It’s a question that plagues nearly every homeowner who’s ready to move on: When is the best time to put my house on the market?
And given that the housing bubble burst in 2008, another question inevitably surfaces: Just how much money can I expect to lose?
Well, it really depends on where you live, says Jed Kolko, chief economist and vice president of analytics at Trulia.com. The good news is that, in most of the country, it’s a seller’s market. “Inventory is very tight, so sellers have little competition, while buyers are getting into bidding wars—and sometimes even facing off against investors,” says Kolko.
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The bad news? Prices are still sluggish to rebound in some big cities, like Chicago, Philadelphia and Newark, New Jersey. That said, a few metropolises have fared better. “The biggest price increases have been in Phoenix, Las Vegas and Oakland,” says Kolko.
So how do you know if it’s a good time to sell where you live? Experts weigh in on three homeowners living in popular regions of the country who are currently debating whether to pack up or stay put.
“We're ready to unload our rental property. Is now a good time to sell?”
—Mindy, Nashville, Tennessee
The Back Story: In 2004 we bought a 3-bedroom, 2 1/2-bath house for $446,000. It was the cheapest home in a really upscale neighborhood. In 2008 we were expecting another child and knew that we were outgrowing the house, so we listed it for $574,900 and went ahead and bought a bigger house for our expanding family—but the first house never sold. We took it off the market after eight months, and we have been renting it out ever since. The renters cover all of our expenses, but we’re definitely ready to unload the responsibility of owning two homes. Is now a good time to sell? We don’t really want to lose any money on it, so we're wondering if waiting another year or two will allow us to sell for closer to what we paid for it. We have no idea what it would go for today, which is why we're looking for advice!
Expert Advice From ... Wade Shealy, Nashville real estate expert and CEO of 3rdhome.com: Many areas of the country are seeing really great homes in this price range sell very quickly, especially if it's the lowest-priced property in a desirable area. Where I live, in Franklin, Tennessee (just south of Nashville), nice homes in this price range aren't staying on the market very long, and prices are holding very firm—some even better than 2004 prices.
However, one of the biggest demands in the Nashville area right now are homes just like this one that are up for rent, because many professionals have lost their homes and they're looking for upscale homes to rent. Also, with tougher mortgage requirements and lower credit scores, many couples are looking to rent instead of purchase.
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If the home is in good condition, and it doesn't require much in maintenance expenses, the best bet may be to continue renting. Rental rates in Nashville are continuing to rise, and we'll probably see a rise in property values as well. If you find a tenant who's responsible and financially worthy, it won't require the owners to go too far out on a lease. With a one-year lease and an option to renew, two good things could happen:
- Home prices continue to rise, and you have more profit on the sale of the home in future years.
- After the one-year lease comes up for renewal, the tenant may allow you to list the home for sale, while continuing to rent, which gives you the best of both worlds.
This scenario just happened recently to a friend of mine. They leased a home for two years while the market was depressed, giving the owner rental income. The tenants wanted to renew, so the owner has agreed to a month-to-month arrangement while the home is on the market. Since the tenants have nice furnishings, the realtor is excited to have them in the home because it shows better. In this case, everyone is happy, and the owner may reap a higher sales price than two years ago—all while collecting rent on a regular basis.
RELATED: Rents Are Rising—What Should You Do?
“We’re outgrowing our starter home.”
The Back Story: Two years ago my husband and I bought a 2-bedroom townhouse for $265,000. We’re now pregnant with our second baby, so we need more room! But we’re concerned because there’s a townhouse that's similar to ours in the same development that just sold for $10,000 less than what we paid. We’ve upgraded the furnace, but our kitchen and AC are original from when the complex was built in 1991. Should we upgrade these before putting it on the market, or is that a waste of money? And should we go ahead and list our home or wait to see if prices come back a little more?
Expert Advice From ... Jill Hare, vice president of sales for Jameson Sotheby’s International Realty: Chicago is experiencing ridiculously low inventory right now due to a perfect storm of people renting out their places rather than selling, and others who are remodeling instead of selling—which makes it a great market for sellers. And the good news is that your neighbor has already stuck their neck out and done the market testing for you. The bad news is that they’ve established a comp price, and you're likely not going to get what you paid for your townhouse.
I recommend listing your place, but don’t worry about upgrading your kitchen or furnace. The cost is never justified, and a buyer may prefer light cabinets over the dark ones you choose. It’s best just to have them buy the home at a competitive price, and then let them do the upgrades they want.
What will be most difficult for you is timing the buying of a new home while trying to sell your existing home—and having a baby on the way. The chances of being able to close on a house that you buy at the exact same time that you close on your townhouse are small, and you’ll probably need a backup plan—a place to move into in the interim. If you don’t want to move twice, another option is to buy a new home and rent out your townhouse. Rental rates are good now in Chicago, and could easily cover your first mortgage. Then you could put your house on the market in 2014, once you’ve rented it out for a year and you're settled into your new place.
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“We’re getting cabin fever.”
The Back Story: My partner and I bought a 2-bedroom, 1-bath, 800 sq. ft. condo in 2007 for $130,000. We’ve made a few upgrades to it, including hardwood floors and slate tile. But we’re getting cabin fever. We don't necessarily want to move to a bigger place, but we would like to buy a condo with covered parking—we’re tired of shoveling snow off the cars! In the past year, other condos in our development have sold for $124,000 to $134,000. And a few have gone into foreclosure and sold for between $119,000 and $122,000. So should we sell or sit tight?
Expert Advice From ... Michelle Ackerman, managing broker for Redfin.com: Denver’s housing market is definitely in recovery mode. However, the condo market is lagging a bit behind single-family homes, thanks to the tougher lending guidelines for condo purchases implemented by the government in response to the housing crisis. Since you bought in 2007, before the deep drop in prices that happened in 2008, I'm not sure that you will recapture what you paid.
In addition, as part of those tougher guidelines that I mentioned, condos require an extra step with the lender to ensure that the Homeowners Association (HOA) is in good financial standing, as well as to ensure that there are no other compliance issues. If your HOA is experiencing any deficiencies—such as being involved in any sort of litigation or financial challenges, or owners being behind on their dues—you may want to wait to sell until they are cleared up. One reason to sell now would be if you foresee any challenges with your HOA down the road. Selling before major issues arise will make the property easier to finance. However, if you don’t anticipate any future HOA issues, I would sit tight, because I think prices will continue to increase through this year, setting homeowners up nicely for 2014.
Planning to Sell Your Own Home?
If you're considering the idea of putting your place on the market, LearnVest Planning Services CFP® Ellen Derrick highly recommends enlisting the services of a realtor right away. "People think that a realtor is there just to put ads in the paper or list the house on their website, but you’re really paying for advice," she says. "So when your realtor tells you what they think your house is worth, listen to them!"
It's also a realtor's job to be up-to-date with your local market, so someone who lives and works in your area will best be able to guide you. "Your realtor can even tell you things like whether you should upgrade your appliances or paint your walls—or whether that's a waste of money," Derrick explains. "At the end of the day, your home is only worth what someone will pay for it—not what you owe on your mortgage or what you think you should get."
Derrick, who with her realtor husband has bought and sold 10 houses in the past 14 years, also shares a pro tip for people with homes on the market: "Clean out all of the clutter—it should look like a hotel. People want to be able to see themselves in the space, but when your personal pictures are on the walls and your books are filling the bookshelves, there's no room for them."