Financial Considerations When Selling Your Home
Selling your home could be a tedious, time-consuming and emotionally challenging process. It becomes even more challenging if it is your first time selling the home. The question that most home sellers will be asking before selling is," Is this the right time to sell, or should I sell my home?". There are lots of factors that determine your home's value and they include; location, age and condition, upgrades, interest rates, size among many more. This article aims at exploring the financial factors that you should consider before selling your home.
Tax Implications
There are numerous factors that determine whether you will owe taxes on your profit from the home sale. They include whether or not the home was your primary residence or the period you have owned the house.
When you sell your property or other investments in general, capital gains taxes have to come into play. If you are selling the home after a year of buying it, you will receive the tax treatment of a short-term capital gain. Therefore, you will be subjected to the normal income tax on the profit that you make. If you have owned the house for more than one year, you will be accorded the tax treatment of a long-term capital gain. Therefore, you will be subjected to a lower income tax rate.
In some instances, you may sell your home at a loss due to personal needs or existing market conditions. Selling your primary residence at a loss is not tax-deductible, and therefore any loss incurred from selling your home cannot be deducted as capital loss.
Costs of Selling the House
There are a lot of costs involved to get your home in shape to sell. Such fees include:
- Repair costs. For instance, a potential buyer could request that you make the appropriate repairs before they buy that home. It is not mandatory to fix the repairs, but it puts off potential customers and they may not go through with that sale. There is an option to list your home in "as-is" condition. This makes it clear to buyers that the home will be sold in its current condition and no repairs will be made. However, this attracts less buyers and may affect your selling price.
- Realtor fees. Typically, a real estate agent's commission varies between 2% and 3% of the home's selling price. That means that the total for both the buyer's agent and the seller's agent will be around 5% to 6% of the home's worth. It is common for the seller to cover the commission for both agents.
- Closing costs. If you're selling your home, there are closing costs such as title insurance, home inspection and appraisal costs. These costs range from 1% to 3% of the home price.
- Concessions. In the event you decide not meet the inspection repairs, the customer could accept other concessions. For instance, you can reduce the purchase price or pay some of his closing costs.
Basically, when you are selling your home, expect to pay up to 10% of the total selling price in costs.
Current Home Value
The value of your property will vary from time to time. Whether you obtained the home decades ago or recently, the first step before selling your home should be determining its value in the current housing markets. There are various approaches to evaluating how much your home is worth. Here are a few
- Consider appraisals. Conducting a formal appraisal ensures that you get the best and most recent valuation of your home. You also get to know how your property compares with others in the market.
- Hire a real estate agent. The agent you decide on will influence the speed of selling and the end price. Key to note is that you have to find a real estate agent that is experienced in selling houses, and has sold a few recently. For instance, employing an agent who has sold a few units recently means that there is a likelihood that he may be knowing a potential buyer. More so, you can decide to use more than one real estate agent to fasten the process. However, note that this comes at an added cost because you will have to pay all the agents regardless of who sold the home.
- Conduct research. When selling your home, find out from websites and journals how much identical houses in your region have sold for. In addition, there are plenty of websites that could provide you with a rough estimation of the home's selling price.
Buying or Selling Market
The main question here is, "Is this season a sellers' or a buyers' market?". Issues such as local economic conditions and seasonality always impact the value of your home. These are the factors that create a buyer's and seller's market which impact the selling price. In a seller's market, there are many potential home buyers as compared to the homes that are available for sale. As a result, the home prices are high, and as a seller, you stand to make more money from your house. Also, you will also be able to sell it faster than you would have in a buyer's market. In a buyer's market, there are more housing inventory, and therefore, buyers have an advantage of negotiating the buying price. To get the best deals for quick sale property go to WeBuyAnyHome.com.
Conclusion
Before selling your home, there are various financial factors that you need to consider. It is a good idea to conduct proper research to ensure you get the maximum possible benefits from selling the house. Consider these factors when setting the selling price to attract serious purchasers and prevent your property from over-staying in the market.
