Global Escape Realty

In this market most people ask what are the benefits to selling my home versus waiting for the values to come back. Most decisions come down to how comfortable you are living in the particular location and the long-term plans. Do you like the neighborhood — your job — how big is your family going to get — when do I plan to retire? These are all important considerations when considering the sale of your home and the purchase of another.

Why am I selling?

Unless you are moving for a job, most would-be sellers do not need to move. Typical reasons for selling are: stagnant or unraveling neighborhoods, employment, upsizing or downsizing due to family constraints and simply finding a new place to live. Unlike many parts of Europe, Americans will move an average of 3-4 times on average in a lifetime — roughly every 7-10 years.

As a guideline, sellers should expect to spend an average of 15% or more of your current home value in the process. Much depends on your down payment when purchasing the original house and the agreements of your mortgage, but more-or-less buyers and lending institutions agree an average of 20% should be strongly considered as a minimum when offering a bid on a home or when coming into agreement of a sale.

For this reason, as a seller and buyer, you need to make sure your potential expenses are covered and you fully understand the reasons and consequences of moving. A quick move without fully exploring reasons and options can lead to expensive repercussions later on. Know why you want to move and what you are buying.

Taxes when Selling Your Home

For those looking to sell, there is something you may not have considered, but should be aware of — capital gains tax. Capital gains tax is the money owed (in the United States) on a primary residence that has been in your possession for less than two out of five years.

This tax may not seem important initially, but could be very important if you plan on using the money for retirement or on the down payment of your next home. Since a majority of Americans go bigger-and-better with gradual movement up the salary chain, you need brace for Uncle Sam claiming his pound of flesh. This is equally important if you plan to allocate money in investment properties. Unless a primary residence, you can expect to pay an average of 30% of the proceeds from the sale of an investment property to the government. My recommendation: move from your primary residence to an investment property — plan wisely.

Invest in Selling Features Before Going on the Market

Want to get the most bang for your buck? Invest in the house before selling; it may make a huge difference in buyer appeal. Remodeling is typically recommended in older houses or if the seller purchased the home with few perks. Buyers are immediately attracted to the newest, state-of-the art designs and appliances and may turn a blind cheek to other things in the house they would consider drawbacks.

Contractors are a must when attempting projects unless you possess skills in the trade. Items such as plumbing and electrical can be majorly problematic if you are not familiar with the turf sorta speak. Hire a licensed contractor that you feel comfortable with and spells the details — never go in without knowing the full details of the contract.

These folks, along with interior and exterior designers can transform your home to top dollar demands in the market today. Consider costs versus benefits. Kitchens, bathrooms and flooring are commonly selling points with potential buyers. Consult these experts and even an agent in the field when trying to understand your maximum value you can attain in the house without breaking the bank. Not only may the improvements help with the value, but they can also help with home equity if a loan is needed and provide some tax breaks or write-offs.

Expenses When Selling Your Home

Outside of capital gains, there are many other expenses that may reduce your potential capital when selling a home. These costs can sometimes be negotiated and split between the buyer and seller depending on the demand from each party. A seller is more likely to push a buyer into paying the closing costs for example, when a sellers market is present. Leverage is the name of the game.

When dealing with real estate agents, commissions are always present, but vary depending on market. A 4 to 7% commission is typically held by the agent, so make sure you know exactly what the terms of contract with the agent are before entering into agreement. Flat fees are also agreeable to some agents, but again, depend on the type of demand the market presents — more demand means the agent can request more.

Home inspections are also highly-sought in todays inventory of foreclosures. It is not uncommon for foreclosed homeowners to remove significant items in the house or even sabotage. Those not in a general sale may not remove items; instead just leave repair to the next owners. A home inspector will generally cost between $100 to $300, but can be well worth the time. They inspect items such as air conditioners, furnaces, appliances, pools, structure, etc. Consider a licensed or certified inspector if at all possible.

Pro-rated property taxes can be another threat to reduced income when selling or more importantly buying a house. Homes in short-sale or foreclosure can go delinquent with counties and parishes; leaving the burden to new owners. Consult the agent or county / city assessors records when reviewing the back tax. Not only can this be a burden when unpaid, but it can also be a burden even when paid. Escalating home prices over the past decade can often mean highly-variable tax (millage) rates depending on how valuable the district feels your area is worth. Knowledge is money.

Home Financing Options

Know the market. If the you are in a position where you are forced to sell your home due to job loss or similar, consider where the marketing stands. If the market is not in favor of retrieving your investment (a buyers market), consider leasing. There are many variables when considering this options such as return and maintenance, but it may be a feasible option.

Refinancing is also something a homeowner may want to consider prior to reselling. After all, a mortgage is nothing more than an expense to a homeowner; reducing this expense through a more equitable rate can mean more returns for you. Whether refinancing or financing an initial mortgages, this can greatly impact your comfort zone in the long-term.

Never Underestimate the Local Real Estate Market

Always remember, no one is going to pay more than they have to. Buyers working with agents know and fully take advantage of this fact whenever applicable. Neighborhood prices guide the market. If a person knows a person with a similar house just sold a similar house for $20,000 less, you can bet they will hold you to this in a buyers market. The opposite holds true in a sellers market — neighborhood prices may play a similar factor when making an offer or can be ignored completely pending on the sellers leverage.

Final Thoughts on Selling or Buying a Home

Always consider your return when selling or purchasing. Are you staying long-term or short-term and how comfortable are you in the sale. Most homeowners figure they can pay more for a home and make-up the difference over time via a climbing salary, but these plans can end tragically in mounting debt. On the opposite spectrum make sure the sale of your home is worth it. The goal is to come out ahead in the end, but in order to do this, you must understand all the expenses on both sides of the table. Buy with a purpose, not an impulse.