When considering whether you should sell your home or not, you might be asking yourself a number of questions: Are we in a buyer’s or seller’s market? Do people want to buy a home in our area? Should we hold onto our house for a few more years of appreciation?
Don’t be overwhelmed. There are a few key factors to consider before deciding to sell.
Look at Local Market Conditions
Though certain life events that inspire change can’t be put on hold, aim to sell in a seller’s market if possible.
You’ll know you’re in a seller’s market if you see listings in your area turning over quickly at or above the asking price. Also, consider if your area is undergoing any major developments that may be attractive to a large group of buyers.
Measure Your Home Equity
Equity is the difference between what you owe on your home and what the house is worth—and it’s an important factor when it comes to selling your home. Having positive equity—meaning your home has risen in value as you’ve paid your mortgage—could help you turn a profit. This is useful if you’re purchasing another home right after selling.
If you have negative equity—meaning that your home’s value dipped or you haven’t been living in your home for a long time—then you may lose money on the sale. In some cases, it may be wise to build more equity in your home before selling.
While researching comparable homes in your area can help you ballpark your home’s value, getting your home formally appraised is the only way to get an official estimate.
Take Stock of Your Debt
If you plan to purchase another home after selling your current one, lenders will closely examine your debt-to-income ratio to determine the kind of home loan they’ll provide. Ideally, your debt-to-income ratio should be in a healthy range before leaping into another home purchase.
If you’re in significant debt, selling your home may be necessary. In some cases, you may need to adjust your lifestyle and downsize. While selling a home (or any valuable asset) to pay off debt can’t replace following a budget, in some instances, it may make sense to sell your home and apply that money directly to your debt.
Consider All of the Work Involved
Selling a home is a heavy lift both personally and financially. Understand what you’re getting into and be prepared to do the following:
- Get your home professionally appraised to understand its value.
- Get your home inspected to proactively identify any areas of concern for buyers.
- Make minor improvements to the home to make it more suitable for showing.
- Pay for moving supplies and any associated costs such as storage, moving services, etc.
- In some cases, pay capital gains tax after the home is sold.
Think of Your Home as a Long-term Holding
A home can be a more emotionally fraught investment than your standard holding, but you can draw parallels between when to sell your home and when to sell a long-term stock.
The best time to sell your home, just like a long-term stock, is when circumstances change in a big, meaningful way—not just a transitory blip.
Big life changes that could spurn a home sale include planning to start a family, retire, or relocate for a new job. There are also less tangible factors that may inspire change, like wanting to live in a different neighborhood or upgrade your lifestyle.
Just like you shouldn’t keep a stock based on its past performance, you shouldn’t keep your home because it made sense for your life a decade ago.
Don’t Go It Alone
Selling a home can be confusing. Having the right team behind you can help.
A qualified real estate agent can help advise on how to navigate the process and help you avoid any unnecessary headaches.
If you’re still not sure if it’s the right time to sell your home, a financial professional can guide you based on your current situation and long-term goals.