Ask Brian: What are Some Dilemmas to Consider Before Selling a House Today?

Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to askbrian@realtybiznews.com.

Question from Timothy in SC: Hello Brian, spring is here and I’ve been seriously trying to decide if I should sell the home that I’ve owned for nine years. I’ve listened to a lot of conversations predicting real estate values, and whether it’s better to wait or to move quickly. I just end up going in a circle without being able to make a decision. I know that listing a home for sale means preparation, lots and lots of preparation. I’ve probably already missed the spring season. I’m not in a situation that is forcing me to sell. But I do want to move up to a nicer home and I have built up lots of equity over nine years. I just want to have solid criteria to decide if now is the right time to make the move?

Answer: Hello Timothy. Deciding to sell your home is a big decision. Especially if you don’t have a concrete reason such as relocating for a job or needing more space for a growing family. If you’ve concluded that you won’t sell this spring, don’t sweat trying to make it happen early in the summer. What may surprise you is that the second busiest time of the year is September, October, and November.

Making the decision doesn’t only require having enough equity to make a large down payment on your next house but that is important. Timothy, take a few minutes to figure out how much of that equity will go towards the down payment. What you need to do is figure out how much it will cost to sell the house you have right now. Because of the real estate agent commission, it typically costs the seller more in closing costs than the buyer. Local regulations and customs will determine what it actually costs you but a good rule of thumb is 8% to 10% of the sale price of the home. If you want to get very specific about your costs, here is a list that you can use to start answering questions and looking for places to reduce your costs. You mentioned expecting to need to make preparations for the sale, so those go at the top of the list:

• Home repairs
• Staging to show the house
• Mortgage payoff (check to be sure there is not a prepayment penalty)
• Agent commission
• Capital gains (zero if your profit is less than $250,000 or $500,000 for a married couple)
• Transfer tax
• Title insurance
• Escrow and closing fees
• Prorated property taxes
• HOA fees
• Buyer credits toward closing costs (not likely in this seller’s market)
• Attorney’s fees
• Your moving costs
• There may be others

Whatever you have remaining after those costs is your true profit. This will be the foundation for the down payment on your next house.

Next, take a look at your other financial situations. Do you have enough income to afford the home that you want to buy? You’ll probably qualify for a mortgage at about 33% of your income but life might be more enjoyable if you cut that down to 25%. Are you debt-free with cash in the bank? You may want to stay where you are until you’re debt-free. Maybe even put a nest egg in the bank or contribute something towards your retirement.

Also, there are emotional considerations that you might need to deal with:

• If you have kids, are you ready to listen to all the reasons why they want to stay where their friends live?
• It’s a busy market. Are you ready for a stream of house hunters walking through all of your rooms and opening all of your closets?
• Staging it once isn’t enough. You’ll need to keep it in tiptop shape every day.
• Are you ready to listen to people criticize your home when trying to lower the price?
• Can you go a few rounds of hardball negotiations as you watch your profit shrink?
• Can you put all of the memories from that home into boxes and move them to your next home?

Many of those are reasons not to sell. Before you make the big decision, spend plenty of time writing down the reasons that you think now is the time to move to the next phase of your life.

People are selling, buying, and moving every week with no indication that the seller’s market will slow down in 2021.

What advice can you give Timothy and others in similar situations? Please comment.

Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to askbrian@realtybiznews.com.