Deciding to Sell Your Home- Step 2

Opting to sell your home is a significant decision, and it's natural to contemplate it multiple times before placing that "For Sale" sign in your yard. Before engaging with a real estate agent, it's crucial to assess the financial feasibility of selling. Consider factors such as your home's equity, prevailing market conditions (buyer's or seller's market), and the impact of the current season on the real estate market.

First, do some research and evaluate your market. Are homes selling fast in your area, or do houses tend to linger on the market? When they do sell, are the sellers getting what they asked for, or are homes selling below (or above) asking price? Are there a lot of homes for sale in your area or just a few? These questions will help you determine if you’re in a buyer’s market or a seller’s market. In a buyer’s market, conditions favor the buyer – lower prices, plenty of inventory, and lots of room for negotiating. In a seller’s market, the opposite is true. Sellers have the upper hand with low inventory, higher prices, multiple offers (often above list price), and even bidding wars. The market varies wildly depending on available housing inventory and your location.

Now that you are familiar with your area’s market conditions, consider the time of year. Maybe you’ve heard about the “magic selling window.” This spellbinding time of year, according to many agents, is between March and May, and it’s the best possible time to sell your house. This is because many home buyers want to move in summer. Typically, home buyers, especially if they have children, want to get the closing scheduled early enough that they can be moved in and settled before school starts in September. To make this timeframe work, they’ll need to find a home in the months leading up to summer.

Evaluate Your Financial Situation

While selling your home can be a rewarding process, it's essential to anticipate and budget for various expenses along the way. Initial expenses include the costs of cleaning, repairing, and preparing your home for the market, along with potential marketing expenses like professional staging and photography. During the showing phase, consider relocating personal items to a storage unit. Additionally, be prepared for possible repair costs requested by the buyer after the inspection.

Closing costs may vary, and while buyers often cover these expenses, sellers might agree to share or cover them, particularly in specific buyer scenarios. Expect to pay your agent's commission, typically around six percent, which is shared with the buyer's agent.

If your home sale will clear your mortgage, additional fees may apply, including penalties for early payoff and interest on the remaining loan duration. Factor in other potential costs such as attorney fees, escrow fees, HOA fees, utilities, property taxes, and transfer tax. By carefully reviewing your finances in advance, you'll be better equipped to handle these costs as they arise.

Understand Your Home's Worth

Throughout the home-selling journey, your home's value will be assessed multiple times for various reasons. Conduct preliminary research to familiarize yourself with estimates that may come your way. Compare your home to similar properties in terms of location, bedroom and bathroom count, square footage, and construction timeframe. While numerous websites claim to provide precise home values, be cautious, as these figures rely on frequently changing factors. Once you enlist an agent, they will utilize comparables (or comps) and other resources to determine your home's value, offering the most reliable information.

The conclusive determination of your home's value occurs during the appraisal in the closing process. If there's concern about the appraisal aligning with your asking price, obtaining an appraisal before listing your house could be a prudent step.

Contemplating a Pre-Listing Appraisal

Some sellers opt for a pre-listing appraisal due to concerns about pricing their home accurately. The fear of undervaluing and losing money or overpricing and deterring potential buyers motivates this decision. However, it's crucial to note that, in many cases, a buyer's loan company will still require a separate appraisal, rendering the pre-listing appraisal redundant. Home values are subjective, and different appraisers may arrive at diverse conclusions. Instead of incurring the cost of an early appraisal, trust your real estate agent to conduct a Competitive Market Analysis (CMA) using the most recent market data, ensuring a competitive and well-informed pricing strategy.

Comparing Home Value and Home Equity

After determining your home's value, it's essential to assess its equity, which represents the disparity between the home's value and the outstanding mortgage. This figure indicates whether selling your house could yield a profit. If the owed amount surpasses the potential selling price, it might not be an opportune time to sell.

To calculate your home's equity, refer to your latest mortgage statement and subtract the amount owed from the current market value. The resulting difference represents your equity. If the equity falls short, it may be advisable to postpone selling and work on further reducing your mortgage before considering a sale.

If, after evaluating your finances, market conditions, and home value, you decide it's an optimal time to sell, the next step is to engage a real estate agent.