I have seen people move again and again looking for utopia, and each move costs them a lot;
- $15,000 to $25,000 in real estate agents’ fees
- $5,000 plus in moving costs
- each new house always seemed to need new curtains, or new carpet, or new kitchen, or a fence.
These costs can quickly add up to a painful $50,000 per move.
I have seen people decide to build a new house, and all too often make some common mistakes;
- not working out if they can actually afford the new house
- failing to get a fixed price and then finding costs run away on them.
I have seen them withdraw large sums from their retirement savings to pay for those runaway costs, and end up having to work longer, or live off very little in retirement.
This can be avoided – do your homework – can you afford it ? And get the costs totally nailed down before you sign any agreement.
Same problems as above. Do your homework before you buy / start.
Buying a new house before selling your old house
Mary Jo was 65 and her husband had just died. Not long later she decided she should move to a nice coastal town as she had found the perfect house there. (impulse or emotion ?).
She needed to sell all her investments, and borrow some money too, because she had decided to buy it quickly before someone else did, and before she sold her current home. I suggested that that was a very stressful thing to do, and would be even more so if her current house did not sell quickly.
She said “you don’t understand, I have found the perfect home, I will never find it again.”
I told her in my experience there is always another perfect home, but she got a bit annoyed at me and stomped off.
Some months later I bumped into her and she told me that she had taken my advice, sold her house first, and “would you believe it, I found an even better perfect home in the same town.”
There is always another perfect home. Don’t put yourself under unnecessary stress, sell your house first.
It is better to rent than make a mistake
The settlement date for your house sale is fast approaching and you haven’t found another house yet. Don’t worry, it will be much better to take your time and find the right house, and probably a lot cheaper too in the long run.
Pay rent and storage if you have to, and get it right.
Try before you buy
You are away from home, and for some reason or other, you find a town that you think would be the ideal place to live.
You come back home, sell your house and move to that new town. After a while you realise it was an impulsive mistake and now you have to go through all the costs of moving again - back to where you came from, or somewhere else.
It would be far cheaper to try that new place first by paying rent for two or three months and see if you really you do like it.
Or do a house sit there. Or perhaps you just needed a change of scenery.
All can cost
Don’t make home buying decisions based on impulse or emotion.
Be patient, and rationalise. If in doubt, write a big list of pro’s and con’s and keep adding to it over a few days.
Then sleep on it. Given time, your subconscious mind is likely to come up with the right answer .
Supplied by Alan Clarke, financial & retirement adviser, & author. He also writes regular articles for the media & on line – see www.acfs.co.nz
His second book is due out in May 2014 & is entitled “The Great NZ Work, Money & Retirement Puzzle”.
Alan is an independent authorised financial adviser (AFA) FSP26532 & his disclosure statement is available on request and free of charge.