Beginner Investor

Should I Sell My House?

Sold Home For Sale Sign in Front of New House

According to the National Association of Realtors, more than five million homes were sold in 2020. Selling your house could be a great way to help you achieve financial freedom. However, if you sell it at the wrong time, you could end up kicking yourself.

There’s no way to know for sure if home prices are going to go up or down in the future. When you want to buy a home, there are many different experts who work with you to make sure that you’re financially ready for such a decision. However, when you start to ask, “should I sell my house?” you’re pretty much left on your own. 

We’ll go over the signs that it’s time for you to sell your home as well as how to know that you should stick it out a little longer. So keep on reading and we’ll walk you through everything you’ll want to know!

Signs You Should Sell Your House

When you’re planning on selling your home, there are a lot of factors that you need to take into consideration. 

It’s important that you know what your plan is for the long term. You should figure out where you want to move once you start thinking about selling.

Are you moving out of the local area? Are you going to move up or move down?

If you’re trying to figure it if it’s finally time to sell your home, we’ve got you covered. Let’s go over the signs that you should sell your home below. 

1. You’ve Seen Strong Home Price Growth in Your Area 

As they say in the stock market, you want to buy low and sell high. Many people buy a home with the intention of building wealth. If you wait for the right moment, you could end up making a huge profit on the sale.  

In order to do this correctly, you’ll first have to see how the value of your home fits into the larger picture that is the housing market.

The National Association of Realtors puts out a sales report of existing homes every month. This report shows the state of inventory across the United States and it breaks down the markets by region. When you read this report, you’ll get a sense of how long it would take to sell a house.

If your market drops below three months’ worth of inventory, then that means that the market is in favor of the sellers. This puts you in a position to strike a deal at a higher price and with fewer concessions. 

You also want to check out your local realtor board. While regional and national stats can be helpful, real estate is really a very locally-minded industry. If you aren’t satisfied with broader reports on the market, then you can look up the realtor association in your neighborhood. 

You should be able to find housing statistics for the current month. You’ll be able to see how inventory and price trends fluctuate from one month to the next. 

If the inventory is headed down and the prices are going up, then this could be an opportune chance to sell. 

2. Your Sale lines Up With Local Trends

Believe it or not, it is possible to manipulate the timing of the sale of your home to get even closer to a perfect sale. Traditional wisdom tells homeowners to sell their house in the spring when the weather is nice and buyers come out in droves. 

This can be true in many markets. However, seasonal trends are going to change from town to town. You could end up benefiting from a winter, summer, or fall sale depending on buyer behavior, competition from other sellers, and the weather. 

3. Take Advantage of a Booming Market 

Between September of 2019 and September of 2020, homeowners were able to accumulate a collective $1 trillion in additional home equity. The coronavirus led to a surge in demand for houses and a low supply. People are fleeing the cities in droves and moving to the suburbs. 

If you see prices and sales going up and up in your neighborhood, you may want to take advantage before prices start to fall and the inventory goes back up. 

4. Making Ends Meet Each Month Is Becoming Too Difficult

Your mortgage only makes up one expense of owning a home. Other fees can also put a strain on your finances. These fees can include:

  • lawn care
  • household maintenance
  • utilities
  • private mortgage insurance
  • home insurance
  • property taxes

And that’s not even taking maintenance costs into account from something like a broken appliance, faulty HVAC system, or a leaking roof. It’s generally recommended that you set aside between one percent and three percent of your house’s purchase price every year for repairs and maintenance. 

Unfortunately, many people just can’t keep up with all of the costs that come with owning a home. And this leaves them becoming house rich but cash poor. 

If you see that you’re spending more than one-third of your income on housing expenses, then you are likely overextended. You might end up being late on a loan payment or dipping into your savings. And this can spiral into a delinquent mortgage quickly. 

delinquent mortgage is when you’re more than ninety days late on a payment. 

When this happens, it’s best to see the home that you can’t afford and downsize. It’s a much better outcome than waiting for a short sale or foreclosure. 

4. You’ve Outgrown Your Home and Can Trade Up

One of the biggest reasons why Americans move is to relocate to a better or new house. Many buyers will use the money that they made from selling their old house to buy the next one. 

However, it’s important that you crunch the numbers before you sign up for a bigger mortgage. You want to make sure that you can actually afford the next house before you complete the transaction. 

Can you sell your old home and have a nice down payment for the next one? Or can you sell the house, walk away even, and then get similar financing for the next house?

If you’re able to put twenty percent down on the next house, you’ll likely get to avoid paying for private mortgage insurance. 

Signs You Should Wait to Sell Your House

Not everyone is going to have the luxury of getting to decide when they want to sell their home. However, if any of the following signs resonate with you, then you could end up being better off if you wait just a little longer to sell your house. 

1. A Slow Housing Market Could Force You to Lower the Price

When the market slows down, it will take longer for someone to sell a house. The longer your home sits on the market, the lower its selling price will be. 

If there are more than six months of housing inventory, then that means that it’s a buyer’s market. This can put downward pressure on home prices. 

If you want to get the possible asking price and can afford to wait it out, then you should check with your agent and ask them how local inventory is moving. If the odds are against you, then put your sale on pause and wait for the tables to turn back in your favor. 

2. You Haven’t Built Up Enough Equity Yet

This is similar to evaluating your home equity when you’re thinking about trading up. You don’t want to move out of your house when it’s considered to be “upside down.” This is when your mortgage is actually worth more than the home itself. 

If your home is worth $300,000 and you owe $350,000, then that’s a clear sign that you should wait to sell. 

3. You Can Benefit from Turning the House Into a Rental

Sometimes, you haven’t built up enough equity and the market isn’t on your side. However, if you still need to move away from your house, you should evaluate how much money you have on hand. You should then consider renting your house while you move into a smaller rental property yourself. 

This will remove the immediate pressure for you to sell. It will also make it easier for you to sell the house at a higher value later. Even if the market doesn’t go up at all, you’ll at least be able to pay down your mortgage balance.

You can then have an equity position to sell the home.

4. You Haven’t Met the Two-Year Use Test to Exclude Capital Gains

Do you want to avoid having to pay taxes on your home sale? If so, you will need to have owned your house and lived in it for at least two to five years leading up to the sale. 

As long as you meet that criteria, you could exclude up to $250,000 of capital gains. If you’re married, you could exclude up to $500,000. 

If you just bought a house, you’re probably better off holding off for a couple of years before you sell it.

5. Your Contract May Include a COVID Clause

If you sell your house during the coronavirus pandemic, then your contract might include a COVID clause. This clause would allow for closing extensions as well as home sale cancellations without any financial or legal repercussions. 

For the sellers, this means that your buyer might leave the deal without losing their money. People could back out of the transaction at any time. 

In order to protect your interests, you can try to negotiate about what scenarios the buyer is able to keep his money.  

5. You Aren’t Emotionally Ready to Leave Your Home

Many people live in one home for decades. Because of this, it makes sense that the house could have sentimental value that is essentially priceless. Sometimes, the emotional cost of selling a home doesn’t outweigh the potential financial benefits. 

The market doesn’t care about your emotions. If you aren’t ready to sell, or you would be insulted if someone asked for a lower price, you may want to wait until you’re emotionally ready. 

6. You Don’t Have the Cash Reserves to Get the House Ready to Sell

Most sellers focus their attention on getting the highest price possible. This can be achieved by listing on the open market with a professional agent. 

However, if you’re house isn’t in a condition to attract buyers without big repairs and remodels, it may become very hard for you to sell your home without spending a ton of money. 

You could sell your home to a cash buyer “as is.” However, you’ll likely end up getting a lot less money than you’d like. But the price difference might be worth it if it’s too costly to fix up your home.

Should I Sell My House?

After reading the above article, you hopefully are closer to an answer to “should I sell my house?” Ultimately, the choice is going to come down to the homeowner. And by taking in the considerations that we listed above, you should be able to make smarter and more confident decisions when it comes to the status of your home. 

Are you looking for other helpful financial articles like this one? If you are, then make sure to check out the rest of our website today for even more!