Consider whether or not you should sell your house.
Examine your personal finances regarding the selling decision.
Determine how much youâll net from the transaction.
Understand your financing options.
IN THIS CHAPTER
Making the choice: To sell or not to sell Selling in weak and strong housing markets Selling your house and moving can be an enjoyable (not to mention profitable) experience. Unfortunately, for most people, it isnât. Selling a house not only introduces financial turmoil into most peopleâs lives but also causes them stress.
One goal of this book is to help you make the right decision about whether to sell your house. If you do decide to sell, we want to make sure you get as many dollars and as few upset stomachs from the sale as possible.
The reasons people want to sell their houses are almost as varied as the houses themselves. Here are some of the common, not-so-common, and downright bizarre reasons:
- Additional debt burden because of layoff, medical expenses, disability, or overspending
- Bad vibes or bad luck associated with the house
- Better job opportunities elsewhere
- Diminished space requirements now that children are grown
- House located in a flood, earthquake, or other disaster zone
- Increased space requirements for expanding family
- Lack of garage
- Neighborhood conditions incompatible with socioeconomic status
- Noisy neighborhood
- Noisy/messy/obnoxious family or business moved next door
- Recent death of spouse
- Recent marriage or divorce
- Serious house defects (such as radon or termites) that owners donât want to or canât afford to fix
- Unfriendly neighbors
- Unsafe neighborhood
- Unsatisfactory neighborhood shopping
- Unsatisfactory school district
- Unsuitable climate
As you can see from this partial list, most of the reasons why people have a desire to sell their houses are based on wants, not needs. In the United States, we sometimes take for granted how economically fortunate we are.
You donât need to move because your neighborhood is too noisy or because your house seems too small. You donât need to move because the weather in your area isnât nice enough. You donât need to live on quieter, tree-lined streets.
All these features are things people desire or want, not things they need. And people who think they can afford to pay for such things usually get more of what they want. Sometimes, however, people spend money moving and, ironically, still donât get what they want. The weather in the new locale may not be terrific, the neighbors may not be friendly and quiet, and the schools may not turn children into stellar students. You may move to get away from particular problems and then find yourself facing a new set of problems.
Weâre certainly not going to tell you how and where to spend your money â thatâs your choice. However, we definitely want you to make the most of your money. Unless youâre one of the few who has far more money than you can ever possibly spend, we suggest that you prioritize the demands on your money to accomplish your most important financial goals.
Nothingâs wrong with spending money to trade in one house for another, but
before you set those wheels in motion, think about the impact of that kind of spending on other aspects of your life. The more you spend on housing, the less youâll have for your other goals, such as saving for retirement or taking annual vacations, and the more time you may be forced to spend working.
Figuring Out If You Really Need to Sell
Although spending your entire life in the first home you buy is an unlikely prospect, some people do end up living in the same home for 10, 20, even 30 or more years. Ray (humble coauthor of this book), for example, lived in his home nearly 30 years. Rayâs no fool; staying put must have its advantages.
If, like most prospective house sellers, you have a choice between staying put and selling, not selling has clear advantages. Selling your house and then buying another one takes a great deal of legwork and research time on your part. Whether you sell your house yourself or hire an agent, youâre going to be heavily involved in getting your house ready for sale and keeping it pristine while itâs on the market.
In addition to time, selling your house and buying another one can cost serious money. Between real estate commissions, loan fees, title insurance, transfer tax, and myriad other costs of selling your house and then buying another one, you can easily spend 15 percent or more of the value of the property that youâre selling (see the bar on the left in
Figure 1-1).
Fifteen percent sounds like a lot, doesnât it? Well, consider this: Unless you own your house free and clear of any mortgage debt, your transaction costs are going to gobble up an even larger percentage of the money youâve invested in your home.
Check out this scenario: Youâre thinking about selling your $240,000 house. If selling your house and buying another one costs you about 15 percent of the first houseâs value, then youâre taking $36,000 out of your sale proceeds. However, if you happen to owe $180,000 on your mortgage, your equity in the home â the difference between the amount the house is worth ($240,000) and the amount you owe ($180,000) â is $60,000. Therefore, the $36,000 in transaction costs devours a huge 60 percent of your equity (see the bar on the right in Figure 1-1). Ouch!
Before spending that much of your hard-earned money, make sure you give careful thought and consideration to why you want to sell, the financial consequences of selling, and the alternatives to selling. In
Chapters 2 and
3, we walk you through the personal financial issues that you need to weigh when contemplating the sale of your current house. But before we get to the numbers, consider the qualitative issues.
Good reasons to stay
Whereas some people have clear and compelling reasons for selling their homes, others do so for the wrong reasons. You donât want to make the financially painful mistake of selling if yo...
