TThe U.S. housing market is facing extraordinary times. Mortgage rates are at their highest levels in years, making it difficult for some buyers to enter the market. At the same time, the nationwide housing supply remains tight.
If you're considering a transition in the midst of these unusual market trends, here are five steps to help you navigate the process.
1) Seek professional help.
Your top priority is to properly manage your current financial situation. This means having a clear idea of what your home is worth and how selling it fits into your financial plan.
To get a holistic perspective, consult a financial advisor to discuss your current financial situation and any concerns you may have when participating in today's markets. Additionally, you can also consult a real estate professional. Finding an agent through a referral from someone you trust is a good way to identify a suitable agent. Don't be afraid to interview multiple agents to find the right person.
2) Determine the value of your home.
Local market conditions, based on the balance between housing supply and buyer demand, have the biggest impact on home values. Determine the realistic value of your home by checking prices on real estate websites, considering getting a formal appraisal, or speaking with a real estate agent. If you have an existing mortgage, consider whether you can sell your home for more.
3) Estimate the cost of selling your home.
The sale price of a home does not reflect the final net profit. There are costs associated with the process. These include real estate agent commissions, which are typically 5% to 6% of the sales price. There are typically an additional 1% to 3% in closing costs, including home inspections, appraisal fees, and title insurance. If repairs are required to the house during the process, additional costs will be incurred. Finally, you may need to negotiate price or offer other concessions to the buyer to close the deal.
Keeping these costs in mind will help you get a clear idea of the return you can expect on the sale of your home.
4) Determine the tax implications.
Capital gains tax may apply on the sale of your home. This is if the home you sold has been your primary residence for two of the past five years and her net income is less than $250,000 (single person) or $500,000 (married filing jointly). This is often not a problem. Other tax considerations arise if you sell at a loss, do not use your home as your primary residence, or if your home is a rental property. Please check with your tax advisor.
5) Please be patient.
Although sellers still have an advantage over buyers in many markets across the United States, the overall process of selling a home still requires patience. It takes persistence to find the right buyer and to be in a position to accept an offer that is comfortable for you.
Your home may account for a significant portion of your net worth. It is important to consider how planned sales will impact your overall financial plan. A financial advisor can help you understand how selling your home will affect your long-term goals and financial aspirations.
Jessica B. Jimenez is a financial advisor with John L. Myers & Associates, the personal wealth advisory practice of Ameriprise Financial Services LLC in central New York. She specializes in fee-based financial planning and wealth management strategies and has been in practice for 14 years. To contact her, visit ameripriseadvisors.com/jessica.b.jimenez.com or call 315-251-0512.
