Start with clarifying questions if you’re wondering, “Should I sell my house?” Sellers are wise to determine housing needs, financial health, and possible equity before staking the “For Sale” sign out front. Trusted real estate advisors are among the best sources of information throughout the home selling process and should be involved when determining the pros and cons.
In this article, we’ll ask a series of questions to determine whether it’s a good time to sell or hold tight.
Have I Outgrown My House or Do I Need to Downsize?
What is the main reason for selling your house? The process takes a considerable amount of work, so it’s best to understand the underlying motivation before speaking with a real estate agent. In actuality, a fair amount of work is involved and could prove stressful.
One of the most common reasons people opt to sell is outgrowing their footprint. However, too much house isn’t ideal; there is value for those interested in downsizing.
Life can happen quickly, so what should you do when your current home feels like a shoebox? When relatives, grandparents, children, and pets demand additional space, the lack of room can take a toll on productivity and, most importantly, your sanity. The current trend of home office digitalization requires more space than ever. In these situations, selling your house and buying something bigger might be a sensible option.
Homeowners who don’t use rooms in their house might consider a downgrade. Paying a mortgage for unused space isn’t sensible when you can use the monthly savings for other financial goals. Selling is the right move when the current residence is too much house to handle.
How Much Equity Do I Have in My Home?
Determining equity is easy; take the sum of all loans and subtract it from a home’s fair market value. Or, you could use an online calculator. Homeowners who want to value their total equity can include additional expenses like a home improvement budget and realtor costs.
Once you’ve determined how much equity is in your home, how can you use it? There are plenty of different ways, including:
- Buying a new home
- Using a reverse mortgage for retirement
- Home equity loan
- Home Equity Line of Credit (HELOC)
- Cash-out Refinancing
Each of these provides a different way to access the equity appreciated in your home.
Do I Have Debt Besides My Mortgage?
Knowing what you owe your creditors, such as student, car and personal loans, is critical when making big financial decisions. By understanding your financial health, you can decide how much house to purchase and what debt considerations to address.
These obligations might impact the amount and rates at which you can borrow. If a lender sees too much debt, it could negatively affect your financing. At this point, sellers should weigh options carefully before putting a house on the market, such as paying down current debt, refinancing, or leveraging equity.
Is My Current Mortgage Too Expensive?
Our incomes and finances fluctuate throughout our lifetimes. What a person could afford a few years ago might seem like a distant memory. If you are overextended, the culprit is usually fixed costs. By lowering fixed costs—unavoidable monthly expenses—you can dramatically reduce your current debt-to-income ratio.
A mortgage is the perfect leverage point. This sizable fixed cost isn’t set for life, so if your current house is draining your finances, it’s time to explore options. Luckily, there are plenty of choices, such as refinancing, extending loan terms, or moving into a different home. Weighing your options when the payment is too steep—including selling your current house—could provide financial freedom.
Do I Have a Down Payment Saved for the New House?
If you’re selling a house, chances are you need to purchase another one simultaneously. Do you have a down payment saved for a new place? According to Rocket Mortgage, the average down payment on a home is roughly 6%.
You don’t necessarily need $25,000 sitting in the bank to qualify for a new house, but it is wise to have a sizable cash position. Some buyers will use the equity in their current home to cover the down payment. Other options include borrowing from friends and family, receiving government aid, or applying for first-time homebuyer assistance.
Are Homes in the Neighborhood Selling Rapidly?
Take a look at the listings in the neighborhood; how quickly are homes selling? If they are peeling off the market within a month, you’re about to list inside of a red-hot housing market. The advantages of selling when demand is high include:
- Houses will sell faster.
- Unique homes and fixer-uppers will fare better.
- Homes sell at a greater value.
- You could save time on repairs and improvements.
If there’s a backlog of expired listings, it could prove difficult. Sellers should consider listing their homes when the market conditions permit. While it’s impossible to time the market, it doesn’t hurt to hold out and continue investing in your home. Building a chunk of equity is useful when put towards your next purchase.
The Bottom Line
Selling your house is a big decision that requires an understanding of current financials, market conditions, and space requirements. If homeowners aren’t happy with the size of their home, they could benefit from an upgrade.
Others might want to shed unused rooms and lighten the burden of a hefty mortgage payment. It can be financially sound to leverage equity to pay off debt or use it to purchase your dream house. Whether you’re upgrading or downsizing, a trusted real estate agent can advise on these matters and identify market conditions before leaping in either direction.
Whichever situation applies, having answers to these questions can help you navigate the underlying reasons why you should or shouldn’t sell.
