Beware Of Traps When Selling Your Home
Are you thinking about selling your home? Many homeowners are keen to cash in on the rise in house prices and bank the profit.
However, many homeowners who sell up even when their home is worth more than when they bought it end up worse off.
How so? An example of a loss is when you sell your property and buy a home worth the same amount – you’ve lost money! The fees associated with selling and purchasing can turn a profit or neutral position into a loss.
Depending on your reasons for selling, an unfavourable position from the sale and purchasing another home may not bother you. However, for some homeowners unaware of the traps to selling their most important asset, this blog post is for you.
Most Homeowners Sell Every 8 Years
Eventually, most homeowners sell to upsize, downsize, or move to another location.
On average, in the USA, homeowners sell their homes every eight years.
In the UK, homeowners will stay a lot longer, with an average of 19 years though some research says it’s much longer, i.e., 23 years.
Many factors influence the decision to stay rather than sell and buy another home, and they include the following:
- Job Status
- Natural and manmade disasters
Economies are still recovering from the Covid pandemic and there is some way to yet as downturns continue and real estate values drop.
Job security is still on workers’ minds, particularly employees in the hardest-hit industries, e.g., tourism, hospitality, and travel. Knowing when to sell your home is vital to getting the best price. Avoid selling your home in a recession when it is at its lowest value. Ideally, sell at the property boom’s peak when there are more homebuyers than homes for sale. Read on to learn more about the property cycle.
How To Avoid Selling, Buying Traps
However, some homeowners need to sell, and before they do, they need to know the following factors to plan their best and worst-case scenarios so they come away from selling their home with the best outcome they could ask for.
Let’s start with what homeowners should know about the property cycle and what they need to know about their property and the local property market.
Homeowners don’t need to be experts in property cycles, but as their home is a big-ticket item, they should know what may affect its value.
A property cycle is said to go from boom (highest property values and sales prices) to bust (lowest deals and sales prices) and typically it can take 10 – 18 years to go complete cycle.
Forbes says USA is entering a new 10-year property boom so homeowners don’t need to rush into selling their home as property values go up in a crash.
Some might say the news is not as optimistic in true English fashion in the UK.
A property market crash is rumoured however when exactly is undetermined with most commentators saying within the next few years.
Hence, if you need to decide whether to sell your home imminently, you’d know you’d get a reasonable price providing the house is in good order, but equally, the home you purchase (if you need to buy a replacement home) will also be at near-peak sales price.
The property cycle tells you that if it’s in a boom, it will typically go through another phase before it reaches the bottom of the process, i.e., bust. The transitionary stage is called the ‘downturn’ or slump.
Knowing the property cycle lets you manage your expectations for a property’s sale and purchase prices. But the property cycle is just one of many factors that you need to know.
Local Market Knowledge
Similarly, homeowners don’t need to be obsessive about property price moments, but a healthy curiosity will come into its own when it’s time to sell the house.
To learn about sales prices, research similar homes in the local market and plot the trends over a few months so you know the sales prices for properties comparable to your own. Some areas hold their value regardless of what is happening elsewhere.
Is your house in an area that’s in high demand?
Plus, homeowners need to keep up to speed with changes in the area that can impact the value of their property, including:
- Housing Developments
- Commercial Developments (shops, offices, etc.)
- Infrastructure Projects (roading and transport, parks, etc.)
You’d be surprised how many homeowners are not house-proud and neglect maintenance. All homes depreciate, and they wear out, so maintenance and, when required, replacement is a big part of the ongoing costs of homeownership.
What is the condition of your property? Get it checked out by a qualified builder, plumber, or electrician regularly – not just when something goes wrong.
Knowing what could devalue your property before you list it for sale empowers you to decide to repair, replace or leave it.
A real estate agent can inform you of the cost of leaving a significant feature in a poor state.
For example, a window seal may be broken, and over time the water has seeped into the frame, and this may be a big repair job, but to leave it may knock your listing price or eventual sales price down by thousands or tens of thousands as no one likes leaky homes. Knowledge is power.
When your builder or property expert visits, ask them about your home’s renovation potential. You may wonder why I want to renovate the property if I leave it. Well, a kitchen makeover, for example, can be the room that attracts a buyer to pay more for the property.
Curb appeal gets prospective buyers to turn up to home viewings and put in an offer. The renovation may cost you $10,000, but you get $20,000 more than your sales price expectation.
In summary, you need to know the following:
- Property Cycle basics
- Local Market activity
- Condition of the property
- Renovation potential
What’s your plan? Avoid impromptu decisions about selling or staying in your home unless you have done the groundwork mentioned in this blog post.
If you’ve been researching and know all you need to know to make an informed decision to sell your property, then listing your home is not an impromptu decision – you’ve been planning it for months, if not years.
When you can answer these questions, you know you’re in control of selling and purchasing.
Selling a property
- How much can I sell my home for?
- Is my home in its best condition to achieve my ideal sales price?
- How much will the costs sell be?
Purchasing a property
- Is the property within the market value for its condition?
- What are the purchase costs?
- Can I afford the repayments, insurance and rates?
- What are the ongoing maintenance costs for purchasing the property?
- What may impact the property’s future value?
Avoiding the traps of selling and buying a property takes more than a quick decision. You will need local market knowledge, a keen interest in the condition of your home and how to improve its value. The same applies to the property you wish to purchase.
A tick list of the property’s condition and the maintenance or replacement costs in the short, medium and long term.
Plan to stick to your goals, and don’t let emotion trap you into selling less than your home is worth or buying a property that’s not worth it.