An Exit Strategy for Your First Home
So you followed all my previous advice and now you’re a happy and financially stable homeowner – congrats! But before you head off into the wild world of homeownership, it’s important that you first develop and understand the exit strategy for your first home.
Selling your starter home after the first five to ten years can allow you to make a significant step up to your next home. Most properties will appreciate enough in that amount of time that you’ll make a decent chunk of change for selling – cash you can put toward the down payment on your next home. Even if you’ve only been in your first home for a few months, take the time to plan your next step to make sure you’re ready to sell at the opportune time.
When to Sell
For some people, selling a starter home after five years makes sense, while others may choose to wait longer. Basically, the best time for you to sell is when you feel ready. There are a few considerations to make to ensure you’re personally ready to sell your house:
- Are you ready for a big move? Are school or work schedules going to make a move prohibitively hectic?
- Do you have the time and energy to buy another house right now? Remember how stressful buying a home was and realize you’ll be dealing with both sides of that – possibly at the same time.
If you are ready to sell, first check the state of the housing market. Right now, with interest rates at historic lows and housing prices rising, it’s a seller’s market. But this isn’t always the case and you want to make sure you’re making the most out of your investment by selling when the market is best.
Typically, the best time of year to sell is the spring and summer, so aim for that time-frame if possible. Not only will the yard look its best, but also kids are out of school so moving is much easier for families. And it will make finding your next house easier because there will be more options out there.
Finally, to sell your current property before buying another. Buying a house with the contingency of selling another is both unappealing to sellers and needlessly risky. If your buyer pulls out or you’re unable to sell, you could be left paying two mortgages. Rentals are usually the best choice for this lull in homeownership, and you could even ask your buyer to rent your old house for a few months while you look for another/move out – this creates a nice buffer for both you and the buyer to get settled. Keep in mind that in a seller’s market you should plan for a potentially long house hunt.
How to Sell
If you’ve decided you’re ready to sell, the first course of action should always be a home inspection. Before trying to sell, it’s important to figure out if there are any major issues that would affect the resale value. If an unknown leak caused foundation damage over the winter you don’t want to find that out when your potential buyers bring in their own home inspector.
Next, map out any improvements you need or want to make to the house before listing it. A fresh coat of paint inside is pretty standard, but it’s better to repaint anything that doesn’t look new. Fixing a cracked porch or taking out an ugly tree can go a long way in improving curb appeal. New carpeting is also a great selling point. Just try to remember how you viewed the house when you bought it and use that lens when preparing for buyers.
Once you feel your home is ready to sell, it’s time to bring in a real estate agent. While it is by no means impossible to sell a house as an owner, it’s immensely more difficult and should really only be undertaken if you have a lot of time to learn the complexities of selling a home. If you want to sell your house yourself, consider that even real estate professionals struggle with selling their own home–people will be coming into your home, criticizing it, and suggesting it’s worth less than you think it’s worth. It’s easy to get too attached and emotional during this process. Real estate agents also bring with them much better marketing and advertising, and will be more experienced at negotiating price.
As you prepare your house to sell, it’s also a great time to get pre-approved for a mortgage. Knowing your price range early will help you look for new homes and may even encourage you to wait a year or more to get into a better house.
If you’ve successfully sold your house, the money you made from the sale is perfect for the down payment on your next house. It will likely be much larger than your first down payment and will allow you to get into a more valuable house. Whatever you do, try to treat your first home as an investment – make it as appealing to buyers as possible and try to extract as much value from it as you can. And once you’ve secured that value, often the best option is to reinvest it in another property, possibly one you can call home for decades to come.
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Happy house hunting!