Deciding to sell your home in today's real estate market comes with a lot of difficult questions.
Every homeowner would love to buy a home when the market is low, sell when the market is high and walk away with a tidy profit. However, that is easier said than done. Your life plans don’t always line up with the housing market and even if they do, you have to consider the cost of your new home once you sell your current one.
With today’s housing market, many homeowners are finding that their homes are not worth anywhere near as much as they were five or six years ago. Those who bought at the height of the housing bubble may even be in a position where their homes are worth less than what they owe on them. If you are in that situation, you may have no choice but to try to hang on to the property until the situation improves.
Many homeowners who are approaching retirement age do have substantial equity in their homes. Yet, they still have to face the difficult question of whether to sell now and take advantage of the lower price of their next home, or wait and hope to make more of a profit when the market eventually rebounds.
There are many factors to consider when deciding whether to sell now or later. A large part of the decision is a financial one. How much equity do you have? Could either strategy cause you to lose money? What are the tax implications? But you also have to consider the more emotional or realistic side of the question. How will the sale (or delayed sale) of your home affect your life plans and how do you feel about that?
If you plan to relocate after selling your home, it’s important to research real estate trends in both your current home and your planned destination. If the community you love is typically priced out of reach, now might be a great chance to buy your dream retirement home—even if that means making less of a profit on your current home. Remember, if a better market makes the sale price go up on your home, it’s also likely to raise the price on the home you plan to buy.
Researching the real estate potential of an area extends to more than just home prices. Look at the area as a whole. What is the unemployment rate? What are the local development plans? If new businesses or public transportation systems (like an extended subway stop) are moving into your area, that might be a sign that the housing market will pick up as well.
When buying and selling real estate, you should always consider the tax implications. Will you be purchasing a more expensive home or will you end up paying capital gains on the money you make? If your home is declining in value while your taxes are rising, would you be better off selling sooner and moving to a home without the heavy tax burden? Talk to an accountant or financial planner if you have questions.
When you can afford both options (selling now or later) but are only trying to optimize your financial gain, don’t discount the emotional benefits of the decision. If you’re eager to sell your family home and move to a new community, the joy of getting started on the next phase of your life may outweigh the money you might (or might not) make by waiting for a better market.
{ 3 comments… read them below or add one }
Spot on Bill; the emotional issues regarding moving on with ones life sometimes are larger than the financial side of the equation. I’m not trying to minimize the necessity of being able to afford to retire, it’s just that piece often seems to override how people view “the rest of their lives.”
Finding balance is so important. Knowing what you want is also critical. Leaving work and that life is so foreign to what most of us know. We worked to live and retirement allows us simply to live without working (for those of us fortunate enough to be in that position). It opens doors to all of the options out there.
Age restricted retirement communities give us the opportunity to sample a dozen things, maybe a hundred of them (dependent on the community). I always encourage those coming up on retirement to get out and try several places to see if they are right for you. Once i found Sun City AZ i began to shift my focus and reset my priorities. I knew what i wanted for the rest of my life and after that it was simply the financial side of the equation.
The one thing we know is you’re not getting any younger and with each passing day you are missing out out that next phase of your life.
Bill,
What I am hearing from my clients are that they want to sell and get the most that they can. I ask the question how much did you pay for your home. I am very shocked when I hear that they paid $40,000 twenty years ago and want to get $700,000 today. My answer to them is take a little less and you still come out way ahead and then buy your dream home in your favorite 55plus community. They are still coming away with a nice profit after they purchase there dream home. I have noticed that several of my clients do listen and just by lowering the price a little they start to get many more showings.
Wilma: I am in a somewhat similar situation like your clients. I paid $88,500 for my home 31 years ago but will be lucky to get $350,000 when I try to sell later this year. When the market was red-hot in this area in 2005, my neighbors got $612,000 for their house after it had been on the market for only two weeks at a list price of $599,000. (A “bidding war” had ensued between two interested parties and the neighbors got $13,000 more!!!)
What this shows is that while I WILL make a profit on the selling of my home, it will NOT be like what my neighbors got for their home! I still think about that $200-250,000 extra profit I probably could have made if I would have sold back then and that I will not make now when I sell but I have a choice to make: DO I WAIT YEARS FOR THE MARKET TO GET RED-HOT AGAIN AND GET ALOT MORE FOR MY HOME OR DO I SELL NOW AT A MUCH LOWER PRICE AND JUST MOVE ON AND BE THANKFUL FOR WHAT I WILL GET FOR MY HOME?
The answer for me is the latter, of course, since life is much too short and I have been in this house much too long and have not been really happy on this street for years. I DO firmly believe that you cannot put a price on happiness!!! And thank God that where I am moving to in another state (in a NON-55+ community), the homes are not super expensive. Like they say, ‘it’s all relative’ to the real estate times today.