Q. We are having a problem with the appraisal on a home we are selling coming in at the offered price. Why don’t appraisers just figure out the price per square foot? If they did that our appraisal would have come in higher than the offering price.
A. There are several approaches to appraisals on a home that an appraiser might use, but cost per square foot isn’t one of them. When a home is being built, a builder figures their building costs on a per square foot basis. When it is resold an appraiser uses criteria from previous sales.
The smaller the home, the higher the price per square foot is. The value of the land and the location, or premiums such as a view, add to the value of the home. Think of it this way: a 1,200 sq. ft. home which has a kitchen, 3 bedrooms, 2 baths, a living room and a dining area sold for $380 a square foot, or $456,000. If an 1,800 sq. ft. home, down the street, with the same amount of beds and baths, a living room and a dining room also sold for $380 a sq. ft. it would go for $684,000. Anybody can see that is too much. Nobody would pay that much for the additional air space. The larger home would have to sell for much less per square foot.
Q. My husband and I are getting up in years and are thinking of downsizing. We have a large 2-story home. The stairs are killing us. The cost of maintaining a home, where we use just a few rooms, is hard to afford. Any tips on how to proceed?
A. Now that you are starting to think about moving, you can start the process by getting rid of things that you are not using or won’t be able to take to a smaller home. After living in your home for many years you are bound to have accumulated far more possessions than you need. One benefit of paring down early is that your home will show much better when it is on the market. If you are having trouble figuring out how you will even start scaling back, you can hire someone to help you. There are people who specialize in helping organize and plan a move. Once you choose a Realtor to assist you they can give you a referral.
Many seniors and move down buyers are looking for a smaller house with one level, in a safe location, convenient to shopping and transportation. They are often interested in reducing their overall costs to have money left over to fund retirement. One thing that can be a challenge is the fact that they might find themselves in competition with first-time buyers. There is frequently a higher demand for smaller, lower priced homes, especially single story, than a higher priced home. Please realize that the price per square foot will be much higher than for a larger home. When you buy a home half the size of the one you are selling don’t expect it to sell for half the price. There are subdivisions for 55+ residents. Of course in these homes you won’t be competing with first time buyers.
Anybody that is buying and selling a home, including move down buyers, wonder whether to buy or sell first. If you sell first you will know exactly how much money you have to work with, but you may worry about finding the next home. If you buy first, you might worry about selling your current home. Many seniors are in a position to buy first, or have enough equity in the home after years of appreciation, to take out an equity line to buy the next house. If this feels too uncomfortable to you, an alternative is to sell your current home and put your things in storage, and live in a temporary rental, perhaps in the same area you want to buy, until the right house comes along. Before you put your home on the market, make sure that your Realtor has shown you enough homes for you to be confident that you will find what will work for you when your house does sell.
To soften the stress of navigating this move you might consider the tax advantages. If you have lived in your home for 2 out of the last 5 years, you and your husband are forgiven up to $500,000 of the capital gain you realize on the sale. If you live in Contra Costa County, you can transfer your property taxes to your new home if you move to another home in Contra Costa County, as long as the sale price of the new home is the same or less than the current home. You can consult with the tax assessor to see in what other counties you can transfer taxes. Please hire a trusted Realtor early on to be your guide.