by Carolyn Rothwell on May 9, 2013

5 Residence Sale Scenarios - TOTAL Planning Suite Tech Tip


There are so many combinations of residence sales, purchases, replacements, and future sales planners need to model in their financial planning software.  For today’s post, I will run through 5 residence sale/purchase/replacement scenarios and how to best model them using TOTAL Planning Suite for Easy Money and Golden Years. 

1) Current Residence, Future Sale

We will start with the easiest situation to model.  If your clients currently own a residence, and plan to sell the residence in the future, this is extremely simple to model. 

Enter the current residence in the Asset section.  On the Asset Details tab, make sure to select the group as “Residence,” enter the current value, cost basis, and assumed appreciation rate.

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Go to the Residence tab and enter the age of sale and an assumed sales cost.  That’s it!  You’re done!

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2) Current Residence, Future Sale and Replacement Residence Purchase

This scenario is just as easy – follow steps 1 and 2, with the addition of filling out the “Replacement” information on the Residence tab.  This will sell the current residence, and purchase a new residence.  

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3) Future Residence Purchase

If your clients will be purchasing a home in the future (unrelated to any current residence), the easiest way to model this is to take advantage of the residence sale and replacement feature.  Start by entering a residence as a current asset, with a value of a single dollar.  

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This will allow the use of the Residence tab to “sell” the $1 home, and purchase the actual future residence using the “Replacement” input.  

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4) Current Residence, Future Sale, with Disjointed Future Replacement Residence Purchase

You can combine techniques in scenario 1 and scenario 3 to model this situation.  Setup the current residence as an asset; sell that residence in the future using the residence tab, leaving the replacement information blank.  Model the future home replace using scenario 3 steps, setting up a current $1 placeholder residence to be “sold” allowing the actual future purchase at the desired age. 

5) Current Residence, Future Sale, Replacement Purchase, Future Sale of Replacement Residence

Things get a little more fun we work with the program to model this situation.  The residence tab is awesome for selling and replacing a home because the program will handle all of the details associated with the process, including the tracking of residence values, existing loan payoff, down payment expense on the new home, starting the new mortgage and any taxes associated with a sale.  However, this function allows for one sale, and one corresponding replacement per residence as you probably have already noticed. 

Here is my suggestion for handling this scenario.  The program is very flexible so there are several other options, but I prefer to keep everything in the residence sale function so the related items (like mortgage payoff, sales costs, down payment, etc.) are handled automatically.

This option will allow you to sell the current residence, purchase the replacement residence, and sell that replace residence in the future.  To model this, we need to enter the current home in assets, and use the residence sale function to sell that home and purchase the replacement home.  Then, we also need to enter the replacement home in assets so that we once again can use the residence sale function to sell that home in the future.  However, entering the replacement home causes that value to show up as part of the clients total residence value, thereby overstating their net worth.  To get around that, we can enter yet another residence to offset that value by entering the value as a negative amount. 

Current home: 

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Current home sale and replacement:

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Replacement home (this causes the net worth to be overstated by this residence value but allows for future sale):

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Replacement sale:

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Finally, the offsetting residence asset entry to correct the net worth and related reports displaying the residence values:

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And from that, we get clear reports with the correct values and automatic handling of mortgage payoffs, capital gains, sales costs, down payments and proceeds. 

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Remember, if there is a mortgage on a current residence make sure you tie that mortgage to the residence asset in the liabilities section.  That will ensure the mortgage will be automatically paid off upon sale of the residence asset.  

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Please add a comment if you have any other residence sale / repurchase scenario you would like to model.   I know what question is going to come up next – how about refinancing?  I will be sure to work through some refinancing scenarios in a separate blog post shortly!

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Carolyn Rothwell

Carolyn enjoys spending her time building Money Tree Software's brand and products. Her experience creating and delivering financial plans for a full-service financial planning firm and supporting advisors working to provide the best planning to their clients as a Money Tree support member has provided an excellent understanding of the importance of financial planning.