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Selling your home is a big decision. Not just financially, but also logistically: It can take months of prep to list the property and requires that you keep it ready for last-minute showings the entire time it’s on the market.
In addition, mortgage interest rates are high, with the average for a 30-year loan sitting at 6.9 percent as of the end of May. The high monthly payments that result are keeping many potential buyers on the sidelines, and keeping homes sitting on the market for longer. And even if you can get a good price on your sale, you’ll find yourself on the other side of the equation if you then need to find a new place to live.
So, how do you know if you are ready to sell? Sometimes necessity makes the decision for you — if you need to move for a job or your family is expanding, for example. The state of the market may also dictate your decision to some degree: When prices are high, it’s hard to resist that potential profit. If you’re thinking of selling your home, here are some important things to consider.
How much is your home worth?
One of the biggest considerations is the value of your home: After all, you’re more likely to want to sell if there’s a big profit to be made. A slew of factors impact how much your home is worth, including location, size, any updates you have made to the home and your area’s local market conditions.
Online price-estimating tools, called automated valuation models or AVMs, can be a useful starting point: You just type in your address and they tell you an approximate price based on a proprietary algorithm. These tools are typically not very accurate, however, and you’re likely to get a different dollar amount with each one.
A more accurate way to determine home value is to work with a real estate agent in your area, who can analyze local comps, or homes similar to yours that have sold recently, to determine what buyers have been willing to pay for other, similar properties nearby. If you’re looking for the most accurate estimate possible, though, your best bet is to hire a home appraiser. An appraisal will take the most amount of factors into account, including an in-person walk-through by a licensed professional, and might uncover potential problems before any buyers see them.
Selling your home after a short time
How long should you wait before selling your house? You can turn around and sell your home the day after you close on it, if you like, but selling after only a short time comes with some financial drawbacks.
For example, selling your home after owning it for one year, or even after two years, means you will likely lose some money. It’s usually advisable to stay put for at least a few years to make the expense of closing costs worth it — and sellers incur a whole new set of closing costs as well. In addition, if you financed your home purchase with a mortgage or took advantage of a down payment assistance or first-time homebuyer program, you may owe a penalty for selling early.
But the biggest penalty for selling too soon might come in the form of capital gains taxes. How much you’ll pay depends on how much profit you make, but if you sell after less than two years, your earnings could be taxed at a much higher rate than they would otherwise.
However, you can still make money on a property even if you don’t own it for very long. Home appreciation and equity begin building as soon as you make the purchase. You may have to sell within the first couple years if you need to upsize or downsize quickly due to family circumstances, or if you find yourself relocating for a job opportunity. But if your property appreciates in value enough during that time, your return on investment may outweigh the financial penalties.
Getting your home ready to sell
Selling a home costs money. Besides the closing costs and tax implications, there’s also the expense of getting a home ready for market. Making a good impression on buyers is crucial, so you want the property to look its best. This involves, at minimum, a serious deep cleaning and decluttering.
A home that is very lived-in and full of personal items — or, at the other end of the spectrum, a home that’s vacant because you’ve already moved out — might benefit from professional home staging. This involves a design pro making the space as appealing to buyers as possible, and the cost can vary depending on the size and scope of the job. Your real estate agent can advise you about whether staging could help you realize a higher price.
Consider the curb appeal of the property as well. Even small, inexpensive improvements, like repainting the front door or adding some bright new flowers in the front yard, can go a long way.
Depending on the condition of your property, you may wonder whether you need to make some repairs or even complete some renovations before you put it on the market. Think carefully before undertaking any new projects — most won’t recoup their cost and won’t be worth it in the long run, especially if you’re trying to sell quickly. Your agent can help you figure out what to fix and what not to bother with.
Next steps: Find a trusted real estate agent
It’s possible to sell your home without a real estate agent, but that doesn’t necessarily mean you should. Especially if you have questions or live in a rapidly evolving market, an experienced agent’s advice can be invaluable — agents are licensed professionals who know their local market inside-out. They can guide you through the complicated sale process and help you get the best price possible for your home.
To find an agent, start by asking friends and family for recommendations. Look at reviews online, and check signs in the neighborhood, too. When you’ve narrowed your search to a few candidates, spend some time interviewing each one, so you can get a feel for who will be a good fit. With the right pro by your side, you’ll be on your way to a successful home sale.
The amount of money you make when you sell your house will differ depending on a variety of factors — most importantly what you paid for the property when you bought it versus the amount you’re selling for. If the house had a mortgage, you’ll have to pay off the outstanding balance of that. You’ll also need to factor in any money spent to prepare the home for sale, closing costs, taxes and real estate commission fees, which are typically paid by the seller.
There is no set amount of years you’re required to stay in your house before selling. However, the longer you own a property, the more home equity you will build, and the more time it will have to appreciate in value. If you sell before you’ve been there for two years, you’ll be subject to a higher tax rate on your profits, so it’s smart to stay put for at least a few years.
Not everyone needs to pay capital gains tax when selling a house. It depends on how much profit you make on the sale, whether it was your primary residence, and if so, how long you lived there before you sold. You will likely have to pay capital gains tax if you sell your home after owning it less than 24 months, and also if you earn a profit of more than $250,000 on the transaction (the cap is higher if you are married and filing jointly).