Weighing financial decisions against home sale

Planning Your Home Sale, Part 3: Finances

In our “Planning Your Home Sale” blog series, we’ve been talking about different reasons to sell your home in today’s hot seller’s market. In addition, we’ve been covering information you need to know, decisions you need to think about and moving plans you’ll want to have in place before you list your property. If you haven’t yet read the other articles, we suggest you check them out:

Part 1: Priorities

Part 2: Timing

In Part 3, we are going to focus on the toughest thing to talk about, and that is your financial situation. There are some instances where your financial situation may warrant a home sale with a move up or move down. Though emotions and other factors will be part of any home sale, it is ultimately a major financial decision for most of us. With that in mind, let’s look at some different scenarios.

Early Retirement

In the wake of COVID-19, we’ve seen a lot of people retiring early. Maybe their small business is struggling and they had to close shop. Maybe the company they work for decided to offer early retirement and severance packages rather than furloughing or laying off some workers that have been with the organization for a long time. Maybe it’s just a personal decision to retire soon, even if you originally planned to do it a few years from now.

Whatever the reason, you are ready to retire and that probably means selling your house to move to a new area or downsize into a smaller home. It’s a great time to sell and get excellent value out of your current property—with equity you can leverage into the perfect retirement home. Just know that today’s market is moving quicker than perhaps any we’ve ever seen in our many years as Realtors®. Make sure you have a plan before you decide to list, even if it’s renting out another place for a few months while you search for your ideal retirement location and fine-tune your financial plan for your retirement years.

Downsizing

We have been working with quite a few empty-nesters lately who are looking to downsize. They may already be retired, planning to retire soon or just have a house that’s way more than they need with the kids all grown up and moved out. It’s easy to stay where you are, but is it the best financial decision? You are paying for a bigger house that’s more work to take care of. We can guarantee there are plenty of buyers out there looking for bigger family homes like yours. They are willing to pay top dollar and close the home sale as quickly as possible. This is when it might make sense to take advantage of the seller’s market conditions. Sell your house, downsize and then put all that equity toward your future.

Moving Up

The opposite situation is also very common right now. More families are condensing their living situations with multiple generations living under one roof. Then, there are always young families who are growing and simply need more space to raise the kids. If you are planning to move up into a bigger home, it is vital to have a plan. Remember, there are two sides to a seller’s market. You can sell your current house or condo quickly and get a great price for it right now. That will give you a lot of equity to work with toward a new home purchase. However, as a buyer you will be on the other side of the coin. The good news is mortgage rates are low and financing is relatively cheap. The bad news is that you can expect to pay more and have to make very quick decisions as a buyer in today’s market.

You have to come in with a strong purchase offer and you may have to be prepared to make some sacrifices in the negotiations. Our recommendation would be to make sure you know where you plan to live before you list your current home. Don’t just sell your house because it’s a great time to sell. Figure out your buying plan first and then sell. Even if you have a little overlap in ownership, you are probably better off in the long run. Take your time to make sure you are buying the right property and making your move go as smoothly as possible.

Relocating

We’re seeing a lot of people moving away from the cities and into more suburban and rural settings. More of us are able (and encouraged) to work from home these days. Even when COVID-19 is behind us, remote living and working options will only continue to expand. This virus will forever change the way many businesses operate. If you don’t have to live near your office to work, you can move to a different area that’s more affordable and better suits your lifestyle needs. As long as you know that you’ll be able to work remotely from now on, it’s a good time to sell your expensive urban home and move into something that will save you money and make you happier.

Mortgage Forbearance

Forbearance is one of the hottest mortgage and real estate topics of 2020. It’s unprecedented for the government and banks to allow for homeowners to delay their mortgage payments for such an extended period of time. The thing to keep in mind, though, is that you aren’t skipping your mortgage payments. You are only delaying them. They will be due at some point and you might quickly find yourself behind. If you have been taking advantage of a mortgage forbearance plan, make sure you understand all the details and have a plan for making those payments when they start back up again—including any back payments that may be due by certain dates.

We’re seeing quite a few homeowners who are currently in forbearance deciding to sell before those payments are due. A quick home sale actually makes sense if you have accrued a good amount of equity in the home. As long as you aren’t upside down, you can sell the house quickly and for a great price. You can potentially make some money and move onto something more affordable while the mortgage gets completely paid off. It’s actually a brilliant move if you know you are going to struggle when the forbearance period is over (and you have enough equity in the property to make it worth your while now). However, there may be a downside. While forbearance gave you some breathing room AND it has stopped potential foreclosure, it did not stop comments or notes being applied to your credit report. These notes (which were not supposed to affect your credit) could make it problematic for you to refinance OR obtain a new mortgage on a property you wish to purchase. You need to have some serious discussions with your lender explaining what you did as this may impact your plans. Please, please tell your Realtor® so you do not have a deal fall apart because of this.

Financial Hardship

Whether you are in mortgage forbearance or just in another tough financial situation because of coronavirus and other economic problems, now might be the right time to sell. There may be a foreclosure moratorium right now, but that will not last forever. It may make sense to get out and move on while you can. Again, a fast home sale is a great idea if you have good equity in your home because you can probably use that cash and benefit from a less expensive living situation (smaller house or rental). Even if you are upside down on your mortgage, it could be the right move before things get worse. Nobody ever wants to be in a position of financial distress, but it happens. It’s important to explore all your options and make the best decisions for your financial future.

These are just some scenarios where selling in today’s market makes a lot of sense. If you are content where you are and don’t have a strong financial, emotional or physical need that is driving a major move, then it’s fine to stay put and keep letting your equity grow. If there is a reason to sell and you have a good plan to make it happen, you should be able to make the most of today’s market conditions.

As we suggested in the previous articles in this series, e always recommend keeping your house in good shape and pretending as if you are ready to sell it at any given time. This will give you a major advantage if and when you do decide to sell because you’ll be ready to act quickly. Even if you don’t sell anytime soon, you’ll still have a clean and upkept home that you’ll enjoy living in as long as you want!

If you are thinking about selling your home in Southeastern Pennsylvania or Northern Delaware, contact The Cyr Team today. We’ll be happy to set up a virtual consultation with you. We’d like to learn more about you and your situation to help you define your housing goals and make the right decisions for your financial future

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