Is your client emotionally ready to sell and rent?

Emotional, practical and physical factors are often as important as financial ones when it comes to selling the family home

With her house in Toronto’s Parkdale neighbourhood, Laura Smythe,¹ 73, is “sitting on a huge pile of capital,” as she puts it. Since her husband’s death 15 years ago, Smythe has lived alone in the main part of the three-storey home in the rapidly gentrifying neighbourhood. Her son lives in the basement suite, while her daughter is in Kingston, Ont., with her family.

Smythe likes her house. “I’ve been here for a while. I’m comfortable. I have lots of good memories here. I know my neighbours,” she says.

Still, the retired editor acknowledges that some of the tasks of homeownership are becoming onerous. And it’s impossible not to be keenly aware of the house’s value: similar properties in the neighbourhood have been selling for upwards of a million dollars. Smythe estimates that she could get around $1.2 million for her place (which is mortgage free), more than three times what she and her husband paid for it 20 years ago.

Her cousin and his wife recently sold their suburban home and now rent a lovely apartment overlooking the Ottawa River. Smythe is contemplating a similar move, freeing up the capital in her home to spend on travel and her grandchildren, while handing over the maintenance to someone else. “Right now, I take one big trip per year,” she says. “I could do that twice, and not worry about the apartment when I’m gone.”

It’s a move being contemplated by many Toronto homeowners, including divorced or widowed women, says Caitlin Chapman, CFA, a portfolio manager with Newport Private Wealth Inc. in Toronto. The city’s frothy real estate market is fuelling opportunities for a retirement lifestyle much more luxurious than many retirees had thought possible. Chapman, who deals with many clients who are divorced or widowed women, has put together a simplified illustration of just how much money could become available for rent and lifestyle expenses each month from the sale of a Toronto home.

Monthly rent and lifestyle expenses

AGE	PROCEEDS FROM HOME SALE
	$1,000,000	$1,500,000	$2,000,000	$2,500,000	$3,000,000
50	$4000	$5400	$6900	$8300	$9600
55	$4400	$6000	$7600	$9100	$10,500
60	$4900	$6800	$8400	$10,100	$11,800
65	$5700	$7800	$9700	$11,600	$13,800

Assumptions:

• inflation at 2% per year
• annual investment return of 5%
• investment capital consumed at age 90
• no RRSP or pension except OAS/CPP
• no other assets, spousal support, employment or other income

Still, the decision to sell and rent shouldn’t be made based on house prices alone, says Chapman. It’s easy, she points out, to get caught up in the drama of the market, the fear that if you don’t sell now the bubble will burst and you’ll lose out. “But your home isn’t a traditional asset. Especially if you’re going to sell and rent, you need to be more diligent with the process. Because you won’t have that asset to fall back on.”

Chapman runs a variety of projection scenarios with retired clients to ensure they’re financially ready to sell and rent. She’ll analyze current expenditures, look at goals (Does the client want to travel? Is it important to her to leave an inheritance to her children?), and stress-tests portfolios plus house proceeds to ensure they’ll last under a variety of scenarios.

But finances are only part of the picture. A lot of emotional and practical considerations go into the decision as well. It’s not necessarily easy to find suitable rental accommodations or to acclimatize to a new neighbourhood in your 60s or 70s. And if you filled your time with tasks like gardening or home maintenance, what will you do to replace those hobbies?

Giving up the family home also means giving up certain roles or traditions, says Chapman. Many retired empty-nesters hold onto their homes because they want to keep a family hub, a place where children and grandchildren gather for holidays and special occasions. “Traditions change when that hub is gone, and that can be difficult. People think, ‘But who’s going to host Thanksgiving dinner?’”

For Smythe, selling and renting feels liberating on the one hand. On the other, it would mean the aggravation of decluttering two decades’ worth of stuff, including her late husband’s belongings. As well, she worries about what such a move would mean for her son, whose employment is precarious.

TIP: Keep a list of vetted, professional organizers handy to refer to clients who need help with downsizing and decluttering or moving. Professional Organizers in Canada and the National Association of Professional Organizers are good places to start.

Still, she points out, if she’s going to make the move, she’d rather do it now, while she’s still healthy and mobile enough to travel. Chapman agrees: many of her clients, she says, want to move while it’s still their decision, as opposed to being forced to relocate as the result of a health condition, a fall or some other event that leaves them unable to stay in their home.

When the financial, practical and emotional aspects of selling the family home have been properly addressed, however, the move can be a great one. Chapman recalls one client, a woman who had been happily divorced for 15 years and whose children were launched. “I’ve worked for years and years to maintain my home,” she said. “Now it’s time for the house to work for me.”

¹ Name and some identifying details have been changed.