Homeowners

The 5 Ds of Real Estate: Why Major Life Changes Often Lead to a Home Sale

Few homeowners decide to sell based on market conditions alone. A new job, mounting bills, the loss of a loved one, the end of a marriage, or the desire to downsize may determine when a property goes on the market.

Real estate professionals sometimes call these life events the “5 Ds of Real Estate”: death, divorce, debt, downsizing, and displacement or relocation. A growing family may also necessitate the need for more space.

Each situation presents different financial and logistical challenges. However, they share one big risk.

“The biggest mistake across all of these is making a permanent decision on an emotional timeline,” said Andrew Fortune, a real estate brokerage owner serving Colorado Springs and Denver. “People dump the home fast to end the stress or take the first lowball offer.”

Here is what homeowners should know before selling due to one of the five Ds.

Death: Selling an inherited home

The death of a homeowner can leave family members responsible for a property while they are grieving. Before selling, the heirs may need to determine who has legal authority to make decisions.

“The home is rarely just a home,” said Gary Lanham, a broker associate with the Gary Lanham Group at Coldwell Banker Realty in Fort Lauderdale, Fla. “They may be grieving while also dealing with attorneys, insurance, maintenance, personal belongings, several heirs, and a property that continues costing money every month.”

Before cleaning out, renovating, or listing an inherited home, families should develop a coordinated plan. They may need to consult an estate or probate attorney, determine who has authority to sign a listing agreement and sale contract, and calculate the property’s monthly expenses.

Insurance also deserves immediate attention, especially when the property will remain vacant. A standard homeowners insurance policy may not provide the same protection once no one is living in the home.

Lanham worked with one family whose inherited Florida property experienced an air-conditioning failure while vacant. By the time someone discovered the problem, heat and humidity had begun damaging the interior.

“Protecting thousands of dollars in equity may come down to making sure someone checks the property every week,” said Lanham.

Divorce: When two home sellers have different goals

Selling during a divorce can become complicated when one spouse wants to maximize the sale price while the other wants to move on as quickly as possible.

“That split stalls the sale more than anything else,” said Fortune.

Before listing, divorcing homeowners should understand who holds title, how mortgage payments and other expenses will be handled, and how the proceeds are expected to be divided. Their attorneys may need to address those questions in a separation agreement or court order.

Fortune keeps communications in writing. Decisions are routed through both spouses or their attorneys.

“A divorce sale dies from poor communication far more often than from price,” said Fortune.

Both spouses may also need to qualify separately for their next homes. Income, debt, credit, support payments, and proceeds from the sale may affect their mortgage options.

Speaking with a lender early can help each person understand what they may be able to afford once the divorce is complete.

Debt: Explore the options before selling a home

A homeowner struggling with debt may see a sale as the fastest way to access equity, reduce monthly expenses, or avoid falling behind on mortgage payments.

Selling may be the appropriate decision in some circumstances. Homeowners should first examine their complete financial picture, including the mortgage balance, other liens, estimated selling expenses, and likely net proceeds.

“Perhaps it is debt that requires the most thoughtful consideration when deciding what to do about your property,” said Nick Heimlich, owner and attorney at Nick Heimlich Law in San Jose, Calif. “When you’re under pressure financially, you might be tempted to sell your home quickly.”

Homeowners who are struggling to make their mortgage payments should contact their loan servicer as soon as possible. Depending on their circumstances, available options may include a repayment plan, forbearance, or loan modification. Homeowners with sufficient equity and qualifying finances may also want to ask a mortgage professional whether refinancing or another home equity option is available.

Waiting until foreclosure is imminent can reduce the time available to evaluate those choices.

Downsizing: A smaller home may not mean a smaller bill

Downsizing is often associated with retirement, but homeowners may also move to reduce maintenance, eliminate unused space, live closer to family, or find a property that better supports changing mobility needs.

The financial calculation can be more complicated than comparing the prices of two homes. Homeowners should consider property taxes, homeowners association fees, insurance, moving expenses, repairs, and the cost of preparing their current property for sale.

A smaller home in a more expensive community or one with substantial homeowners association fees may not produce the monthly savings the homeowner expects.

Timing presents another challenge. Buying before selling may require the homeowner to carry two properties temporarily. Selling first could mean finding short-term housing while searching for the next home.

Beginning the process early gives homeowners time to sort their possessions, research potential communities, estimate their sale proceeds, and speak with a lender about financing the next purchase.

Relocation: Look beyond the moving date

Relocation may result from a job opportunity, retirement, divorce, death, or the need to be closer to family. In many cases, several of the five Ds overlap.

“The actual move is rarely the hardest part,” said Mladen Dejanovic, owner of Affordable City Movers Chicago. “The real challenge is making big decisions in the heat of the moment.”

A homeowner facing a firm relocation date may feel pressure to accept an early offer or choose the first available property in the new location. Before committing, homeowners should research neighborhoods, commuting times, taxes, insurance expenses, schools, and the local housing market.

Renting temporarily may make sense for someone unfamiliar with the area, although the right decision will depend on the homeowner’s finances, timeline, and long-term plans.

“The surprising part is that a forced sale almost never has to be a rushed sale,” said Fortune. “Even in probate or divorce, there is usually more time than the seller feels like they have, and using it protects them.”