Should You Even Sell Your Home?

Many people are asking if this is a good time to sell their home.  Try taking a macro view and ask yourself…should you even sell your home in the first place?

Here is some background information about me.  I purchased my first home in 1994 when I was first stationed at McChord AFB.  I paid $137,000 for a 1,700 square foot 3 bedroom home.  I had very little equity to sell at the end of my assignment.  (I would have to contribute money to pay the transaction fees.)  So I elected to rent the home.  And, 25 years later, I still own that home as a rental.  It just appraised for $355,000 this past spring when I refinanced it.  There was definitely some stress holding on to this home when I PCSd.  I still had to make the $1,200 monthly mortgage payments.  Back in the 1990s, $1,200 seemed like a hefty payment.  Over time, the rent slowly came up and now the $1,850 rent payment I collect easily makes the monthly payments for me.  Having the home appreciate by $218,000 is nice too!

Anyway, analyze your personal circumstances.  You may have a compelling reason to sell your home like: you need to sell your current home to purchase your next home, you are taking advantage of a 1031 tax deferred transaction, there is a death in the family and the other parties in the estate insist on selling the home, or maybe renting your home really freaks you out.

Carefully consider the option of hanging on to your home as a long term rental.  Selling your home will create a tax event and you will have to pay federal capital gains taxes.  There will also be quite a few selling costs like: seller’s agent commission, buyer’s agent commission, title policy, escrow fee, county excise tax, marketing costs, staging, and making cosmetic repairs like paint or carpet.  These fees total roughly 10% of the sales price.

Perhaps worst of all, selling your home means you will lose out on any future property appreciation.  For me, having $218,000 in home appreciation (plus the pay down of the mortgage balance) has done better than my 401K and Air Force Thrift Savings Plan.  And, the tenants renting my home make the mortgage payments for me.  YMMV