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Almost every day, someone calls The Dave Ramsey Show to ask Dave if he thinks they’re ready to buy a home. But there’s another side of homeownership that doesn’t get as much attention: When are you ready to sell your house?
It’s an important question to answer since selling at the wrong time can cause trouble for years to come.
“Should I Sell My House?” 4 Signs You’re Financially Ready
If you’ve been asking yourself this question lately, we’ve got good news: It’s a great market for sellers! Limited inventory continues to drive home prices up, and the latest data from the National Association of Realtors shows that nearly half of recently sold properties were on the market for less than a month.(1)
Of course, the decision of when to sell your house isn’t solely based on market conditions. You have to take your personal situation into account—and that’s where expert advice comes in handy.
We asked Linda Domis, a Los Angeles-area real estate Endorsed Local Provider (ELP) with nearly 40 years of experience, to share her advice. Here are four signs you’re ready to sell your house:
1. You’ve got equity on your side.
For most homeowners, being financially ready to sell your house comes down to one factor: equity. During the housing meltdown of 2008–09, millions of homeowners found themselves with negative equity, which meant they owed more on their homes than they were worth.
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Clearly, selling your home when you have negative equity is a bad deal. That’s called a short sale. Breaking even on your home sale is better, but it’s still not ideal. If you’re in either situation, don’t sell unless you have to in order to avoid bankruptcy or foreclosure.
For the last several years, home values have been on the rise, and that means most homeowners are building equity. Their homes are now worth more than they owe on them, and that trend will persist as they pay down their mortgages and home values continue to increase.
Figuring out how much equity you have may sound complicated, but the math is actually simple. Here’s how it works:
- First, grab your latest mortgage statement and find your current mortgage balance.
Next, you’ll need to know your home value. While it’s tempting to use figures from online valuation sites to determine how much your home is worth, they’re not always accurate. Ask an experienced real estate agent to run a free comparative market analysis (CMA) for the best estimate.
- Once you have those two numbers in hand, simply subtract your current mortgage balance from your home’s estimated market value. The difference will give you a good idea of how much equity you have to work with.
So how much equity is enough? Linda says it’s worth the sale “if your home has recovered enough value to provide at least 20% equity for your next purchase.” Why is 20% the magic number? Because putting 20% or more down on a home keeps private mortgage insurance (PMI) at bay. That could save you hundreds of dollars each year!
2. You’re out of debt with cash in the bank.
If you didn’t have all your financial ducks in a row your first time around the home-buying block, you probably learned a few things the hard way. Like the fact that Murphy can smell broke from miles away. If it can go wrong, it will! Put those lessons to good use and be a money-smart home buyer the next go-round!
Start by taking a hard look at your finances. If you’ve paid off all your nonmortgage debt and have three to six months of expenses in your emergency fund, that’s a good sign you’re financially mature enough to purchase a home again.
3. You can afford to buy a home that fits your lifestyle better.
Another factor to consider is how well your home meets your everyday needs. Perhaps you could use another bedroom (or even two) to accommodate your growing family. Or maybe your kids have all moved out and you’re ready to downsize.
“Empty nesters can really benefit from selling while rates are low,” Linda says. “It’s very freeing to sell a large home, pay cash for a smaller one, and invest the rest in your retirement.”
Whether you’re sizing up or down, make sure your mortgage fits your budget. Dave recommends keeping your monthly payment to 25% or less of your take-home pay on a 15-year fixed-rate mortgage.
4. You can cash flow the move.
Don’t get so carried away by the excitement of your next home that you forget to account for the cost of leaving your current one. Hiring professional movers? Save up cash to cover the cost of packing up and hauling your stuff away.
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You should also invest a little to get your current place ready for prime time. Linda recommends focusing your home-improvement dollars on these areas:
- Paint: “Paint is the number-one investment when upgrading,” she says. “Buyers love the look—and smell—of fresh paint.”
- Curb appeal: You only get one chance to make a first impression. Linda suggests a three-pronged approach: “Plant flowers, trim shrubs, and paint the trim.”
- Kitchen and bath: “You don’t need expensive appliances or countertops, but new faucets and fixtures go a long way,” she says.
Want a bonus tip that doesn’t cost a dime? Clear out the clutter. “Neat closets and tidy shelves make your home look larger!” Linda adds.
When Are You Emotionally Ready to Sell Your House?
If the numbers show you’re financially ready to make a move, great! But don’t forget, selling your home is an emotional issue too. Before you plant the For Sale sign in the front yard, take a minute to answer just a few more questions:
- Are you ready to put in the work to get your house ready for house hunters?
- Are you committed to keeping it ready to show for weeks or months?
- Are you ready to hear the reasons why potential buyers believe your home is not perfect?
- Are you ready for honest—and sometimes hardball—negotiations over what buyers are willing to pay for your home?
- Are you really ready to move out and leave the place where your family has made memories?
Don’t get us wrong; we’re not trying to talk you out of selling your home! We just want you to be completely ready when you do decide to move on to the next stage of your family’s life.
A qualified real estate agent will give you a clear picture of what it’s like to sell your house and if now is the right time for you, both financially and emotionally.
Ready to Sell? Get More Money for Your House in Less Time
There’s no single formula for determining when to sell your house. Partner with a pro you can trust to provide honest advice so you can do what’s best for you and your budget. A good agent puts service before sales—but knows how to get things done when it’s time to sell.
Looking for a pro to guide you in the right direction? We can recommend a real estate agent in your area who’s earned Dave’s endorsement.
When it comes to selling homes, our ELPs rise to the top. According to a six-month survey of home buyers and sellers who used an ELP versus those who used other real estate agents, our ELPs are twice as fast at selling homes and twice as likely to sell your home above asking price.
Don’t trust an amateur with one of your biggest financial investments. Work with a high-octane agent who knows your market inside and out and can get you top dollar for your home. Find an ELP in your area today!