When To Sell Your Home
Here are a few factors to consider and help you decide when is the right time to sell:
If Mortgage Interest Rates Are Low
It may be a good time to sell your home and purchase a new one when mortgage interest rates are low. Lower interest rates mean you pay less in interest over the life of a home loan. In other words, you’ll save more money financing a new house.
Low rates can also be a double-edged sword for homeowners. Plummeting rates often create a lot of demand since buyers want to take advantage of low rates.
While you may be able to sell your home at a healthy profit, you may struggle to purchase a new home due to the crowded housing market. If you’re comfortable selling and buying a house at the same time, selling your house during a period of low rates may be a financially savvy choice.
If The Housing Market Supply Is Low
In a buyer’s market, there are more houses for sale than buyers, giving home buyers more leverage and negotiating power. In a seller’s market, fewer houses are for sale than buyers searching for new homes. In this situation, the seller has more negotiating power at the closing table – making a seller’s market a great time to sell your house.
When home buyers compete for fewer homes, the seller can often set a higher competitive asking price and may be less willing to compromise on contingencies and other requests.
Experts say the current seller's market will continue early into 2024 – but it won't last forever. Encouraged by a 5% year-to-date surge in newly constructed home sales, home builders are ramping production to meet demand. As builders create more inventory and more sellers enter the market, home buyers will have more homes to pick from.
While an increase in home buyers may seem like good news for home sellers at first, a surge in sellers and housing supply may produce more competition for sellers. As more homes come on the market, sellers will have less power to negotiate the price of their homes. Given these predicted increases, the best time to sell your house may be early 2024.
If You Need To Relocate
If you’re relocating, you may need to sell your house. If you’re in the market to buy a second house, this may not apply to you, but when homeowners need to move, they frequently sell their current home and buy a new one.
You may need to relocate for a new job, a smaller home, a larger home to accommodate a growing family, etc. If a personal reason is compelling you to sell your current home and purchase a new one, you should consider selling, especially if your reason is time-sensitive.
If Your Home’s Value Has Increased
One great bonus of a strong seller’s market is that your home’s value may have increased with demand. If your home appraises at a higher value, consider cashing in on your home equity by selling. Depending on how much your home has increased in value and how much equity you’ve built, you may make a substantial profit selling while homes are still in high demand.
If you’re not ready to sell but want to take advantage of your home’s boost in value, you can always explore other options. If you want to improve your home, a cash-out refinance may be a better solution, leaving you with money in your pocket and the home you love.
When To Wait To Sell Your House
While there are good reasons to sell your house, there are also good reasons to consider waiting. Let’s go over a few scenarios when selling your home right away may not be the best choice.
If You Don’t Have Enough Home Equity
As you pay off the principal balance of your mortgage, you build equity in your home. If you have a lot of equity, you’ll profit more from the sale of your house. When you sell a home, you should make enough to pay off your remaining mortgage balance and closing costs. After all expenses are covered, the amount left over is your profit.
If you don’t have much equity in your home, you risk breaking even or losing money on the sale. This scenario can happen when the combined total of your outstanding mortgage balance(s) and closing costs exceed what you earned in the sale. When you have little to no equity in a home, your mortgage may be underwater, and you may take a financial loss when you sell your home.
What Is An Underwater Mortgage?
An underwater mortgage happens when the principal balance of a mortgage is higher than the home’s market value. An underwater mortgage can occur when a property’s value drops or a homeowner misses mortgage payments. A homeowner selling a house with an underwater mortgage may need to pay a significant amount out of pocket to complete the sale. This scenario may not be as common right now due to the high demand for homes.
If you haven’t built much equity in your home, consider waiting to sell until you can make a profit. Most experts recommend living in a home for about 5 years before selling to at least break even on the sale.
If The Housing Market Supply Is High
If the housing market is flooded with more homes than buyers – it’s a buyer’s market, and you should consider waiting to sell. Home sellers are at a distinct disadvantage in a buyer’s market. As the seller in this situation, you’ll be competing for the attention of buyers. You may have to sell your home for less or entertain buyer concessions and requests, such as handling repairs before the sale.
Even if the national housing market shifts to a buyer’s market, you can still sell your home in a buyer’s market. It’s just that it isn’t an advantageous market for sellers.
If You Can’t Afford The Next Purchase
If you can afford to sell your house but can’t cover the down payment on a new one, you should also wait to sell the home. Just because you can make enough to cover your existing mortgage and closing costs doesn’t mean you should sell. You’ll likely need a significant amount of capital to close on a new house, and for many home sellers, that capital often comes from the sale of their current home. Breaking even on a sale may not provide enough to cover closing costs, lender origination fees and the down payment.
If you don’t have enough savings to afford your next purchase, you may want to wait to sell your home.
If You Have Incomplete Home Renovations
If you’re in the middle of remodeling your kitchen, you might want to pump the brakes on listing your house. Incomplete home improvements can be a huge turnoff to potential buyers and drive them away. Finish any remodeling projects in progress before listing your house for sale.
If you need to move urgently and your renovations are in progress, talk to a real estate agent or REALTOR® about your options. Depending on the state of the remodel, you may need to sell your home as is.
