Most homeowners that are selling a home are doing so to purchase another home. If you’re planning on purchasing another home after you sell, it’s important to know if you should sell now or wait until later. Answer the following questions before you decide:
- Am I going to sell and buy a more expensive home?
Based on recent housing data, there has been double-digit appreciation this past year. It’s very possible we could have double digit appreciation again during the coming year. If you sell now, you’ll lose the additional appreciation, but it will cost far more to purchase the more expensive home. For example, you sell your house now for $100,000, and purchase another for $200,000. If you were to wait another year and market values increased another 10%, you would lose the extra $10,000 ($100,000 x 10% =$10,000), you could have made by waiting to sell your home until later. The problem with that logic is that your new home will now cost $220,000 ($200,000 x 10% =$20,000). The net effect if you wait to sell is that you will lose $10,000 by waiting to buy the more expensive home. (You make the extra $10,000 by waiting, but it cost you $20,000 for the new home for a net loss of $10,000.
- Am I going to sell and buy a less expensive home? In this case, selling now to downsize or buy a less expensive home may not make sense. If you were to reverse the prices above and you sold your $200,000 house, you would lose $20,000 in additional appreciation you could have made by waiting until next year to sell. If you were to purchase the less expensive home today, you would save the $10,000 extra it would have cost you next year after it appreciated 10% to $110,000, versus buying today at $100,000. From a financial perspective, it would make sense to wait to downsize because you would be ahead $10,000.
- If I wait to sell what would I be sacrificing in my quality of life?
Assuming you had decided to take advantage of the additional appreciation by waiting to downsize, you still have to consider the emotional cost of waiting to sell. Give serious thought to the emotional drawbacks of waiting to sell. then make a list of the disadvantages of waiting. Compare the list of disadvantages to the additional money you would be making in the above example and then decide if that dollar amount justifies you waiting until later to sell.
As you can see from the above example, the sale of a home cannot be determined solely from either financial or emotional considerations. Each category must be carefully reviewed for both benefits and drawbacks with the results contrasted or compared to one another. After all, there is no scientific formula for buying and selling real estate for personal use.