Should I Sell My House While Prices Are High?
The housing market definitely favors home sellers right now. And if you’re in one of the really hot housing markets, you may be watching the bidding wars and cash offers for your neighbors’ homes and thinking about all the things that money could do for you.
But before you sell your house, do your research. Here are some considerations to help you determine if now is the right time to cash in or if you should stay put in your home.
Questions to Determine If You Should Sell Your House
How much equity do you have? If you bought the home for a low price, you could stand to make a good amount of money. But you need to ask yourself some related questions, such as …
How much do you still owe on your home? Whatever you make on your home sale will need to cover the remaining loan balance.
Did you factor in closing costs? These will take a bite out of your final sale amount.
Did you account for capital gains? Let’s assume your home qualifies as a primary residence that you lived in for two of the past five years (different tax rules apply otherwise). You will not have to pay capital gains tax on any proceeds up to $250,000 if you’re single or $500,000 if you’re married. Above that, and the IRS wants a portion of your money. (Save receipts for remodeling and other improvement projects to help reduce the tax load.)
What is your housing plan post-sale? Do you want to upgrade your home? If you do, you’ll buy that house at a premium price. Do you plan to downsize? Move out of the area or even the state?
Whatever your plans, do your homework to make sure they’re feasible. For instance, you’ll want to understand housing or rental costs in your new location. Just as importantly, you’ll want to check for availability. Many locales are tight on availability—make sure you can get what you need.
Have you factored in property taxes on your new home? State property tax rules vary. If you plan to stay in California, be prepared for a property tax increase for your new home based on the price you buy it. If you move out of state, make sure you know the property tax rules before you go. (It’s a good idea to research all the costs to live there.)
How do you see your current home? If you’ve always seen it as an investment, then you will probably feel dispassionate when you pack up your belongings. But if this is a home you feel attached to—say, you raised your children there—you may need to deal with emotions such as sorrow or doubt. That’s not to say you shouldn’t sell—you just may want to bring in the support of friends and family.
If you plan to move far away, do you have a social network in your new locale? Are you willing to be farther from children, grandchildren, and close friends? Like the question above, this one can help you understand the non-financial costs of selling.
Summary
With skyrocketing housing prices, you may feel FOMO—the fear of missing out. You want to get top dollar for your home like seemingly everyone else is. But before you call your real estate agent, consider talking with your financial advisor.
Your advisor can go over the dollars and cents of buying and selling with you. They’ll help you decide how selling your home works into your other long-term plans and look at the impact on areas such as taxes and inheritance. Understanding the impact—positive or negative—can help bring objectivity to your decision on whether it is truly time to sell.
Our Sacramento-area wealth management firm helps clients answer questions like these as part of their overall financial planning. Schedule a complimentary, 15-minute call with a financial advisor today to discuss your personal situation.
This material was prepared by Kaleido Inc. from information derived from sources believed to be accurate. This information should not be construed as investment, tax or legal advice.
Parkshore Wealth Management is a family-owned, independent, fee-only Registered Investment Advisor serving the greater Sacramento area with an office in Roseville, CA. We partner with financially responsible individuals and families who are eager to take positive steps that will allow them to use their money to build the life they desire. The firm is led by Harold Anderson, CFP®, and Daniel Andersen, CFP®, both members of NAPFA, the country’s leading professional association of fee-only financial advisors.