Thinking of Moving?
If you want to sell because you're unsatisfied with the size or lack of features of your home, you may find that remodeling it to fit your needs could cost less than selling the house, moving and buying another one. Perhaps you can build an addition or "greenify" your home to lower energy bills.
If you have to renovate before you sell anyway, it won't hurt to do the extra research to see what it would take to make you stay. It may make more financial sense to customize your current home rather than buy another one.
- In addition to repairs and improvements, expect to pay about 7 percent to 10 percent of the home's sale price in closing costs. These include:
- Real estate agent commissions - This is typically 4 percent to 7 percent of the sale price, but shop around. Commissions are negotiable, and in a slow market, an agent may be willing to accept less of a commission. Or, consider paying a flat fee to add your house to the multiple listing service (MLS) or contracting an agent for specific services.
- Professional home inspection - It's not required but getting one will reveal any problems with your home before a buyer finds them.
- Transfer taxes - Some cities charge a transfer tax, which is based on the property's sale price.
- Prorated property taxes - Depending on the date of your closing, you may owe property taxes. Check your state laws. If you've prepaid your property taxes for the year, you may get a credit. You may also get a refund on prepaid escrow costs like your annual home insurance premium.
Factor in other selling related costs:
- Staging and marketing expenses - You'll need supplies to prep the house, such as new paint, furniture, light fixtures, window treatments, rugs and other accents.
- Mortgage payoff penalties - If you're subject to a penalty, negotiate with your lender to reduce it.
- Capital gains tax
- Moving expenses - This can range from a few hundred dollars for a local move to thousands of dollars for a cross-country relocation.
- Roughly estimate how much you expect to get for your home, based on comparable home sales and listings in your area.
- Subtract your selling and moving expenses. If you're lucky or live in a solid housing market, you'll see a good percentage of appreciation and potential profit.
- Selling is really three parts: selling, buying and moving. If you want to "trade up" to a better home, job, neighborhood, school district or city, make sure you thoroughly research your destination. This will require several trips to see homes and get to know the area - another expense.
Know what to expect with home prices, cost of living, schools, crime rates and amenities. For example, moving from Cleveland to Los Angeles for a promotion may seem enticing, but you may become more financially challenged when living in your new city. Make sure you can handle any changes in overall costs of living.
- The last thing you need is to be "homeless" or waste cash on rent because you sold your home too soon. If possible, hold off until you're sure you can find a new place to live.
- If you're looking for more space or amenities, crunch the numbers to see if you can afford a larger mortgage.
- Check your credit report and credit score. Talk to your current lender and others to find out what kind of mortgage terms and rates you can get. Make sure you can secure a mortgage that works with your financial goals.
- Now that you've gauged your motivation, look at current market conditions. Are people buying in your neighborhood? Do research on the Internet and consult with local real estate experts. If home prices have dropped significantly or foreclosures and short sales have flooded your market, you may want to wait it out. Otherwise, you're likely to be bombarded with low-ball offers.
Evaluate the popularity of your neighborhood. If demand for housing in your area is high because of factors like a great school district or walkability, you may want to capitalize on that and sell at a premium.
- If you haven't lived in your home for two of the last five years, or you have the capital to finance another move without selling your home, or if the market is slow in your area, you might want to consider renting out your home.
When budgeting for a renter, be sure to include the following costs:
- Mortgage payment
- Property tax
- Homeowner insurance (check to be sure your premiums won't change if you convert your residence into a rental property)
- Homeowner association dues (if applicable)
- Property management company (if applicable)
- House maintenance
Warning: Not everyone is cut out to be a landlord. Prepare yourself mentally. Realize this house is no longer yourhome but your rental property.
CENTURY 21 Infinity Realty Inc., Brokerage*