On the other hand, after you give away that first item that has some historical significance to your life, there is a twinge of anxiety followed by a much larger feeling of liberation. The dam of reluctance breaks and each succeeding separation becomes much easier.

Last summer when I went into Craigslist downsizing-mode, I also decided to sell two large objects that I have carried around with me for 45 years. I have been an Amateur Radio operator since the 8th grade. For $50 dollars (an advance from my parents), I acquired my “dream” radio receiver in 1965 (used, of course). In 1967, I acquired a radio transmitter that I had lusted after. I used these throughout high school. When I went to college, this equipment went into boxes. Since that time, I have fired them up only once.

I loved the memories of using that equipment. But they were outdated (remember vacuum tubes?), needed to be refurbished, and weighed almost 100 pounds between them. (What we Hams call “boat anchors.”) They simply needed to go. So I sold them to another Ham who wanted to restore them.

When I physically transferred possession of my old radio gear, there was some uneasiness. I asked the buyer to email me photos of the restored equipment so I could cherish those images instead of the actual “stuff.” This “fond photo-memory” strategy works better than keeping the stuff around. Five minutes after the stuff was gone, I was over it. The positive feelings of being liberated from stuff were now dominating my stuff-attachments.

Since that time, I have had no problem getting rid of anything that I have no use for. The irrational attachments to “things” are gone. Each trip to the dump or to Good Will brings more freedom – mental and physical. If it is something I want help remembering, I photograph it.

So my regular stuff-separation trips will continue. I am invading the attic now. There are many more downsizing adventures ahead of me. When it is time to sell this house, I will be ready.

Now if only Mrs. P. will join the de-cluttering club! That will be another chapter in our downsizing story.

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The interview was by telephone. It didn’t last long. Most of it was me discussing our personal downsizing experiment to a condo that is 1/3 the size of the house we raised our family in. Because there were not many questions asked, I doubted that I would be quoted in the article.

I was wrong.

The article – “When Downsizing Makes Dollars and Sense” – was published yesterday at CNBC.com. I was surprised to see that I was quoted extensively in the article. Even better, most of it was accurate. (The article states that we built our family home in 1980. Actually, we moved to Tennessee in 1980 but our present house wasn’t built until 1992.)

Unfortunately, the article did not link to this blog. That would have been nice because it would probably have added new readers.

The article is definitely worth your time, and not because I am quoted in it. It contains advice from others that should be considered. One piece of advice is a warning against keeping a vacation home in retirement. We are on a different path because right now we are juggling three homes, with plans to sell the “big house” in the next few years.

We still have lots of stuff to get rid of – that is a slow process but we are taking our time to reduce the shock value of downsizing.

Here is the link to the CNBC article:  Downsizing Makes Dollars and Sense.

Related posts:

1. Remodeling and Downsizing

Two weeks ago we launched what will be likely be the most expensive and comprehensive remodeling project – our master bathroom. I am painfully aware that our actual return on this “prepare to downsize” cost will be less than 100%. However, our master bath was so dated that it was likely to cause potential buyers to turn around and walk out of the house without further consideration. Moreover, our shower was constantly leaking into the lower level and I was tired of trying to stop those leaks. It was time to gut the bathroom and start over.

We brought in a remodeling expert with design expertise and a Realtor on staff. We told his team that we wanted a complete bathroom makeover but with two stipulations: (1) the design and decor had to appeal to a large percentage of potential buyers when we sell in a year or two; and (2) the level of finishes should be consistent with homes in our price range but without over-the-top luxury.

Clearly, our Jacuzzi tub had to go. In its place will be a smaller soaker tub and an expanded shower. The corner linen closet is also gone because it occupied too much space. In its place will be a floor to ceiling linen cabinet built-in along the wall with the double vanity sinks. The carpeting is being replaced by travertine tile. The cultured marble vanity tops will now be granite.

To select the contractor, we interviewed three and obtained two fixed-price proposals. The third proposal was for a cost-plus job. That is the proposal we selected, for several reasons. First, this remodeling contractor has been around 30 years with a significant positive track record. Second, he had a larger staff available to help us make appropriate selections of materials. Third, his internal cost estimates (one by the owner, one by his designer) were in-between the two fixed-price proposals we received. This will end up being a $25k-$30k project.

The work is progressing rapidly. I was shocked at how quickly Mrs. P and I were able to select the new fixtures, tile, and cabinets, with the expert assistance of the contractor and his suppliers.

Sadly, the beautiful custom solid cherry cabinets and tub skirting are gone. However, we will try to reuse the vanity cabinets at our lake house.

Although this is expensive, we will end up with a master bath that will not scare-off buyers. At least we will get to enjoy the new bathroom for a year or two ourselves before selling.

After the dust settles (and our bank account recovers!) from this bathroom remodel-to-downsize project, the next project will probably be the kitchen. We will not do a complete kitchen make-over. Instead, we will refinish the existing cabinets and replace the solid-surface counter-tops with granite. We may need to update the appliances.

Are any of you preparing your home to sell so that you can downsize?

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1. Don’t be in a hurry.  Some vehicles are always popular and are certain to find buyers if the price is close to reasonable. Other vehicles require more of a “niche” buyer. Our vehicle was more in the “niche” category. It was an older (1999) premier brand (Lexus) that combined high performance (not a gas saver) with luxury features. I knew it would take time to find the right buyer who valued vehicles like this, even in our MSA with a population of 1 million plus. In a smaller market, eBay would probably be a better selling channel compared to Craigslist. I was almost ready to put the car on eBay myself.

2. Put photos and lots of detail in your ad.  I learned from my earlier sales that I did not enjoy answering endless questions from buyers/lookers about the item for sale. With this vehicle, I cleaned the car inside and out, polished it up, and took 4 high quality photos (the maximum allowed on craigslist). I then crammed the text of my ad with the history of the car, where it was garaged, how it was maintained, its physical condition , every feature it had, and why I was selling it. This greatly reduced the amount of time I had to spend answering questions. Instead, most of my inquiries were “do you still have it” and “when can I see it?”

2. Test your pricing.  I first put the car on Craigslist a month ago. I priced it at the high end of retail book value ($9,100). I had almost no activity in response except for the shopping trolls (more on that later). Ten days later I dropped the price to what I believed would be another resistance point, $8500.  I had one looker who offered me $5000. I politely rejected that with no counter-offer. Two days ago, I moved the asking price to $7950 and again renewed the ad (which pushes it to the top of the list). This generated a lot of activity.

3.  Ignore/blow-off the shopping trolls and email negotiators.  Apparently there are folks out there who think they can solicit better prices by making low-ball offers or asking “what’s the lowest you will take for the car” without even seeing the car. Apparently, there are also sellers who lack the confidence to blow these people off. I had one guy email me yesterday with $4500 offer – cash! – if I didn’t sell it before my deadline. First, what did he think I would take from other buyers other than cash? Second, I had no deadline. I emailed him this short response: “Not gonna happen.”  To other trolls I just said: “I only negotiate in person.”  Another prospect wanted me to drive the car to his brother’s shop to look at. I of course declined. Apart from the safety concerns, I would not want to negotiate on the buyer’s home turf.

4. Don’t negotiate against yourself.  I had a prospective buyer drive the car on Sunday. He was there with his two brothers. Each took a turn asking me “what’s the lowest price you will accept.” I kept answering “I haven’t decided that but if you make me an offer, I’ll let you know if it’s high enough.” Finally, the guy offered my $65oo. I said no, but after thinking for a minute, I countered at $7400. He then told me that his offer was firm. I said that’s too bad because he was turning down a good price on a good car. I told him I had two other buyers wanting to see the car. They left.

5. Establish trust with your buyers. With each buyer, I was quick to disclose the one item that I knew was wrong with the car (missing pixels on the audio display). I never said there was nothing else wrong, only that I didn’t know of anything else. (A true statement.)

6. Go along on the test drive.  Even if you trust a prospect not to steal your car, the test drive gives you more opportunity to highlight the selling points of the car. Our car had a lot of small luxury features that were not readily apparent in a short test drive. I made sure the buyer knew about them.

7. Have your documentation ready. When you get an eager buyer, make sure you can close the deal quickly by having a clean title in the proper name, etc. Last evening, a single baby boomer woman drove the car for 5 minutes and offered full asking price on the spot. She was tired of the minivan/SUV experience and was ready for something radically different but affordable. Our car filled that need perfectly. She offered me a personal check right then or a cashier’s check today. I wanted the certainty of a bank check so I agreed to meet her at her bank first thing this  morning. I wanted to meet at the bank so I could confirm that the check was genuine.

8. Use a Bill of Sale. Although a signed title is adequate to convey ownership in most states, I recommend that you also provide a Bill of Sale, to be signed by both seller and buyer. The Bill of Sale should contain clear language stating that the car is being sold “as-is” with no express or implied warranties as to the condition of the vehicle. This protects you against legal claims if the transmission falls out of the car the day after you sell it. A frustrated buyer may claim that you stated the car was in “perfect condition.” A judge might believe the buyer and rule that you made a verbal warranty to the buyer. Not good.

Car selling and selling in general on craigslist can really help with your downsizing. I know it has helped us.

Do any of you have other tips to share?

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So far, I am quite please with the results. In less than a week, we sold a treadmill, a large desk, a large bookcase, an old audio cabinet, and a bicycle. In each case, the first looker became the buyer. I priced the items aggressively for quick sale because I didn’t want to waste time on emails, phone calls, and showings to people who enjoy negotiating. I enjoy negotiating sometimes, but not when we are merely eliminating stuff that has no value to us because it is just taking up space.

Before posting our Craigslist ads, I studied other ads for similar products. There were two characteristics of many of those other ads that I believed were counter-productive to a good selling strategy. First, the photos of the item for sale were either non-existent or of very poor quality. I took high quality photos and in most cases, posted four photos (different views) of each item. (Four is the Craigslist limit.)

The other problem with most Craigslist ads is that the descriptions of most items bordered on the worthless. There was not enough  information about the features and condition of the items. There is no excuse for this because the Craigslist ads are free and allow you to post lots of info about your items for sale.

Providing a lot of detail in your Craigslist ads will, in my opinion, minimize the frequency and duration of communications that you will have with prospective buyers. You want buyers to know as much about the item as possible from your ads so that they don’t have to ask you. Downsizing is something you do to make your life easier. Therefore, you should design your downsizing strategies (and your Craigslist ads) for that purpose.

There a few things I’ve posted on Craigslist that have not attracted much attention. Those will become donated items. One reasonable attempt at selling is all I intend to make, then the stuff will be eliminated by any means possible. Seeing the newly opened spaces in our home and garage is a reward unto itself.

We have other stuff (mostly collectibles belonging to my wife) that will need to go on eBay. More about that later.

Have any of you  boomers used Craigslist as part of your downsizing strategy?

Related posts:

1. Craigslist Car Selling Tips
2. Remodeling and Downsizing

I will post (bore you with) photos of the condo  next week after a lot of our tasks are complete. Our three sons and one significant other are coming up here for Thanksgiving. This will be their first chance to see the completed condo and for one, his first visit to Long Branch Lakes.

We are condo pioneers here. We are the first occupant in the first of what will be 8 buildings, each having 8 condo units. The builder has been fantastic to work with. There are a few projects left inside and outside our unit but work is progressing rapidly.

We are without TV or high-speed internet service. The local provider is a rural cooperative that is having technology problems running and terminating optical fiber to our building. That may get resolved next week.

Meanwhile, because I work so much from home, I found an interim solution. I bought a cellular USB modem on Craigslist for $10 ( a real deal) and then purchased a 30 day, 5 GB mobile broadband data plan from Verizon for $80.  It’s fast and reliable enough that I can get my work done. I may use this strategy for when we travel as well because Verizon also has daily and weekly pre-paid data plans.

Although this will be our smallest residence since I was in law school, it doesn’t feel cramped. I think part of that sensation is because we are part of a 5,000 acre, low density development with thousands of acres of woods, trails, pastures, and lakes. If we want space, we just walk out the front door. Our two black labs are surely enjoying that space.

I can’t say we are true downsizers yet because we still own (and will use) our larger home back in Nashville. If our experiences here are what we expect then I anticipate that the “big” house will be on the market sometime in the next three years.

Do any of you have some tips for us as we begin this condo/downsizing experiment?

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Fortunately, tools have been developed to aid in this decision.

Trulia now has an entire section on its real estate site dedicated to discussion of  rent vs. buy issues.

There is also a rent vs. buy online calculator that you can use obtain financial feedback on the decision, taking into account your tax bracket, inflation rates, etc. Sometimes people forget that renting vs. buying should be a compared in the short term and long term.

CNN/Money has also published a map showing twenty major cities with an assessment of whether it makes more sense to buy or rent in that city. Not surprisingly, cities like Fresno,  Miami, and Mesa and Phoenix, Arizona made the “buy” list. These are cities where values have fallen the most, creating bargains galore.

If I were contemplating a relocation to an unfamiliar area as part of a retirement downsizing, I would very likely rent first. This provides an environment where you can objectively evaluate the merits of living in that area long term, without being influenced by financial pressures associated with home ownership and having to resell to undo a bad decision. The days when homes would automatically appreciate in value each year are gone. Thus, a purchase of a home to live in retirement should not be looked at as an investment.

Of course, there is a subjective component to the rent vs. buy decision. Some folks are just emotionally attached to home ownership. They cannot picture themselves as retired renters. If you are in that category, make sure you also ask yourself these two questions:

Are you emotionally attached to home maintenance?

Is it likely you will need the equity in your home to supplement your retirement income?

That last question is so important. It is better to know ahead of time if you can afford to stay in owned real estate for an extended period. Having to sell or use a reverse mortgage strategy because of financial pressures may be more stress than you want to take on.

Have any of you considered downsizing into a rental home?

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We made another visit to Long Branch Lakes yesterday to assess the progress of our condo under construction. Much has been done. The walls were painted, trim installed and stained, doors hung, wood ceilings installed and stained, and master-bath shower tiled. Everything looks great. The size – 1500 sq. ft. – still looks perfect for our needs.

We met more recent buyers during a visit. One couple is preparing to build a house in Long Branch Lakes. They are renting in a nearby town during construction. They sold their home in New Jersey. Even though that home was paid for, the taxes were so high that their rental costs are lower than their NJ tax bill. This is a perfect example of why and how downsizing can be such a benefit to a retiree. This couple had done their pre-downsizing homework, including speaking to the county tax assessor and visiting area health care facilities.

I recently wrote a post for the On Retirement blog at U.S. News and World Report, summarizing some reasons why downsizing can be an excellent strategy for the baby boomer.

You may have thought of other reasons why downsizing would make sense for you (or not). If so, please leave a comment for the rest of us.

Thanks for reading.

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With interest rates on refinancing so low, it appears that we can reduce our mortgage payments on our present home to a point where it would be more expensive to rent. Refinancing would allow us to stay where we are and use the extra cash flow to gradually make the upgrades we were planning before selling. We are in no hurry to leave the area because my office is here and because it seems that our sons enjoy living in the city where they grew up. How about that?

Our new community bank offered us a seven year ARM at 3.875% with no points or origination fee and a $200 rebate of our closing costs because we are an existing customer. The lower rate and new amortization schedule will cut our total monthly payment (PITI) in half and reduce our monthly interest payment by more than $200.  The lower interest payment will allow us to recoup our out-of-pocket (non-escrowed) closing costs in less than a year. I chose not to finance the closing costs because I am emotionally opposed to increasing our debt load on an existing asset. We can either sell the house or pay off the loan before the rate adjusts seven years from now. It seems like a no-brainer. The extra cash flow will also make it easier for us to finance our condo purchase and not be in a hurry to sell our primary home.  Our lake house is paid for.

The downside to keeping the house is that we will have a lot of equity tied up in the house for a longer period. If the stock market were flying high, the lost investing opportunity would be a concern. In our case, I expect that we will get more of a return (and tax free at that) from a rebound in real estate values in our area.

So it looks like our physical downsizing will be delayed but our cash flow downsizing is on schedule. I locked the rate on the loan today and started the paperwork.

During my search for refinance rates, I called Bank of America, our long time (but soon to be former) bank. The loan officer was located in another state. The Bank of America rates were much worse than those offered by our new community bank. I specifically asked if we could get preferred rates or lower closing costs because of our long time relationship and because our present mortgage is with BofA.

“No can do” he said. “That would be discriminating against other borrowers who are not bank customers.”

Of course it would. That’s how you keep long time customers, by rewarding them for their loyalty and profitable business relationship.

No can do, he said.

No more Bank of America, I thought.

What do you think about this new strategy? Have you explored the benefits of a new banking relationship?

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I continue to be impressed with the insulated concrete form structure. Our oldest son came with us and described it as being “built like a tank.” With thick concrete walls, ceilings, and floors, noise will not be an issue unless someone starts dropping bowling balls on top of us. I also learned that each unit will have its own tankless water heater which I expect will add to the energy savings.

The developer finally completed his condominium documents and established the first year monthly condo fee: $125. That is less than I thought it would be. It is bound to go up of course but that is a reasonable starting point.

We spent some time visiting with our friends who have been building a large house on five acres in Long Branch Lakes. I feel bad for them because they are acting as their own general contractor and things are going very slowly. Our condo will be finished way before their house will, even though when we bought last summer, no dirt had been turned at the condo site, whereas our friends expected to be in their home by November 2009! At their current pace, they will now be fortunate to be finished by November 2010.

I think this is somewhat indicative of the differences between downsizing and upscaling in retirement. Our friends’ house will be magnificent as well as roomy, with elaborate outdoor spaces. They will have a great deal of privacy on their five acres.

Our condo is only a mile away from our friends’ house. It will be compact and efficient. It will have all the amenities of a much larger home but without the energy and maintenance demands of a large, self-contained structure. It will have no stairs to negotiate as we age. Our only private outdoor space will be a large deck overlooking the water. However, there will be a community pool, dock, and grilling/dining patio shared by the 64 condo units but maintained by fees from all of Long Branch Lakes homeowners (including our friends.) This is an advantage I can embrace.

Upscaling like our friends is a popular choice for retirees and I have no criticism of it for those who can afford it, as our friends can. (Upscaling into a mortgage is not a good idea, however.) Many boomers and retirees consider an upscaled place to live after the nest is empty to be a payoff for years of hard work raising children.

There is another angle to explore in the downsizing vs. upscaling comparison. Our ultimate plan is to have two homes in retirement, both smaller than our primary residence now. One is our lake house which we purchased seven years ago. The other will be the condo. Although I don’t know this for a fact, I believe the combined cost of our two homes will be substantially less than what our friends are spending on their one home. I like the living and recreation options that our strategy presents, for the same investment. We know of many retirees who are snow birds for this same reason. We shall see how it works for us, although we will not be moving for weather changes. Our condo and lake house are only a few hours drive apart.

What are your thoughts on upscaling vs. downsizing in retirement?

A couple of reads to pass on. First is this post from the My Dollar Plan blog that illustrates the benefits of making 401k Catch Up Contributions. Also, don’t forget to take a look at the articles in this week’s Carnival of Personal Finance.

Have a great week and thanks for reading.

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