Many people ask about the best time to sell a home. The answer is simple: When you’re ready. For the most part, it’s the right answer. Because the real estate market is so variable, you can’t know exactly when you’ll be able to get the most you can for your home. And, although there are times when you could make a little extra money, you always have to be ready before you actually pull the trigger. Find out what factors really determine whether you can sell and when you should go through with it.
Do you have the equity in your home?
Are you an investor?
Investors can enter or exit a real estate market anytime they’re financially able to do so; if the market is up and they feel like cashing out, there isn’t that much to hold them up because they already have somewhere to live. The only other real issue is if there are tenants renting the property. If so, a certain amount of notice needs to be given. This differs depending on the situation and the jurisdiction, so make sure you know your landlord and tenant laws and regulations. Of course, the ideal situation for an investor is to be able to sell at the market’s peak; unfortunately, this is virtually impossible to predict, which means that investors are always taking a bit of a risk when they sell. That said, being ready is important for real estate investors, too. After all, investors who want or need to sell aren’t going to wait around to see what the market will do.
Are you an owner?
Most people who own real estate are home owners. They own now, and they’ll own again. Homeowners, unlike investors, don’t have the luxury of selling at the height of the market and then waiting around for another good opportunity to come along because they need to buy a new place to live. This is why you may as well wait until you feel it’s the right time to sell rather than trying to time the market. After all, your next home will be riding the same wave as the one you’re selling. If the market’s running high, you’ll make more on your current home, but you’ll spend more on your new home too.
Are you exiting a market?[pullquote_left]When you exit a market, you may be able to benefit from a market peak[/pullquote_left]
Are you downsizing?
A similar situation to last-time ownership is downsizing. Because the market operates on percentages, a large, expensive home gains more in dollar value when the market increases than a smaller, less expensive home in the same area. This means that you can keep some money when selling at a market peak if you’re buying something less expensive in that same market. But bear in mind that the spread between the two prices is only as substantial as the change in home values.
For example, if your current house cost $500,000 10 years ago and now it is worth $600,000, you made 20% on your home – which is $100,000. If you’re planning on buying a condo worth $300,000, that condo should have cost around $250,000 10 years earlier – a difference of $50,000, but still 20%. Of the $100,000 you made on your home, only $50,000 of it is absorbed back into the market when you sell your home to buy that condo, which means you get to pocket the other $50,000. If your house increases in value, it will increase at about the same percentage as other properties in the same market, giving you an edge when you downsize. This formula should hold true for any downsizing situation as long as the homes are in the same market.
For any of these situations to work in your favour as a seller, you need to know where the market is going. Although there are ways to guess the outcome, buying again will generally absorb any gain you make by timing the market. When you take everything into account, the truth is that many homeowners don’t have much power to capitalize on market cycles. There are intra-year cycles, there are slow times and hot markets, but you’re still going to buy, right? By the same token, waiting is not a sure bet that prices will increase. When you want to sell your home, it’s not time to worry about things you can’t change, but rather things you can. When you sell is still not as important as your desire to sell, so forget timing the market and sell when the time is right for you.