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Before selling, how long someone spends in their home will be a lifestyle choice. For some, it’s all part of the “five-year plan” to purchase a home, live in it until they’ve outgrown it, and then sell it to pay for a larger one. For others, it’s part of a retirement plan to fix it up and sell immediately. Then some must sell for unexpected reasons. Whatever the reason might be, there is an ideal time to sell.
When is it time to sell your home?When is it time to sell your home?
So how long should you live in your home? So assuming you’ve put at least five years into the relationship, there might be other personal reasons why you want to sell now. See if you check off any of the following:
The tipping point at which owning a home becomes more financially viable than renting is 5.6 years. It fits with the “five-year rule,” but you’re probably only breaking even. Also, an actual break-even point isn’t merely what you originally paid for the home. It also includes the costs associated with buying and owning, the closing costs when you sell, and the listing agent’s commission. Because every neighborhood and building is different, you’ll need to break the numbers down to see your true break-even point. Then decide how much longer to wait to make a decent profit. Start by:
- Add up the total home purchase costs – original purchase price plus closing costs.
- Calculate the costs of owning your home – maintenance, repairs, and renovations.
- Figure out the costs of selling your home – commission for both agents, sales taxes, and attorney fees.
Next, take account of the following subtractions:
- Any equity on your home.
- Tax refunds you received from owning your home.
- Appreciation increases.
There will be a degree of guesswork in figuring out how much you can make from a home sale. But a Comparative Market Analysis (CMA) will give you the closest approximation. The more equity you can build on your home, the more of it your own. The main reason for the five-year rule is that it takes time to build equity on a mortgage. Most of your monthly payments for the first few years go towards paying the interest rather than the principal. You’ll also want to see your home appreciate nicely. The good news for NYC is appreciation rates have been above average for the last ten years.
Your family has grown, but your home hasn’tYour family has grown, but your home hasn’t
Perhaps the most common reason for a family to sell and move is when their family has expanded. It might have been the right home when you were expecting your first child, but now that you have a new arrival, space isn’t there anymore. It can be painful to give up a place with many memories, but if tight living quarters are making you stressed, it’s probably better to move on. Other life-changing events like divorce, a death in the family, or severe illness are other reasons for making a change in life. But let’s not think too seriously. Sometimes it’s just a desire for a change in scenery and lifestyle.
Expenses are becoming too much, so you need to downsizeExpenses are becoming too much, so you need to downsize
Not every homeowner sells to make a tidy profit. Some underestimate the costs of homeownership or suffer a change in their financials, such as losing their job. Their mortgage payments and property taxes have become too much, and they need a way out to find a more affordable home. High common charges or maintenance costs are another reason for wanting to sell.
There’s currently a boom in the housing market.There’s currently a boom in the housing market.
Even if you don’t feel any pressure to sell, it should be considered if there’s a booming seller’s market. Knowing whether the market is experiencing or about to experience a boom requires carefully studying current trends. Look at properties in your neighborhood and see what you can find. Is the average sales price going up? Is the average number of days on the market decreasing? Also, look at current developments. If many properties are being bought up and converted into new condominiums, that could indicate that the local market (and property values) is about to expand.
Deciding when to sell is personal and should not be taken lightly. At the very least, you should wait two years to avoid paying capital gains taxes. If you want to build up equity without costly renovations, you’ll need 5-7 years. These are all good benchmarks, but you’ll also want to watch the market. If there’s a buyer’s market, it may be better to wait until things stabilize.
On the other hand, if you can play things right, you could walk away with a happy sale. Seek consultation from an experienced real estate agent before making any decisions. They can provide you with all the necessary information to make the best decision possible.