Should You Sell Your House?
Are you wondering if now is the time to sell your house? With the Federal Reserve raising interest rates, you may feel compelled to put out the “for sale” sign in case the housing market cools off. But before you contact your real estate agent, consider these questions to determine whether you’re ready to move or if you’re better off staying put.
How Much Equity Do You Have in Your Home?
With home prices up sharply, you could stand to make a good deal of money. But your proceeds will be offset by how much you still owe on your mortgage.
Consider determining how much you may make given current prices. In addition to your loan balance, subtract broker’s fees, closing costs, and any improvements needed to prepare the home for sale.
Also, consider what you will use the proceeds for and ask yourself if you will have enough. For example, you may have an eye on a new home—will the proceeds provide the down payment?
Will You Need to Pay Capital Gains Taxes?
You will not have to pay capital gains taxes if:
Your home has been your primary residence in which you lived for two of the past five years
Your sale proceeds do not exceed $250,000 if you are a single taxpayer or $500,000 if you are married
Above the $250K/$500K amount and you will need to pay taxes. (You may be able to use receipts from home improvement projects to reduce what you owe.)
Where Will You Live After You Sell Your Home?
While interest rates were low during the pandemic, sellers competed to buy property. With interest rates on the rise, the home inventory will likely increase and prices may stabilize—but the impact’s extent is unclear.
Are you prepared to buy a home at a premium price? Have you considered what kind of home you like? If you have a family, you may be planning to upgrade to a larger home. If you’re ready to retire, you may want to downsize.
Once you know what you want, check the market to determine availability and prices to see if the move is feasible.
Have You Factored in Property Taxes?
You won’t just pay a home loan—you’ll have property taxes to budget for. Colorado has one of the lowest median property tax rates in the U.S., so if you plan to move out of state (perhaps to warmer winter climates), you’ll want to research how property taxes can affect you. You may find this Kiplinger review of state taxes helpful.
How Do You Feel About Your Current Home?
You may feel dispassionate about moving if you view your property as an investment. However, if it was the home where you raised your children, you may have second thoughts about moving. At the least, you’ll want to process any emotions, perhaps with the support of friends and family, before you say goodbye to the house.
Do You Have a Social Network in Your Desired New Location?
This question becomes key if you plan to move to another state or away from family and friends. In essence, you’ll be starting over. Does the new area offer opportunities for you to meet new friends? Does it provide access to activities you love, such as hiking or dancing?
Final Thoughts
With interest rates rising, it’s natural to feel like you should sell while you have the chance. But that doesn’t mean it’s the right decision for you. Take a hard look at the pros and cons before you list your house.
If you work with a financial advisor, talk with them about how the home sale can benefit your financial situation and its potential disadvantages. Our fiduciary financial planning firm in Greenwood Village, CO, regularly helps clients make decisions about buying and selling as part of their financial goals.
We offer a complimentary 15-minute call to discuss your financial situation and concerns and share how we may be able to help.
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