“Normal” Sellers…When is the Right Time to Sell?

Westcoe Realtors, Riverside California…This is probably the most universally asked question by all our clients who currently own a home.  We have learned over time that this question is usually code for “When will my home be worth an amount that will not make me choke”, as most home owners wistfully pine for the glory days of 2005.  However, this is really a very good question…and one that we will attempt to answer here, because most home owners have a tendency to look at this from a clouded window.

First, for purposes of this discussion, we will assume that as a seller, you are not being forced to sell your home, ie; that your decision on whether to sell or not is voluntary, and can de done at any time.  For anyone who is forced to sell their home (transfer, divorce, financial issues, etc.) generally the best time to sell is when life forces you to do so.

Secondly, we will also assume that you have equity in your home.  Granted, it may not be as much as you had a few years ago, but you still have some.  Contrary to the national news, there are many people who fall into this category, and simply want to know the best time to sell their homes.

So, where to begin?  Given the above two assumptions, potential sellers fall into one of two categories.  The first is those sellers whose sole purpose for selling is to buy another home in the same basic area (basic area in this case would refer to the Inland Empire/Southern California).  This would include anyone who wants more bedrooms, bigger home, larger yard, etc.  An “upward” move, for lack of a better description.  As your family grows, so does your housing needs.  The second category is for those home owners who are perhaps downsizing, retiring…the kids are out and you are now looking for a smaller home, less upkeep, more suited for your changing lifestyle as well…or perhaps you are not even going to repurchase at all, but rent, or move far away to retire.  Let us look at both of these scenarios.

Staying in our area, buying a similar or larger home.

Unfortunately, most people in this category have focused far too much on “what they have lost in equity” instead of what they can do with whatever equity they now possess.  As an example, let us assume that in 2005, your home was worth $400,000, you owed $150,000, and you could have purchased your new dream home for $650,000.  To keep it simple here, we will also assume that all the $250,000 equity in your old home would have been applied to your new home…leaving you with a loan of $400,000…which at 6%, would have been a payment (principal and interest) of $2,400 per month, and monthly taxes of approximately $540 per month, for a total of $2,940 per month not including insurance.  Voila, and you are in your dream home.

Now let us assume a 40% drop in values since then, and re-examine this scenario.

Your old home has dropped to $240,000, and your equity is now $90,000.  Your new home is now selling for $390,000, and your $90,000 down payment would leave you with a $300,000 loan, which at the same 6% would be a monthly payment of $1,800 and monthly taxes of $325…for a total monthly savings of $815 per month…and you now own the same dream home you wanted 4 years ago.  Not exactly a down side here…and that is precisely our point.  If your intent is to simply get from Point A to Point B, then pricing is all relative.  What you “lost” at Point A you “gain” at Point B.

How about if you are leaving the area…retiring…maybe not even re-purchasing now?

The answer to this question is far shorter and totally in your hands…because the answer here is simple…how long do you want to put your life on hold?  Only you can make that decision.  All we can say with any certainty is that if you are waiting for home prices to rise to their height of a few years ago, it will be a very long wait.  Westcoe does not make predictions, but to get back to where we were in 2005 is way out there on the real estate horizon…and do you want to wait that long?  If you can answer that, then you will know when to sell.

In the end, when you sell will depend on why you are selling.  Just keep in mine that focusing on what you gain is far more productive (and many times more profitable) than longing for what you have lost.

Take care, and as always, if there are any issues you would like to see addressed in this blog, just let us know.