Selling your home isn’t an easy decision to make, and you might change your mind several times before finally getting that sign in your yard. But before you reach out to an agent, there are some things you’ll want to consider. First, does it make sense financially to sell your home? How much equity do you have? Are you currently in a buyer’s market or a seller’s market? You may even want to consider what time of year it is, since even the calendar can impact market conditions.
Is This a Good Time to Sell My House?
It’s true that timing is everything. In real estate, it’s second only to location. When deciding whether to sell your home, getting both to line up is ideal. But even if that isn’t possible, you’ll still want to know what you might be facing.
First, do some research and evaluate your market. Are homes selling fast in your area, or do houses tend to linger on the market? When they do sell, are the sellers getting what they asked for, or are homes selling below (or above) asking price? Are there a lot of homes for sale in your area or just a few? These questions will help you determine if you’re in a buyer’s market or a seller’s market. In a buyer’s market, conditions favor the buyer – lower prices, plenty of inventory, and lots of room for negotiating. In a seller’s market, the opposite is true. Sellers have the upper hand with low inventory, higher prices, multiple offers (often above list price), and even bidding wars. The market varies wildly depending on available housing inventory and your location.
Now that you are familiar with your area’s market conditions, consider the time of year. Maybe you’ve heard about the “magic selling window.” This spellbinding time of year, according to many agents, is between March and May, and it’s the best possible time to sell your house. This is because many home buyers want to move in summer. Typically, home buyers, especially if they have children, want to get the closing scheduled early enough that they can be moved in and settled before school starts in September. To make this timeframe work, they’ll need to find a home in the months leading up to summer.
Of course, for every rule there’s an exception. For example, if you live in a tropical or coastal region, winter might be a better time for you to sell. There are fewer tourists, the weather is often pleasant, and buyers in these areas might want to get settled before summer, when beachy fun and tourism heat up again. This is especially true if you’re in an area where homes are often purchased for use as vacation rentals.
No matter when you decide to sell, your real estate agent should have some suggestions for capturing the attention of home buyers. They are out there, no matter what time of year it is, and your agent will know how to find them.
Review Your Finances
While selling your home is the payoff, getting to that point will require you to spend money on things you may not have considered. There’s the initial clean-up and repair to get your house ready to put on the market. You may encounter marketing costs, such as having your home professionally staged and photographed. While showing your home, you might want to move your personal items to a storage unit. Once you have an offer on your home, the buyer may request additional repairs based on the inspection report. While these costs are usually minor, they could be a financial strain if you aren’t prepared for them.
Depending on your situation, you could encounter more costs during closing. While the buyer often pays the closing costs, there are instances where the seller will agree to pay or share closing costs, especially when dealing with a first-time buyer or a buyer that has plenty of credit but very little cash on hand. You’ll also pay your agent’s commission, which is usually six percent (your agent will split the commission with the buyer’s agent).
If part of the sale of your home will pay off your mortgage, there will be fees associated with that, as well. Some mortgages have penalties for paying it off early, and you may be asked to pay the interest on the remaining life of the loan.
Other costs could include things like attorney fees, escrow fees, HOA fees, utilities, property taxes, and transfer tax. By reviewing your finances now, you’ll be more prepared to deal with these costs as they arise.
Know the Value of Your Home
During the home selling process, your home’s value will be estimated several times for a variety of different reasons. Do a little research ahead of time so you’re prepared when those estimates start rolling in. You’ll want to compare houses that are like yours – same area, same number of bedrooms and bathrooms, similar square footage, and built around the same time. This will give you a general idea of what your home is worth. Beware of any website that claims to know your home’s actual value, since that number relies on a wide variety of factors, many of which change frequently. Once you’ve found an agent, they’ll use comparables (or comps) and other resources to determine your home’s value, and this is the most reliable information you can get.
The final word on your home’s value will come during the appraisal, which takes place during the closing process. If you’re concerned about the house not appraising for what you plan to ask, you might consider getting an appraisal before you list your house.
Should I Have My Home Appraised?
There are a variety of reasons some sellers choose to hire an appraiser before putting their home on the market, but the main reason is concern about pricing the house incorrectly. If you price your home too low, you could be losing money on the deal. If you price it too high, however, you may not be able to attract a buyer, which could make your house sit on the market for far too long. Sometimes, when a house has been on the market for an extended period, the seller may have to accept a lower offer than if they had priced the home correctly in the first place.
That said, you may want to forgo an early appraisal because it could end up costing you money without a satisfactory result. The buyer’s loan company will still require an appraisal, whether you’ve had one done or not. This is because there’s no absolute in home value, so different appraisers could look at your house and arrive at completely different conclusions. The loan company will have specific appraisers they use and trust, so your appraisal won’t matter to them.
Instead of getting an early appraisal to determine your home’s value, rely on your real estate agent to help you price your home competitively. Your agent will conduct a Competitive Market Analysis, or CMA, which contains the most up-to-date information available. The CMA consists of properties in the area that are currently on the market or have recently sold. Your agent will use this, combined with their knowledge of the market, to determine the best price for your home.
Home Value vs. Home Equity
Once you’ve determined the value of your home, you’ll want to examine its equity. Your home’s equity is the difference between the value of your home and what you owe on it. Before putting your house on the market, this is the number that tells you if you’ll be able to make a profit. If you owe more than you can get for the house, it might not be the best time to sell.
To find out how much you owe on your home, look at your last mortgage statement. Subtract that amount from the property’s current market value. The difference between those two amounts is your equity. If you don’t have enough equity in your home, consider staying put and paying down your mortgage a little more before selling.
If you’ve reviewed your finances, your market, and your home’s value and you’ve decided now is a great time to sell, your next step is to find a real estate agent.