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Selling a house is one of the major decisions you’ll ever have to make. The process involves more than putting your house on the market and waiting for the most suitable buyer. Whether you’re selling it to upsize, downscale, relocate for a job or retire somewhere, there are a lot of factors you need to take into account.
It’s typical for homeowners to expect a financial profit when they decide to sell their homes. But many are overly optimistic about their actual return on investment after selling. They often forget to consider every factor that makes up the worth of their home.
To help you set the most reasonable price and realistic expectations, here are some financial considerations you need to know before selling a home.
What Is Your Home’s Value?
Knowing the value of your home is the first critical step when you’re looking to sell it shortly. Remember that your home’s value can change over time due to certain economic conditions, which can impact your selling cost and price. But being in the know of what you should be getting for your property will help you make a more informed decision.
There are different ways to get an idea of how much your home is worth, but you can use the following approaches:
- Use Online Valuation Tools: With online valuations tools, all you need to do is input your address, and you’ll get the estimated value of your home for free. But though convenient, these tools don’t consider factors like repairs, which can affect your home’s worth.
- Work With A Real Estate Agent: Real estate agents have their own techniques when evaluating a home’s value. If you want to save time and effort, you can choose to work with one of them. They might also be able to factor in things that will add value to your home.
- Get A Professional Appraisal: Typically, you’re not obliged to get an appraisal as a seller. But it might be a good idea if you want the most thoroughly researched price estimates possible since a professional appraiser considers an array of factors, such as local market trends, comps, and property’s interior and exterior.
What Are The Costs of Selling A Home?
Selling a home may come with several costs, and while some of them are upfront and clear-cut, others may take you by surprise. It’s worth noting that these costs may vary from one seller to another, depending on factors like the selling method, timeline of selling, and the home’s condition.
But as a general rule of thumb, you can expect to put approximately 10% of the money you’ll earn from a home sale on the selling costs. Below are some of the typical costs you should be prepared to pay up.
- Real Estate Commissions: The typical commission of real estate agents is around 5%-6% of the home’s selling price when the deal closes. Although you may consider selling the property on your own, doing so may require some degree of expertise, especially in setting the price, advertising, and legal processes.
- Closing Costs: Around 1%-3% of the home price may be lost in paying the closing costs, which usually includes appraisal, home inspection, title policies, property taxes, and other customary fees.
- Repair Costs: Some fix-ups might be necessary to sell your home, which may cost you a lot. If you don’t want to deal with these repair costs, you have the option to sell your house as-is, but it may significantly affect your selling price.
- Seller Concessions: After a home inspection, buyers may request some major repairs. If you prefer not to make the inspection repairs, they may ask for concessions. You can do it by lowering the purchase price or paying for some of the buyer’s closing costs.
What Is The Right Price For Your Home?
When it comes to selling your home, you would not want to sell for significantly lower than its market value. But buyers may have a different view on value. Note that pitching your home at too high a price won’t sell fast and may go discarded in the market. On the other hand, an underpriced property won’t give you the best possible return on your investment.
It’s essential to understand the market you’re in to set the right price for your home. If you’re in a seller market, you may price your home slightly higher than the market value since the housing inventory is low. But if you’re in a buyer’s market, there are more housing options, so you may have to price your home slightly below the market value to get people interested.
What Are The Tax Implications of A Home Sale?
Keeping an eye on the calendar is critical when you sell your home. Because if you don’t, you could end up paying a hefty amount of taxes. Factors like how long you owned the house and whether or not it’s your primary residence can affect your taxes after making a home sale.
Capital gains come into play once you sell the property and make a profit. If you’re single, the first $250,000 of profit is tax free provided that you owned the home for at least five years and lived in it for no less than two of those years. On the other hand, the first $500,00 is tax-free if you’re married and filed taxes jointly.
But if you gain more than $500,000 from the home sale, or you owned the house below five years or lived in it for less than two years, you’ll have to pay regular income taxes on the profit. Nonetheless, it’s always best to consult a tax professional regarding the tax matters of a home sale.
Final Thoughts
Before deciding to put your house on the market, there are many financial factors you have to consider. Make sure you understand them and always take time to research your options. Also, don’t hesitate to ask for financial advice if ever you need one.
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