How Long Should You Live In Your Home Before You Sell It?
To us, this is a strange question. We can give you the facts and statistics, but mostly, we disagree with this approach. There is no SHOULD in the answer to this question. We just think it's an unhelpful overall approach for our clients. Let me explain what I mean.
According to the National Association of Realtors®, ten years is the average amount of time that a homeowner will stay in their home before deciding to sell it.
If you're under ten years and itching to sell, many experts say you should (there's that unhelpful word) follow the “five-year rule” and stay in the same home for at least five years before selling.
While the above information is helpful, experts can only speak to so much. They can give us great statistical information on what the averages are and what generally people do, however, they cannot speak to your very personal goals and dreams associated with your real estate journey. The truth is, we hope you live in your home for as long as it continues to provide you the space that you want and the amenities that are important to you. If it is serving you, then allow it to keep serving you! When it is no longer serving you, for whatever reason, that's a great time to consider selling.
If you're on the fence about any of the above, we encourage you to consider the following things. If you have any questions about the information below, we are here. You can lean on the PIH Team to help you answer any questions you might have!
A few things to consider:
1. Your Mortgage
One of the first and foremost factors to consider when you decide to sell your home is your mortgage payment. If you want to make money when you sell your home, then your sale price must be greater than what’s left of your mortgage. When you first buy your home and begin to pay your mortgage, the first few years will go towards interest rather than the principal amount. This typically means that it’s more difficult to make money off your sale under 5 years. However, if you put a larger downpayment on your house, then your interest rate and mortgage will probably be smaller, making it possible to make money in a shorter amount of time.
Building home equity is important. You’ll want to have a lot of equity built up when you decide to sell. The amount of home equity you’ve obtained depends on any remodeling or renovations you’ve made, as well as your mortgage. If the home you bought was already in tip-top shape, then it may be difficult to build equity. If you’ve remodeled the kitchen, bathroom, redone the flooring, or made other renovations around the house, then you have most likely gained home equity. You can also increase your home equity by paying off more of the principal on your mortgage.
3. Market Conditions
One of the more common reasons you’re eager to sell your home is to make money on your property. There are a few things to look out for when deciding if it’s a seller's market and whether or not it's time to make your move. If you notice the price per square foot in your area is increasing, chances are that homes stay on the market for a shorter time. You should also take note of homes near you that are selling. It might seem time-consuming, but don't worry! We always keep track of recent home sales in the area and can send you over an up-to-date market report.
Is your space still serving you? Do you have the space you want for the projects you like? Are you looking to expand or seeking to downsize? Do you want a larger yard? Or maybe a smaller yard will suit you more so there is less to maintain! All of these are good questions to ask when considering your space or amenities you are seeking.
Other life changes such as career shifts, divorce, illness, or even the need to downsize may also lead you to sell sooner than you originally planned.
5. Capital Gains Tax
If you don’t qualify to avoid paying capital gains taxes on the sale of your home, you may not want to sell your home yet. To avoid capital gains taxes, you should make an effort to stay in your home for at least two to five years. Making a sale before two years could be a huge mistake, and could ultimately leave you without much equity, especially if you have to pay capital gains tax.
6. Closing Costs
Closing costs are often overlooked but play an important part when it comes to selling your home. On average, real estate agents have a commission rate of 6% when you sell your home. You are also likely to pay a closing cost when buying a home, which can be between 3%-6% of the purchase price of the home. Keeping closing costs in mind before you sell allows you to budget this into your expenses and avoid surprises when it comes to closing.