Thinking about your next move when your home has outgrown you

Should you stay or should you go? This is the question facing many so-called “empty nesters” who find their home has outgrown them as their children grow up and leave.

It's a considerable number of people: the Central Statistics Office says there are about 120,000 households in Ireland which fit this description. However, it doesn't mean they're all actively looking to move. A survey from Sherry FitzGerald last year showed that trading-down sales accounted for a bit less than 10 per cent of overall property sales.

Financial adviser Fonz Scanlan of Money Smart says people typically make the move for one of two reasons. If the kids have flown the nest and it's a very large house, they may feel that it just doesn't suit their needs any more.

For others, it can be a lifestyle choice, with people looking to release capital they may need to fund their retirement. "Pensions aren't always sufficient and many people don't have a nest egg large enough to support a long retirement," Scanlan says. "Property remains a huge part of Irish people's assets, and for many it's the one big asset they have left in retirement."

But if this is something you’re considering, what do you need to know before you take the plunge?

The dos

Do consider it for financial reasons If you’re living in a house where you may only use two rooms but have to watch every penny, it may not stack up. A better option may be to sell up, buy somewhere cheaper and use the capital to help fund your retirement. “It becomes a clear decision if the only large asset left is the home. The only solution then is to effectively

downsize

and create a cash boost,” says Scanlan.

If you do go ahead with it and secure a sale but are not particularly financially literate, it can make sense to get professional advice on what to do with the lump sum you receive. After all, this will have to see you through the rest of your life.

Expect to pay more Given the relative scarcity of properties that may appeal to empty nesters in certain parts of the country – two-bed bungalows, for instance – you may find that you will have to pay more than you may have expected for your new home. If you're looking for an apartment, you might find you will be competing with investors, which can push prices up.

"A lot of people think they might like to live by the sea, but unless they're moving down the country, they're not prepared for how much they'll spend," says Karen Mulvaney, managing director of The Buyer's Agent, where her job is to find properties and help people complete the sale.

Make allowances for your emotions Selling the home in which you may have raised your family and in which you may have lived for more than 40 years is not an easy decision.

“It’s a very stressful thing, giving up a home having been in it for a long time, so make sure you’re able for it,” says Mulvaney. “If you’re not excited about it, don’t do it.”

The Buyer’s Agent had one client who wished to move out of her big, old house and downsize. However, despite finding another property on the road to which she wanted to relocate, in the end she decided to stay.

“She started off excited but when it came to the crunch, she just couldn’t do it,” Mulvaney says.

The don’ts

Don’t scupper a deal If you’re certain you want to do it, then do it. Procrastinating and changing your mind may see you lose your opportunity. It will also frustrate potential home-buyers in the process. “People trading down are very definite about what they want,” says Mulvaney, though she adds that conversely they tend to be quite unprepared vendors.

“They tend to drag out a sale and only really start looking when they have a sale agreed in hand,” she says, adding that such an approach runs the risk of losing a good buyer.

Many “trader-uppers” may have found themselves frustrated by an “are they selling or aren’t they?” approach taken by certain vendors, who may be unsure and are simply testing the market.

“They hold off and hold off for the best deal,” says Mulvaney. “They’re just trying to get every single penny; that’s their security.” Don’t rule out renting Trading down doesn’t always mean buying another property.

“Buying and selling simultaneously is a very difficult and very stressful thing to do,” says Mulvaney. “My advice is take the pressure off and take your time.”

Having a rental property ready to move into once you close the sale on your own house can take the pressure off and prevent you from making a rushed – and potentially wrong – decision. Scanlan also believes that buying and selling at the same time can be risky. “Everything is dependent on you selling, and you may not have enough money to buy first anyway,” he says.

However, it should be pointed out that renting may be easier said than done in the current tight rental market.

Don’t forget the hidden costs If you’re keen to downsize, remember there will be costs that will eat into your capital. First, you are likely to incur some costs when selling your home.

Appointing an estate agent to sell it for you will typically cost about 1-2 per cent of the sale price. So if you sell your home for €400,000, you will get a bill for between €4,000 and €8,000.

You’ll also have solicitor’s fees of about €1,000, and you may need to get a BER certificate for the property (about €150), as well as paying to have the property freshened up. If you have always used the property as your home or your “principal private residence” in tax parlance, capital gains tax should not be an issue, but there may be a liability if you have rented it out for any period of time.

Buying a new property also attracts costs, in respect of stamp duty at a rate of 1 per cent on purchases up to €1 million and 2 per cent above. So, an apartment purchased for €400,000 will leave you with another bill for €4,000 owed to the Revenue.

Legal fees upwards of €1,000 will also apply, while there will always be additional costs such as surveys.

An important point to note if you are looking to trade down to an apartment or townhouse is that you may have to stump up management fees on an annual basis. It is worth bearing this in mind when you do your calculations, as the fees can add up quickly to a very substantial sum.

Management fees will typically start at about €1,000 a year in Dublin, but if you have luxury in mind, expect to pay considerably more.

An apartment at Hollybrook in Foxrock, for example, will set you back upwards of €13,177 a year in charges, rising to €20,000 a year at the Intercontinental Hotel (formerly the Four Seasons) in Dublin 4.

If you opt for a sheltered living-type complex, fees will also be hefty. At Beechfield Haven in Shankill, south Dublin, located on the grounds of Beechfield Nursing Home, you can expect service charges of about €575 a quarter or €2,300 a year.

There is also the option of ordering home-cooked meals on a daily basis from the nursing home, which can be delivered to your apartment for an extra fee.