5 Questions To Ask Before You’re Ready to Sell Your House
1) How much is your home worth?
When estimating how much your home is worth, many real estate professionals use recent comparable home sales in your neighborhood to determine the price range that you can sell your home for. In the real estate industry, these comparable homes are referred to as “comps” and by comparing different sale price comps, you can get a general sense of a price range that home buyers might pay for the home you are trying to sell.
No two homes are exactly the same so there are several items that need to be taken into account when determining if the home is comparable.
- Number of bedrooms: How many bedrooms are in the home you are trying to sell versus the comparable one
- Number of bathrooms: How many bathrooms are in the home you are trying to sell versus the comparable one? You might need to adjust depending on what size bathrooms you have versus the one you are comparing to.
- Size of the home: What’s the size of the home you are trying to sell versus the one you are comparing to? What’s the price per square foot in your area and how does that compare to your square footage. It’s also important to note finished square footage is what’s important when calculating this number. Unfinished square footage, and below-ground square footage affect your value differently.
- Unique features: Does the property you are going to list for sale have any unique features such as a fireplace, pool, sauna, or maybe even a bowling alley? How does that stack up to the home you are comparing yours to?
It can be difficult to determine how much your home can sell for. That is why we recommend selecting a professional real estate agent to come out and give you recommendations on what you might be able to sell your home for. They will run a similar analysis as we mentioned above but have much more experience doing so than the average consumer. Additionally, one extra tool you can use is Trelora’s home value estimator which is located on our website.
2) Do you have enough equity?
The main factor to being financially fit to sell your home relies mostly on the amount of equity that you have available. If you remember, the housing crisis in 2008/2009 caused many homeowners to have negative equity, meaning they owe more on their homes to banks than the home is actually worth.
What is home equity?
Home equity is the percentage of the home that you actually own vs. what the bank owns. If you bought your home entirely with cash, then you would have 100% equity. However, most people take out a loan to purchase a home and typically put 10% – 20% down, so they are essentially slowly building equity by paying off interest and principal each month.
You can easily estimate your home equity by simply subtracting your remaining loan balance (the amount you owe on the home) from the amount of money you can actually sell your home for.
Again, you can get a general estimated home value from Trelora Sell or you can schedule a free pricing consultation for an agent to come and give a cost analysis of your home that you are trying to sell.
Why do you need home equity to sell your home?
You never want to lose money when you sell your home and breaking even is ok but still not the best result. If you think you’ll lose money or even break even on your home, it’s almost never a good time to sell unless you are trying to avoid bankruptcy. If you owe more on your mortgage than you can sell your home for, then you have negative equity and it’s not a good time to sell your home.
Luckily, the last few years have been beneficial to homeowners because home values have been on the rise. That means most homeowners are building equity and are probably in a good situation to sell their home. Depending on the market value of your home and the amount of downpayment you placed when initially purchasing it, will greatly affect the amount of equity you have and your ability to safely sell your home for a profit.
3) What are the costs to selling a home?
In addition to having enough equity, it’s important to factor in additional costs that are required to sell your home. You’ll need a combination of enough equity and cash on hand to cover these costs. The total cost of selling a home can be around 10 percent of the sale price. These additional costs include seller concessions, possible closing costs, repair costs, and maybe housing overlap costs if you can’t line up selling your home with the purchase of your next home.
Below is a breakdown of the average standard costs (not all of these will affect you) to sell a home. Values are based on average sale price of $300,000:
- Staging costs – $3,000: Staging a home can help your home sell faster.
- Home repairs/renovations – $15,000: You’ll want to paint, fix minor issues, etc.
- Real estate commissions – $18,000: Most agents charge about 6% of a homes sale price. Trelora can save money here by charging a low, flat fee.
- Seller concessions – $4,500: Depending on several factors such as your inspection report, sellers sometimes have to pay concessions to the buyers.
- Closing costs – $3,000: Sometimes closing costs are negotiated into the contract and are paid for by the seller.
- Moving costs $2,000: Cost to hire movers, trucks, buy boxes, etc.
- Transition costs $2,000: Maybe you need to rent an apartment for a month while your other home sells?
4) How long does the selling process take?
If you plan on selling your home, always consider the amount of time it might take to sell your home. Always factor in a scenario where it might take longer to sell your house, just in case. There can be a significant financial impact if it does, and you should prepare yourself financially to be on the safe side.
One of the strongest indicators in determining how long it will take to sell your house is the average days on market (DOM). This is a basic real estate statistic used by professionals to track the time a home is active on the market from its initial listing date until the final contract is signed.
Days on market can vary widely depending on the season in which you are trying to sell and also local market conditions. Additionally, there are several other factors that take place before listing your home such as photography and staging. See our timeline below for average days it takes to sell a home with Trelora.
5) Do you have a good real estate agent?
We highly recommend that you interview several real estate agents before selecting one to help sell your house. When interviewing agents, be sure to ask about their experience, connections to buyers, and marketing expertise. A real estate agent should be able to give you a well thought out plan on how they are going to sell your home including their marketing strategy. Lastly, be sure to ask real estate agents about their commission structure because real estate agents are still selling homes for 6% of the final sale price. Many people believe that a 6% commission is no longer a fair price to sell a home for several reasons:
- Homes are much more expensive now: In past years, homes sold for a fraction of the price they are now, a real estate agent earned much less then. Real estate agents have essentially gotten a 100% raise over the last 7 years and we don’t think that’s entirely fair.
- The internet has made things easier: Real estate agents have much less work to do now that the internet is making buying and selling homes easier.
- Alternatives to a 6% commission structure exist: There are several high quality companies out there now that will sell your house for either a flat-fee or a much lower percentage which will help you get top dollar for your home; Trelora being one of them.
Next Steps: Should You Sell Your Home Now?
If you ask yourself these 5 questions and “pass” the test, then you are in a good position to sell your home. We think the most important factor in selling your home is determining how much equity you have and if you can afford to sell your home. You’ll want to have enough equity to cover the cost of selling your home, moving costs, transition costs, and possible repairs, but hopefully have some leftover to put towards the down payment for the purchase of your next home. Additionally, factor in the timing in which you are selling your home because seasonality and possible home overlap can affect your final price that you are trying to achieve.