Sell your house at the wrong time and the consequences of that careless decision will haunt you down the road.
Hang on too long when you’re in financial trouble and you could end up with a foreclosure or short sale. Jump the gun out of fear when the market’s down, and you’ll miss the upswing right around the corner. Want to stay for the memories but not the maintenance? Prepare to watch your home’s value chip away every year and net less in the end.
When you set out to buy a home, a mortgage lender helps to make sure you’re ready with a look into your income, credit history, and cash reserves. But when you question “Should I sell my house now or wait?” it’s on you — and only you — to make a smart move.
So start here. Let’s review the signs it’s time to let go of the house even when your heart fights back, how to know when to stick it out a little longer, and the tools and resources you need to make a decision with all the facts in front of you.
Signs you should sell the house: How to listen to the market, analyze your financials, and figure out what’s next
“There are a lot of factors you have to consider when you are planning to move out of your current property,” said Todd Schroth, a top-selling agent in Wekiwa Springs, Florida. “What’s your long-term plan? Have you identified where you want to move once you sell? Are you moving up or are you moving down? Are you moving out of the area?”
Whether you can’t keep up with your mortgage or your house has skyrocketed in value, these are the sure signs that now’s the time to sell — don’t hesitate another minute to get the ball rolling.
1. You’ve seen strong home price growth in your area for several years and the market generally favors home sellers.
As they say in the world of stocks: buy low, sell high. You bought a house with the intent of building wealth. Sell it at the opportune moment and you could push your potential windfall from this investment to the ceiling.
Get a sense for the health of the U.S. housing market
For this strategy to work, first you need to understand how the value of your house fits into the larger housing market picture. Not confident in your ability to read the real estate tea leaves? Then stick to the basics with a review of your local market inventory and the price trends in your area.
NAR puts out a monthly existing-home sales report that shows the state of inventory across the nation and breaks it down by region. Inventory refers to the number of homes for sale on the market. “Months of supply” of inventory represents how long it would take to sell all those homes up for grabs. If your market drops below 3 months worth of inventory, sellers have the clear advantage, putting you in the position to command a higher price and make few to no concessions.
Next, you can check the Case-Shiller national index, 10-city index, and 20-city composite index for national and metro-level price trends. Real estate is an appreciating asset meaning it gains value over time, but it does fluctuate and move through up-and-down cycles.
At HomeLight, we also post a quarterly national housing market update, which synthesizes the latest stats on inventory, prices, unemployment, and mortgage rates for an easy-to-digest summary.
Check stats from your local Realtor board
While national and regional statistics can give you a great overview of how the U.S. housing market is performing, real estate is highly local. If you’re unsatisfied with the broader market reports, do a Google search for your local realtor board (just type in “[your city] realtor association”). Go to the website and dig into the housing stats for the current month. See how price and inventory trends compare month-over-month and year-over-year. If prices are going up and inventory is headed down, it could be a great moment to sell.
Understand when the market’s peaking
In a steady housing market, homes appreciate at a clip of 2%-3%. If you’ve held onto a house for 5-10 years with that kind of growth, you could be in a good place to make a sizable profit. But price growth can be even more extreme: Over the period of 2017-2018, white-hot markets such as Seattle and Las Vegas, for example, saw price gains of 15%-20% but tempered in 2018’s latter half. That made 2019 an excellent time to sell a house in many markets across the U.S. as prices peaked.
And with no shortage of surprises, 2020 brought us a pandemic that caused a 31% GDP contraction and somehow, also a nationwide seller’s market. In HomeLight’s Q3 2020 Top Agent Insights Report, 99% of agents surveyed by HomeLight reported steady or rising prices in their market.
The bottom line is you want to ride a home price run-up as long as you can while values rise, and collect your maximum proceeds before prices cool again.
2. Your sale lines up with local seasonal trends and buyer behavior in your market.
Believe it or not, you can tweak the timing of your home sale even closer to perfection with clues from real estate transaction data. In fact, HomeLight found that you can boost the profits on your house by 75% and cut weeks off your days on market by selling at just the right moment.
Traditional wisdom has it that the best time to sell your house is in the spring when the weather warms up and buyers come out in force — and this is true in many markets. But seasonal trends differ from city to city, so you could benefit from a fall, summer, or even winter sale depending on the weather, competition from other sellers, and buyer behavior.
We analyze millions of transactions to crunch the data on when homes sell faster and for the most money on a local level. So rather than throw a dart at the calendar, use our Best Time to Sell Calculator to find out the best (and worst) months to sell a house in your city and plan accordingly.
3. Making ends meet every month feels like a stretch.
Your mortgage is just one expense of homeownership. Property taxes, home insurance, private mortgage insurance (typically between 0.50% and 1.% of your loan amount), utilities, household maintenance, lawn care and other fees can strain your finances. According to an analysis from GoBankingRates, these costs can add up to $1,200 per month — or $14,448 annually.
And that’s not considering maintenance costs that arise from a leaky roof, faulty AC unit, or broken appliance. It’s advisable to set aside 1%-3% of your home’s purchase price each year in a separate savings account specifically for such maintenance and repairs.
Unfortunately, not everyone can keep up with all the costs or would rather not be house rich, cash poor. If you find yourself spending more than a third of your income on housing costs, it’s a big sign that you’re overextended.
Dipping into savings once or a late loan payment here and there can spiral into a delinquent mortgage (that’s more than 90-days late) quickly.
It’s much better to face the music, sell the house you can’t afford, and downsize to save money rather than wait for the inevitable: a foreclosure or short sale — both of which damage your credit and leave you with no money to walk away with.
4. You’ve outgrown the house and are in a financial position to trade up.
The opportunity to relocate to a new or better home is the no. 1 reason Americans move, according to a study by Move.org. And as one of the main benefits of homeownership, many buyers use the proceeds from their old house to comfortably purchase their next one.
Don’t overshoot your budget
However, before you sign up for a bigger mortgage in a snap decision, crunch the numbers to make sure you can afford your next residence when the dust settles.
“We’ve got to look at the equity position that they have. Do they have enough money to sell it and have a nice down payment for the next property, or can they sell it, walk away even, and get similar financing on the next home?” said Schroth.
The nice thing about being able to put 20% down on your next home is you’ll likely be able to avoid private mortgage insurance. Take your price range down a notch, keep your down payment the same, and you can shave off the cost of insurance from your monthly payments.
“What’s the maximum comfortable payment?” Schroth figures out with his clients. “We’re not looking at $400,000 houses when they can only afford $350,000.”
Calculate your equity
CoreLogic, which analyzes global property information, notes that the average U.S. homeowner gained $9,800 in home equity between the second quarter of 2019 and the second quarter of 2020, with the most significant increases in Western states such as Seattle, Idaho, and Montana. Overall, U.S. homes with mortgages (roughly 63% of all properties) have seen their equity increase by 6.6% year over year.
Estimate your home equity with this simple formula: subtract your home’s estimated market value from your current mortgage balance.
To find out what your home is worth, check out HomeLight’s Home Value Estimator, which pulls data from several leading sources to get a real-time value estimate based on current market trends. While HomeLight’s Home Value Estimator is a great starting point (we use a 7-question quiz to learn more about your property and enhance the accuracy of our estimate) you should also ask your agent to walk you through a comparative market analysis of recently sold comparable homes near you to lock down your pricing strategy.
5. Maintenance keeps getting away from you or you’d like to age in place longer.
90% of retiring homeowners want to age in place, but Americans notoriously wait too long to downsize or switch to a house that better meets their needs later in life. Seller generational trends from the National Association of Realtors show that 70% of people who moved between the ages of 55 and 94 did so for a health-related concern.
While you cling to the memories of the house you’ve lived in for years and dread the idea of parting with your neighborhood buddies, the clock ticks toward a time when you’ll have to call in help (whether it’s your kids or a professional) to sort, organize, pack, and move all your belongings for you. It’s a lot easier to move out of a two-story house with a basement when your knees don’t hurt.
What’s more, houses require a lot of upkeep or they’ll start to lose value.
If the time has come when you no longer can deal with your home’s maintenance demands and would like to stay in your personal home until later in life, it’s time to sell the house and look for one with the right floor plan, style, and features for senior living.
Signs you should wait to sell the house: When housing is in a lull, you lack equity, or your gut says now’s not the time
Not everyone has a choice about whether they sell the house now or later, but if any of the following signs resonate with you, it could mean you’d be better off if you held onto your home a bit longer.
1. A sleepy housing market could force you to lower the price.
When the market slows, it takes longer to sell a home—and typically, the longer a home is on the market, the lower its selling price. More than six months of housing inventory indicates a buyer’s market that puts downward pressure on prices and could mean you’ve got to agree to more repairs during closing.
So if you’d like to get the best asking price — and you have no other considerations, such as a new job or a health issue — check with your agent to ask how local inventory is moving. Put a pause on your sale if the odds are against you and you have the luxury to wait for the tables to turn back in sellers’ favor.
2. You haven’t built much equity yet.
Similar to evaluating your home equity when you’re considering trading up, you don’t want to move when your home is considered “upside down,” i.e., you owe more than the property is worth.
“If the value’s $200,000 and they owe $210,000, that’s obviously a sign you should wait or rent the property out before you sell it,” Schroth said.
3. You could benefit from keeping the property as a rental.
Sometimes the market isn’t on your side and you haven’t built adequate equity for a new purchase, but you need to move anyway because of a job or other lifestyle change. In these cases, Schroth suggests evaluating your cash on hand and perhaps renting your current property while moving into a smaller rental situation yourself.
It removes the immediate pressure to sell, plus it makes selling the house at a better value easier later. “Even if [the market] doesn’t go up at all, you’re at least paying your mortgage balance down and you can then have an equity position to sell the house,” Schroth said.
4. You haven’t met the two-year use test to exclude capital gains.
To avoid having to pay taxes on your home sale, you’ll need to have owned the home and lived there for at least two of the five years leading up to the sale.
So long as you meet these criteria, you can exclude up to $250,000 ($500,000 if you’re married) of “capital gain” on your main home. If you’ve lived in the house less than two years, then you could be on the hook to pay capital gains taxes — which will be even higher if you’ve lived there for less than one year (review our breakdown of the capital gains brackets for more information).
This means that if you just bought a house, it’s in your best interest not to sell it for at least two years. Hold onto it at least that long if you can.
5. You’re not emotionally ready to part with the house.
Considering we stay in our homes an average of 10 to 20 years, depending on our age, it’s understandable that homes are full of memories. Sometimes the emotional cost of selling the house doesn’t outweigh the potential financial benefits.
“I want to find out what their situation is and advise what I feel I would do. If it’s, you know, ‘my grandparents have had the home for 50 years,’ it’s not a good time to get them out yet. Maybe we need to wait a little longer,” Schroth said.
Even with all of these considerations, opting to sell your house now or wait sometimes comes down to a hard choice based on your current financial position. Schroth notes that one of his relatives has a beachfront condo that’s been upside-down in equity and finally decided to take the loss in a sale. “The value hasn’t gone up on it where it makes it worthwhile taking a loss every year,” he said.
6. You don’t have the cash reserves to get the house in marketable condition.
Most sellers are focused on fetching the highest possible price for their house, which is typically achieved by listing it on the open market with the assistance of an agent.
But in the event that your house is not in a condition to attract buyers without major renovations and repairs, it becomes nearly impossible to sell without going broke first.
However, there could be another option on the table—selling your house “as is” to a cash buyer. You’ll likely take a discount on price, but a cash buyer makes an offer on your house before it ever hits the market, saving you those pre-listing expenses (not to mention you’ll close faster if speed is a priority).
For the many homeowners who value simplicity, speed, and certainty, HomeLight created Simple Sale™ — a way to sell your home directly to our network of pre-approved cash buyers, whenever you’re ready to sell. Answer a few quick questions about your home and timeline, and you’ll receive offers in 48 hours or less. If you decide to accept the offer, you get to pick the move date.
Where to go from here: Is it best to sell the house now?
Often deciding whether to sell now or wait is a battle of the heart and mind. When the housing market and your equity situation say one thing, your emotions pull you in another direction.
When in doubt, remember the sentimentality you feel about your home is valid, but should never be put before logic. No house is worth risking your financial livelihood.
Header Image Source: (Ben White/ Unsplash)