6 Factors To Consider Before Deciding To Sell Your Home
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So you’re thinking of selling your home, but you’re not sold on the idea just yet. Maybe the size of your current house isn’t really working for your family or you’d like to relocate, but whatever the reason, you want to make a decision that’s financially sound.
The past two years have been a resounding sellers’ market, but this may start to level off soon. Zillow forecasted 11% home value growth for 2022, a notable decline from the 19.5% projected in 2021. Consequently, if the market peaks in the near future or has already peaked, it could be best to sell soon to ensure you get top dollar for your home — but of course, there are other issues to consider too.
Ready to decide if you’ll stay or go? Weigh these six factors to make the best choice for your family’s financial situation.
Amount of Equity in Your Current Home
Before deciding if you should sell, Ashley Oshinsky, a real estate agent with the James Real Estate Agency, LLC, based in Waterford, Michigan, said to take a look at the mortgage payoff balance.
She said you can plug different sale prices into the net sheet to find out what your bottom line is when it comes to selling. If you’ll likely be in the red, Dan Belcher, CEO at Mortgage Relief, an Oklahoma-based company that specializes in pre-foreclosure and short sales, said selling isn’t ideal. “Refrain from selling your house, unless you’re trying to avoid foreclosure or bankruptcy,” he said. “You want enough equity to pay off your mortgage and selling costs.”
On the other hand, he said you’re in good shape if you’ll walk away with at least a 20% down payment for your new home.
The potential gross proceeds of your home sale might be excitingly high, but that money won’t all go in your pocket.
“Most sellers forget that there are significant closing costs when they sell — often more than double those of buying,” said Katie Wethman, CPA, MBA, a real estate agent with The Wethman Group at Keller Williams, based in Arlington, Virginia. “I tell my sellers to budget 7% to 9%, and that’s not including prep costs and repair work on the house itself.”
Selling Prep Expenses
In addition to updates, investing in proper staging might also help you get a premium for your home.
Where You’ll Move
If you sell your home, you’ll need to find a new place to live. “If you want to stay in the area that you live in now, rising home prices and mortgage rates mean that selling and buying in the same area could mean higher monthly costs, unless you’re looking to do significant downsizing,” said Danielle Hale, chief economist at Realtor.com. “Of course, paying more for a home that is a better fit for your family may be well worth it.”
On the other hand, Hale said if you currently live in an expensive area, you might consider moving somewhere cheaper. If you take this route, she said you might be able to financially downsize. “In other words, even if the square footage of your home doesn’t change, you might see lower monthly costs,” she said. “If this is an option you’re considering, think about not only the costs of the home and mortgage, but also the general cost of living and potential new tax and living environment in your new home.”
Rent vs. Buy Your Next Home
You currently own your home, but that doesn’t mean you can’t rent your next one.
“I often work with seniors who are downsizing and want to rent,” Wethman said. “While there are advantages to this, it often comes at a high financial price to insert a new large expense — one that grows with inflation and market pressures — into their fixed-income budget.”
She said she’s often able to help these clients find a condo to purchase that meets their needs while protecting their nest egg. Another factor to note, Hale said rent is expected to rise faster than home prices over the next year.
Selling your home could leave you with a hefty tax bill.
You probably don’t want to give Uncle Sam a chunk of your profits, so get this sorted out before putting your property up for sale.
This article originally appeared on GOBankingRates.com: 6 Factors To Consider Before Deciding To Sell Your Home
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