How Long Should You Live In Your Home Before You Sell Your Home?
Whether you have just moved in or have lived in your home for 50 years, it's very common to wonder how long you should stay in your home before you actually sell it. According to the National Association of Realtors®, ten years is the average amount of time that a homeowner will stay in their home before deciding to sell it. But, is that really how long you should live in your home before selling it?
If you're under ten years and itching to sell, many experts say you should follow the “five-year rule” and stay in the same home for at least five years before selling. This may sound like a long time and you may think you are ready to sell now, but you certainly don’t want to make a rash decision and regret it later. Before you make any moves to put your house on the market, you should review a few of the most important factors that influence your decision to sell. Here are 6 things to consider before you decide to sell your current home.
1. Your Mortgage
One of the first and foremost factors you must consider when you decide to sell your home is your mortgage payment. If you want to make money when you sell your home, then your sale price must be greater than what’s left of your mortgage. When you first buy your home and begin to pay your mortgage, the first few years will go towards interest rather than the principal amount. This typically means that it’s more difficult to make money off your sale if it’s within those first 5 years. However, if you put a larger down payment on your house, then your interest rate and mortgage will probably be smaller. If you can afford this route, it makes it more possible to make a profit off of your home in a shorter amount of time.
Building home equity is important. Ideally, you will want to have a lot of equity built up when you decide to sell your home. The amount of home equity you’ve obtained depends on any remodeling or renovations you’ve made to the home, as well as your mortgage. If the home you bought was already in tip-top shape, then it may be difficult to build equity. On the other hand, if you’ve remodeled the kitchen, bathroom, redone the flooring, or made other renovations around the house, then you have most likely gained home equity and improved the value of your home. You can also increase your home equity by paying off more of the principal on your mortgage.
3. Market Conditions
The most common reason that people become eager to sell their home is to make a sizeable profit off of your property. But, how can you accurately gauge the market conditions to maximize your profit? There are a few things to look out for when deciding if it’s a seller's market and whether or not it's time to make your move.
Keep an eye on the price per square foot in your area. If you notice the price per square foot in your neighborhood is increasing, it’s highly likely that homes in your area stay on the market for a shorter time. If it’s decreasing, that’s most likely a sign to stay put for now. You should also take note of any homes near you that are selling. This might seem like a time-consuming process, but don't worry! The Grant Muller Group of Spaces Real Estate always keeps track of recent home sales in your area. Let us handle that tedious work and we’ll send you periodic up-to-date market reports. Just request a market report using the button below! Or join our email list and get market updates regularly.
4. You're Out Of Space
Maybe you’re still living in the first house that you bought when you were expecting your first child and there were only three of you. But now, with three kids and two dogs, your family just doesn't have enough space to adequately co-exist. Although it may be sad to move out of the home where your family first started, your family’s happiness will always be greater than the cost of selling your home and buying a new one. If you’ve run out of space, it may be time to move onto a new home, even if the market conditions aren’t ideal.
Other major life events like divorce, illness, or employment troubles may also lead you to sell sooner than you had originally planned.
5. Capital Gains Tax
If you don’t qualify to avoid paying capital gains taxes on the sale of your home, you may not want to sell your home yet. Capital gains taxes can suck a large chunk of your sales profits away, leaving you wondering why you sold your house in the first place. To avoid having to pay capital gains taxes, you should make an effort to stay in your home for at least two to five years. Making a sale before two years could be a huge mistake, and it could ultimately leave you without much equity, especially if you have to pay capital gains tax. This is one of the most important factors when making the decision to sell your home.
6. Closing Costs
Closing costs are often overlooked but play an important part when it comes to selling your home. On average, real estate agents have a commission rate of 6% when you sell your home. You are also likely to pay a closing cost when buying a home, which can be between 3%-6% of the purchase price of the home. Keeping closing costs in mind before you sell allows you to budget this into your expenses and avoid surprises when it comes to closing. 6% may not seem like a lot right now, but just wait until you do the math.