sale. “A reverse mortgage is a way to extract equity without selling the home and without making monthly payments. Reverse mortgages require financial advice and should not be taken lightly,” says Lewis.
Other options for retirees looking to draw on their home equity include applying for home equity loans or lines of credit (HELOCs) provided they have good credit and are not burdened with debt. “Before you jump into something like this, make sure you understand what you’re getting into. Defaulting on a home equity loan can result in the loss of your home, and a reverse mortgage could make it extremely difficult for you to pass your home on to your children or other family members,” says Channel. Check out the best HELOC rates here.
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Source : www.marketwatch.com