Blog posted On February 08, 2024
Deciding to sell your home is a significant decision that requires careful consideration. Whether you're downsizing, upsizing, facing financial concerns, or taking advantage of a booming sellers’ market, the timing of selling your home can greatly impact your financial outcome. How do you know when to sell, though? Is there a specific amount of time you should stay in your house before considering selling? This blog will showcase some of the reasons to consider selling and what factors may impact your decision.
Common Reasons Homeowners Put Their Home Up for Sale
There are a number of reasons a homeowner would put their house up for sale, but here are some of the most common ones:
Many homeowners choose to sell their homes to downsize due to changing lifestyle needs or financial considerations. The size of a home impacts several factors; a home that is too large for the homeowner’s circumstances may create unnecessary utility expenses, require more attention, or create a feeling of isolation. In this case, downsizing may be a good reason to sell.
On the other end of the spectrum, growing families or evolving lifestyle preferences often prompt homeowners to desire larger properties. Whether the need is for additional bedrooms, a different environment or neighborhood, or extra space for your belongings, upsizing can solve many of these issues.
Job loss, income reduction, or changes in financial circumstances may necessitate selling a home. The ideal scenario for a homeowner is for your monthly home expenses to stay under 30% of your take home income. Being above 30% doesn’t automatically mean you should sell, but if it’s well below that percentage and you find yourself unable to make your payments month after month, you may need to sell.
A booming seller's market may present lucrative opportunities for homeowners to capitalize on. Even if the house is great, a homeowner could get the most out of the equity in their home by selling in an opportune market. The best way to determine if this is the case for you is to speak to a mortgage lender or other real estate professional to get an accurate idea of where the market is currently and where it’s going.
Consider The Five-Year Rule of Real Estate
The "five-year rule" of real estate is a widely recognized guideline that advises homeowners to hold onto their properties for at least five years before considering selling. This timeframe is based on the principle that the longer you own your home, the more equity you can build. By allowing time for property values to appreciate and mortgage balances to decrease through regular payments, homeowners can accumulate substantial equity over five years, providing a cushion to offset the various expenses associated with selling and moving.
However, it's important to acknowledge that individual circumstances and market conditions can play a significant role in determining the optimal duration to hold onto a property before selling. While the five-year rule offers a general guideline for building equity, it's essential for homeowners to consider their unique situation and consult with real estate professionals to make informed decisions about when to sell their homes.
Factors To Consider Before Selling
If you think it’s time to sell, think about the following first to best prepare for the possible journey:
? Initial Costs: Assessing initial expenses such as staging, repairs, and home improvements is crucial to enhance market appeal.
? Closing Costs: Consider real estate commissions, property and transfer taxes, notary and attorney fees, which impact net proceeds from the sale.
? Capital Gains Tax: Understanding capital gains tax implications, including exemptions for homeowners who meet specific criteria, is essential.*
? Personal Circumstances: Personal factors such as job relocation, lifestyle changes, or family needs may influence the decision to sell.
Talk To the Pros
Before making the decision to sell, it’s vital to chat with a loan officer about all the moving pieces involved. Not only can a professional give you the most up-to-date information on the market, but they’ll be able to assess your circumstances and advise on the best methods for selling that will get you the most out of your home.
*For tax advice, please contact a tax professional.