Tuesday, October 21, 2014

Can You Afford To Sell Your Home?

Many home owners want to sell their home and move up to a larger home to fit their current family needs. But you need to decide if you can really afford to sell your home.

Now, I can find ways to make it affordable to sell your home and buy the next one, but that's not what we're talking about here.

I'm talking about: Can you afford it, is the equity there, and if you do, can you accomplish the goals you set out to accomplish?

When I'm speaking with someone who wants to sell their home, one of my first questions is always, "How long have you owned your home?" For me, a good rule of thumb is that you need to be in your home about six years in order to get any equity out of it. Now, that's just a rule of thumb. There are a lot of variables that go into this. Did you buy your home when the market was in an upswing? Did you put down a significant down payment when you bought your home? The goal in selling would be to take your down payment with you, but that's not always possible.

There are costs that go into selling a home - beyond your Realtor® fees. You'll also pay your property taxes, usually a month's worth of interest on your loan, State Documentary Stamps, escrow closing fee, title insurance, and possible seller required concessions such as paying for the pest inspection or a loan fees depending on the type of loan the buyer is using. And then there are other variables such as lender required or buyer negotiated repairs and seller's concessions (buyers closing costs). All these things add up and can chip away at what you thought you might have in equity in your home.

Many home sellers first reaction when discovering these additional costs is to immediately decide to sell their home on their own. But did you know that according to the NAR 2013 Profile of Home Buyers and Sellers, homes sell for $51,000 less on average when sold For Sale By Owner. That's a scary number isn't it? Obviously if you're selling a $100,000 house, it's probably going to sell better than $49,000. But, you still run the risk of taking a significant reduction in what you sell for when going it alone. That's because when you have a Realtor® on your side, we negotiate for you to make sure you get the best price for your home.

But the question remains, can you afford to sell your home? The best way to find out the answer to this question is to request a CMA - a Comparative Market Analysis by a Realtor® experienced in your area. This analysis should include a Seller's Net Proceed analysis as well. This will require you to be up front and honest with what you owe on your home. That will get you the best results. If you were hoping to get a specific amount out of the sale of your home, this is where to start to find out if it's possible.

Get your CMA before you start shopping for homes. You'll want to know whether it's a possibility or not. If you cannot afford to sell the home just yet, you may want to call your lender next and talk to them about an upcoming preapproval. Your lender may have a simulation tool that will help you either raise your credit score to get the best possible rate, or determine what debt to pay off to help you qualify for more money when it comes time to buy a home.

Doing a little homework in advance of your new home search can save a lot of heartache and time and energy.

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