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.
Monitor the Housing Market
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 whether to wait and hope to make more of a profit when the market eventually rebounds.
Understand Your Finances
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?
Research Real Estate Trends
If you plan to relocate after selling your home, it’s important to research real estate trends in both your current location 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.
Don't Forget About Taxes
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.