So you want to sell your home – but are you actually able to sell it? The fact is, selling a home is not as easy as tidying up and calling your real estate agent. There are many factors that dictate whether you can sell your home beyond just wanting to move. Just like a buying home, selling it requires the right timing and preparation. Find out what you need to consider before putting out a ‘for sale’ sign.
Can You Afford To Move?
If you haven’t lived in your home for long and the market has declined, it may cost you money to move.
The first thing you should consider if you are looking to sell your home is whether you have enough equity in the home to make this a viable option. If you haven’t lived in your home for long and the market has declined, it may actually cost you money to move. This can happen when a homeowner buys a house at a market peak and/or with a very small down payment; when the market declines, the homeowner is left with a loan that’s bigger than the property’s current value. This means that selling it could actually cost you money. If the market goes down, moving might leave you with no down payment for a new home – and remaining debt to the bank to boot. In such cases, homeowners may just have to wait the market out.
Have your agent do a market evaluation before you decide to sell. If your home is worth the same as when you bought it, chances are you haven’t been there long and moving might not be the best option. Of course, you can always choose to sell anyway, but you’ll have to pay out-of-pocket for expenses like closing costs on your mortgage and fees to professionals. Ideally, those costs should be covered by the money you made on your property.
Your Mortgage is a Contract
Check with your lender to find out whether you will incur a penalty on your mortgage.
You are legally allowed to sell at any time, but there may be penalties associated with selling before the end of your mortgage’s term. When you last mortgaged your place, what length of mortgage term did you choose? Note that this is different from the mortgage’s amortization period, which is typically 20 to 30 years. If you mortgaged your home for a longer term than you now need (say you’ve chosen a five-year term and are ready to sell after only two years), you might have to pay the lender an interest rate differential or 3 month’s interest (whichever is larger) for breaking the mortgage early. For large mortgages, this amount can be quite hefty – as much as $30,000 in some cases. You may be able to avoid this penalty if you buy another house and move your mortgage over to the new property, but if you’re planning on going with a different lender or aren’t buying again at all, paying a penalty to the bank is something you may have to contend with. Before putting your home up for sale, check with your lender to find out whether you will incur a penalty and how much it will be.
Where Will You Live?
Where you are going to live is something to think about before you sell – not after
Selling and buying may be seen as separate, but they are almost always related because moving entails finding another place to live. Do you have anywhere to go? Can you get what you want or need in a new home? Has your situation changed in a way that might make it harder to qualify for a mortgage? Where are you going to live if you sell your home? This is something to think about before you sell – not after.
If you are motivated to sell because your dream house is available now, it might not be there when you finally sell. If you don’t know where you’re headed next, listing your house will be a little premature. Moving is a stressful ordeal, so knowing the facts about your future move will make the transition smoother. Make sure to discuss your options with your family and your real estate agent.