By Jeremy DeLay, Tulsa Home + Design Realty
A number of factors play into why someone decides to sell their home and, when making the decision, timing can be everything. Traditionally, spring and summer are thought of as the best times to list your home but, depending on where you live and local market conditions, there may be plenty of other times that are right. Personal motivators are obviously going to be the main driving force in the decision to list your home, but understanding the market is also key to ensuring you achieve your goals, get the best return on your investment, and ultimately are able to find the perfect new home after you sell. Deciding to sell your home may be a very practical matter, you might have just outgrown it. As your family has grown and space has gotten tighter, it may be time to find a home with additional bedrooms, storage, or space to roam outside. A few things to take into consideration as you think through this big decision are return on your investment, budget constraints, and the inventory of existing homes on the market.
When thinking about the return on your investment in your home, consider how much you initially put down at closing, how long you’ve been in the home, and how much you hope to sell it for. Historically, the average Return on Investment in real estate in the U.S. is 8%-10% per year (this number may be much less depending on where you live), so you can use this as a guiding metric in determining if you’ve recovered your initial investment and earned a sufficient return. Ideally, you’ll be getting the equity you’ve put into your home back out when you sell and will be able to use this towards the purchase of your next home. Having a good understanding of your investment and the return you can expect to earn will be incredibly helpful in your decision to list your home. This brings us to the next very important thing to consider, budget.
If the supply in the market is greater than demand for new homes, a “buyer’s market,” it may not be the best time to list your property because you may not get back what you’ve put in and have the ideal amount for a down payment on your next home purchase. Before you decide to sell your home, it’s key that you meet with a trusted lender and are prequalified as a buyer. Make sure that you’re fully aware of what you’ll be able to offer on a new house, and that the new mortgage will fit into your budget. A couple of different metrics for determining how much to spend each month on your mortgage payment are the 30% rule, and the 50/30/20 rule. The 30% rule simply means that you spend no more than 30% of your take home pay towards your mortgage payment. This rule of thumb is very straightforward but is seen by some as outdated and potentially unrealistic. The 50/30/20 rule says that you should aim to spend 50% of your take home pay on necessities, including mortgage, utilities, and groceries, 30% on wants or discretionary spending, and the remaining 20% towards emergencies and long-term savings. These are just guidelines to help you as you plan out your budget and decide how much you can afford on a mortgage, but again, talking to a lender first is always best before you jump into the market. After you’ve worked out your budget and you know how much you hope to get from selling your home as well as how much you can afford on a new place, you need to consider the available inventory of homes in the market.
When demand is high and inventory of new homes is low, you’re in a seller’s market. While a seller’s market may be great from the standpoint of listing your home and getting a top-dollar return, you may be hard-pressed to then go and find a new home that you really want in your ideal location. Before you list, make sure you’re aware of the supply of new homes in the area you hope to move to. Additionally, just as you are able to sell for more money in a seller’s market, the homes you’re looking to buy will also likely go for much more than they otherwise would, and that may affect your ability to find what you’re looking for as well. This is where finding and working with the right Realtor and real estate brokerage is so important.
Something else to consider on the topic of inventory is thinking outside the box. You may find that you need to be open to alternative ideas such as renovating and expanding your existing home instead of selling. Or, if you’re certain it’s time to sell but can’t find your dream home, buying a new home that’s close to what you’re looking for and working with a design and renovation team to modify it and create exactly what you want. Here again, this is a great example of why talking to a lender and Realtor on the front end of this process is so important. You may discover that using the equity in your existing home to design and renovate your current space makes more financial sense than selling and purchasing a new home.
At the writing of this article, our market here in Tulsa, OK is in a huge seller’s market. Homes are selling incredibly fast, often within a day or two of listing, and frequently for quite a bit over the original listing price. There is also a very low inventory of new homes hitting the market, leaving everyone to compete for the ones that are available. If you’re in a position where you think you’re ready to sell, you’ve met with a lender and are prequalified, you’ve chosen a trusted Realtor who knows the market, and you have a good idea of what you want next, now may just be the perfect time to list your current home.
*At Tulsa Home + Design we work with clients at every step of their home-buying and owning journey to help them find and create spaces to live and grow. Call us today. www.tulsahomeanddesign.com