Should You Sell or Save a Paid-Off Home?
Table of Contents
Gen X’s Retirement Preparedness
Gen X has made headlines in recent weeks for a lack of retirement preparedness. According to one report, the average retirement savings across Gen Xers — or those born between 1965 and 1980 — is about $130,000, despite the numerous surveys that show people generally believe they’ll require $1 million or more to enjoy their golden years.
A Silver Lining
But there is a silver lining. In 2023, 72% of Gen Xers were homeowners, and many of them are now on the cusp of paying off their homes entirely — or are already living in a house they paid off years ago. Selling a paid-off home in the current housing market to unlock both record equity and profits looks incredibly appealing, but finding a replacement home in that same market largely means rolling those profits straight into a new home, or even getting priced out.
A Homeowner’s Dilemma
Take Jeff Inman, who moved into his home in Chesapeake, Virginia, back in 1999. His two-story house has four bedrooms where he raised his three kids. But 25 years later with all of the children out of the nest and the home only one year away from being completely paid off, life is throwing another curveball: His aging mother-in-law needs to move in so he can care for her. “We have space for it to work, but it’s upstairs,” which is a physical challenge for her, he says. “It’s either build on to accommodate, which we’re willing to do, or sell the house, take the equity we built up, and find a place that has the accommodations that work.”
Core Costs Linger
Making the move to build wealth through real estate can hinge upon whether one finds themselves in a buyer’s or seller’s market. A buyer’s market is defined by too much housing inventory where buyers have their pick and can negotiate for a lower price. A seller’s market is the opposite, and what many saw in the years of the pandemic — houses sold lightning-fast, and buyers had to win bidding wars to snag one. For Erika Villegas, president of the Chicago Association of Realtors, determining whether to sell or save in a seller’s market like Chicago begins with digging into what a client is spending per month to maintain their home, even if there’s no mortgage.
The Landlord Option
Virginia realtor DJ Parker is a big proponent of homeowners buying their own apartment units, transitioning into one of them and renting the rest. Another option is for homeowners to even rent out their paid-off home, or portions of it, because the rental market is so lucrative and steady. “Renting is a great idea if people are willing to become landlords, or hire someone to do that for them,” he says. “Passive income, to me, is a very good thing.”
Trusting Your Gut
Choosing to sell or save a home is a deeply personal decision — no two homeowners are alike in their family, economical, cultural and health makeup. “It just depends on your life situation,” Parker says. Parker warns that one misconception among homeowners is that their house will sell immediately at a slightly inflated price similar to the eye-popping sums that homes fetched during the thick of the COVID-19 buying frenzy. In reality, though, “we’ve seen a halting over the last few months in my area,” he says, and “houses [are] staying on the market longer.”
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