Decide to sell
You’ve seen your neighbor sell their house for good cash (or maybe cash only!) The constant bombardment of real estate news may seem to be calling to you. Demand in your neighborhood is high, as is FOMO, or the fear of missing out on making a great deal.
Perhaps you have outgrown your home, and you’ve long thought of trading up to a bigger one. Or maybe you no longer need all this space and would prefer to downsize to something more appropriate.
Whatever is influencing you to sell your home, you’ll want to ensure that your decision pays off.
Selling a home is financially and emotionally challenging. Because of this, you must be sure about the moves you make. A flawed approach could leave you with less profit or worse, with major financial strain.
Fortunately, there are ways to know whether a decision to sell now would be wise. Start by asking yourself the following.
Is now really the right time to sell?
On the fence with what to do about your property? There’s no way to tell other than examining current market conditions and certain personal factors (more on that later). Let’s get started.
A seller’s market
There’s no doubt that today’s market favors sellers. From the beginning of the pandemic until the end of 2021, the buying rush fueled by historically low mortgage rates coupled with low inventory led to U.S. property values appreciating dramatically. Home sellers have booked some epically good profits.
What might 2022 offer? According to Realtor.com, the median sales price for existing homes will appreciate by 12% by the end of 2021. And they are projected to increase by 2.9% in 2022. Home sales are expected to increase by 6.6%, suggesting that the buyer demand is here to stay!
Further, the anticipated change in interest rates over the next year may fuel a buying spree, as buyers want to lock in their interest rates while they remain extremely favorable. As of this writing in December 2021, the average 30-year mortgage rates in the U.S. are 3.05%. But the rates are set to increase to 3.3% in the first quarter of 2022, and are anticipated to further increase to 3.6% by the end of the year.
Yet the increased rate is only marginal. This means it’s still a strong market for sellers. As a bonus, you can still lock in a lower interest rate as a buyer of your next home with your sale proceeds.
Is the market situation alone enough to push you to sell? What about your personal financial situation? Here are two questions to consider:
- Have you built enough equity for a rewarding home sale? Is your savings high enough to bear the costs of moving and settling in a new home? What about the repair costs, if any, required before you make the sale?
Equity is the difference between the pending mortgage with your lender and your home’s current value in the market. If you’ve paid your mortgage for five years or more, you’ll have built some positive equity. The sale proceeds then could cover the initial expenses for your new home—and if you’ve saved enough, it may even cover moving and repair expenses.
- Have you recently refinanced? If this is case, then now isn’t likely a good time to sell. The refinance has probably brought you some financial breathing room and shifting your resources into a new property might put you back on the treadmill instead of staying ahead of the game.
Need for relocation
Maybe your family has grown, and you need more space. You might be working from home and find that an having a proper home office is in order. Or perhaps the location no longer suits your needs. You may be an empty nester who wishes to move into a smaller place where you can save up for or enjoy your retirement.
If your reason to sell is strong enough, go for it. But don’t decide solely on the basis of your emotions. The following advice can help you to make a rational call.
How much is my home worth?
Before deciding to sell, you have likely given some thought to the actual salability of your property; that is, how easy it might be to sell and what it is currently worth.
Home values vary widely, and they depend upon multiple factors. Though the U.S. is current a seller’s market, buyers can push back if you were to list your home at too steep a price. Determining your home’s realistic value before deciding to sell is therefore critical.
Here are some important factors that influence home values.
To find accurate home values, check the recent sale prices of similar homes in the neighborhood. These are commonly referred to as ‘comps’ or ‘comparables.’
As comparables take account of granular information and in some cases highly qualitative details such as home upgrades, proximity to schools, square footage, a scenic view, etc., they can provide a much more accurate framing for a realistic sale price that buyers may be willing to pay.
Don’t worry about calculating the value of your home’s comps on your own, though. As conducting data analysis for comps is a complex process, your real estate agent will fill you in using their expertise and knowledge of current pricing formulas.
You’ve probably heard this one a time or two. Where your property is located influences how fast it may sell, the type of buyers it could attract and, yes, the price you can fetch. Homes in affluent neighborhoods with access to top-rated schools, beautiful parks, nearby public transportation, high-end shopping, and entertainment centers may be preferred by buyers with greater spending power.
As a result, home values in these locations tend to be higher. Those that are located in emerging neighborhoods with up-and-coming amenities, though, may represent a wise investment for buyers with lower-than-expected prices. But properties in areas that are economically depressed or marred by crime will (perhaps unsurprisingly) tend to have a significant negative impact on home values.
Everyone loves a bit of space to move around. If you have a 4,000 sq. ft. property and 700 sq. ft. of that is a garage with a 500 sq. ft. attic, the usable space is only 2800 sq. ft. This size may be less desireable for many buyers who seek more room for themselves or their families. Because of its lower amount of living space, your home value automatically decreases.
On the other hand, if your home has more usable space in the form of, say, a finished family room and additional bathrooms or guest bedrooms, its value increases.
Age of the house
Some folks prefer traditional Victorians, while others might be more into midcentury modern, and still more might be after a recent build. Generally speaking, newer homes appraised higher than older homes. This makes sense for several reasons:
- Various systems in a new house are less likely to break down. This is a critical prospect for buyers who don’t want to add potentially major expenses to their costs.
- Cosmetic updates are typically unnecessary or only according to buyers’ preferences. A shorter to-do list for a prospective homeowner can be a really attractive thing!
- The layout of a newer home likely reflects current trends, such as open floor plans, which then positively influences its appraisal estimate.
Keep in mind that many buyers—especially those who aren’t in DIY projects—are more willing to pay top-dollar for move-in-ready homes.
What’s the real estate activity looking like in your neighborhood? Are you seeing lots of ‘For Sale’ signs as you drive around, or are hardly any going up these days? Have homes like yours been selling relatively quickly or do they seem to be languishing on the market for months at a time? Answering these questions will give you valuable insight into your next steps.
When it comes to considering your local market, it’s all about the current supply and demand of properties. If there’s high demand and a low supply, that’s good news for you as a seller: home values will appreciate. But if the reverse is the case, you might be facing a compromise (or a reason to hold out for a stronger local market). Keep this in mind before deciding to sell.
State of the economy
How is the economy looking these days, and why should you care? What’s happening in your region will impact the sale of your home. In slower markets, for instance, buying activity will be lower, and home prices will fall as a result. Companies may have hiring freezes in place, and people may be struggling to find or keep jobs, which leads to a lack of buyer confidence and less discretionary income to work with when purchasing property. The opposite is the case in robust economies, where booming growth and abundant jobs mean more people are willing and able to move.
It’s clearly essential to know the state of the economy before making a decision to sell your home. If you’re in the middle of a slump and not in any hurry, you can wait for better economic conditions to fetch a higher listing price.
Should I sell as-is?
When you list a home without making repairs, it means you’re selling it as-is. The buyer gets what they see. According to Matt Leighton, a licensed realtor from Arlington, Virginia, selling as-ishas three pros and cons.
- Selling as-is doesn’t involve any upfront costs. Since you’re not spending on repairs, paintwork, or other stuff, you’ll be saving money.
- There are fewer contingencies. You could negotiate an all-cash deal or other ways for the contract to fall out of escrow.
- You can avoid the inconvenience of preparing the property for the market. There’s no need to waste time researching or calling contractors, securing bids, and scheduling repairs.
- You might get lowballed by buyers. The prospect might reject you or come with a counter offer less than the listed price. Be prepared for this scenario and be ready with a plan of action.
- You may be dealing with a pool of real estate investors. In particular, first-time homebuyers are less likely to buy a property as-is because they have less experience with real estate.
- Your property can’t compete with better local options. While you listed your home as-is and a comparable home with upgrades is listed, it’s harder to attract buyers. The result? You’ll likely need to lower your asking price.
If you decide to sell as-is, sit with your realtor and price your home accurately. You could list it a few thousand dollars below the market value to entice buyers. Depending upon how competitive your area is for buyers, this could bring about a bidding war where you might fetch a better price than anticipated.
Does my home match buyers’ expectations?
As a seller, you need to attract buyers and get the highest possible price for your home. That’s a no-brainer. But how exactly can you do that? By showing off features that match the desires of today’s buyers.
For example, some desires reflect a move toward greater convenience versus more privacy. According to a survey conducted by the National Association of Home Builders (NAHB), 85% of homebuyers surveyed wanted an open layout between the kitchen and the dining room. This shift has been widespread, as families wish to be able to interact with one another across rooms without partitions.
Similarly, 63% of homebuyers wanted a washer and dryer on the first floor. And over 40% of home buyers preferred a two-car garage (which we all know can hold a lot more ‘treasures’ than just our cars) over other parking options.
The most desired feature in a home, according to the NAHB survey? A dedicated laundry room. And the highest rated outdoor aspect in a home is good exterior lighting, with nearly 87% of homebuyers citing it as a priority.
What do these survey findings suggest? That you add the kind of top-rated features to your home that attract buyers to seal a quick deal.
If upfront costs are a major concern, we recommend taking a step back. You may be at risk of losing even more money by not making the necessary renovations. Buyers are typically more than willing to pay extra for a home that has been updated. And you may easily be able to recover 48% to 94% of costs upon selling, which certainly lightens the load.
So before deciding on selling your home, weigh which kinds of renovations will add the most value. As buyer tastes vary across regions—a bevy of fireplaces in a Florida property might not make sense, but an updated inground pool will— you can consult your real estate agent and get more informed suggestions on renovations. Or follow the market listings and home selling trends in your area to know which features and updates are in demand.
Make a wise decision
Taking the time to analyze and think through deciding to sell your home is so important. You’re playing the long game here. Yes, we’re human, and we tend to make some of our most critical decisions based on emotions rather than rational thinking. But thankfully, we can overcome this by taking a deliberate approach. Selling a home is so significant in terms of your financial goals that it truly requires research and careful consideration.
By asking the questions highlighted above, you can get a clearer picture of whether you should move forward with listing your home or staying put. One thing, however, is abundantly clear: The decision you make will impact you for years to come.