The thought of selling your home crosses your mind from time to time, but how do you know when to sell your house? There are several factors to consider—from your personal financial condition, local real estate market conditions, and your own emotional preparedness to let go of your current home in favor of something new and different. The following are a few of the many factors to think seriously about:
Equity
The last thing you want to happen is a “short sale,” or selling when you are “underwater”—owing more than your house is worth. Equity is essentially the value, represented as a percentage, of the home that is truly yours, free and clear. It’s the amount difference between your mortgage loan balance and the current value of your home. For example, if you bought a house with a $450,000 mortgage, it’s now worth 475,000, and you currently owe 400,000 on the loan, you have $75,000 in equity. The $50,000 you’ve paid off plus the $25,000 increase in the home’s value. If you don’t know what your home is worth, you can do a comparative market analysis with a real estate agent by taking a look at public records of what homes of similar size, age, and features have sold for in recent months. A professional real estate appraiser or real estate agent can also help you understand the current market value of your home. Remember the current market value of your home is likely to be different from the estimate of fair market value you see on your property tax bill. Markets shift and change according to current economic conditions, competition, local housing inventory, and average time on the market in your area.
Selling a home involves costs that will eat into your equity. You may have to make some improvements to spruce up the home before you list it, your real estate agent will receive a commission upon sale, and you’ll also have to pay for things such as appraisals, attorney’s fees, moving fees, and possibly inspections and taxes from previous years. Subtract your best estimate of all these costs and you have your net equity in the home. This should be a comfortably positive number that gives you a cushion for a down payment on your new place and several months’ living expenses for emergencies.
Life Changes
As your life and your family change, your house can suddenly seem too small, or too large. More kids, new jobs, and a bigger salary may put you in a position to consider selling and trading up. Do the math and find out how much your current home is worth, what type of new home you want, and whether you can sell your current home for enough to comfortably acquire a new one.
On the other hand, if the kids have grown and left the house, you may suddenly discover that having all that space to yourself isn’t all it’s cracked up to be. Without extra help around, the house can start to feel like too much to bother with. A two-story house with a finished basement and plenty of closets turn into a houseful of stuff you no longer need, and you have to go up and down the stairs to shovel it out. Then there’s the exterior maintenance—from mowing the lawn to cleaning the gutters, chores that require more energy than you may be willing to invest anymore. Downsizing while you’re still physically active and healthy is easier than when the normal ailments of aging mean you have to call in reinforcements to clear out the attic, basements, and unused rooms.
Your Heart is Ready
All that stuff in the attic is there because it means something to you, as does the house. If you’ve lived in your current home for decades, it’s likely full of memories, and it is understandable that you might have a tough time letting go. Remember that putting your house on the market means taking yourself out of it—detaching—and you need to be honest with yourself about whether you’re ready to do that. There are some questions to answer that will help you know when to sell your house. Can you pack away all the family photos? Paint over the height measurements you drew for each kid on the kitchen doorframe over the years they grew up? Are you ready to stow the keepsakes and souvenirs from the adventures you had while you lived there? If you can’t bring yourself to clean up, declutter, and paint everything a neutral color, you’re not ready. If all your stuff, including your memorabilia, is starting to feel more oppressive than delightful, it’s time to sell and move on to something less burdensome.
Your Home is Ready
You finished all the remodeling and upgrades, and the house looks better than ever. As soon as it’s done, however, you realize that you’ve added a lot of upkeep with those new bells and whistles. When keeping it all shiny and new takes up almost all of the time you should be spending enjoying your new kitchen or finished basement, it might be a good time to consider selling. This way, you can still work the value of the new, gleaming upgrades into the selling price.
If you haven’t remodeled but you have done a good job of maintaining, repairing, and refreshing your home, keep it looking good during peak selling seasons. This way, your home will be ready to go on the market.
Your Local Market is Favorable
“Peak selling season” isn’t always spring and summer. The best time to put your home on the market is different in different parts of the country. And, while spring is the typical season for sellers to put their homes on the market, they’ll have plenty of competition from all the other sellers who jump in when the flowers begin to bloom. In some areas, winter months actually do better than the warmer days of spring. Relocations and moves for new jobs often correspond with the end or beginning of the calendar year. Do some research about existing home sales in your area over the past few months as well as seasonally. The National Association of Realtors publishes a monthly report that breaks down the inventory of homes for sale by region. The report shows how many months’ worth of homes sellers have currently listed, and the estimated time it would take to sell all of them. A general rule of thumb is that when inventory dips below three months’ worth, the market advantage swings toward sellers. Check for an upward trajectory in home prices in your area, as well. Prices can fluctuate and vary depending on the hyperlocal conditions, so enlisting the help of an experienced local realtor with thorough knowledge or your area is a must.
There’s another thing you may not have considered—if you are in great financial shape, you may be able to find a new home while keeping the current one and generating income from it as a rental. Excalibur Homes can help both as a realtor for a sale and a property management company in Atlanta, Georgia, should you decide to retain your home as a rental.
