Updated November 14, 2019
Selling a house is no small task. It takes hard work every step of the way — from pre-listing preparation to listing, showing, negotiating offers, and closing the deal — and the full process can take as many as 2-4 months to finish up. And when it does, sellers wind up paying between 4-10% of the final sales price in fees and selling costs.
That's just on average. How best to sell your specific house will depend on a complicated web of factors, including:
- The time of year
- The state of the housing market (national, state, and local)
- Your location and neighborhood
- The age, size, and features of your home
- The work you've put into it over the years
- How urgently you need to sell
- And so on
The best way to navigate this web is with the help of an experienced real estate agent.
The best realtors take all those unique factors into account when pricing, staging, and marketing your home.
They manage the whole selling process on your behalf, negotiate the best deal with your buyer, and get you to the finish line with as little pain as possible.
In this guide, we'll walk you through every step of the home selling process and offer advice on how you can reduce the time, cost, and effort involved — while still pocketing the most profit at the end of the sale.
Ready to get selling? Let's go!
Jump to a Section:
- The Home Selling Process (Step By Step)
- How long does it take to sell a house?
- When is the best time to sell a house?
- What's the fastest way to sell a house?
- 4 tips for selling a house fast
- How much does selling a house cost?
- Real Estate Commissions 101: How much are realtor fees?
- How much are closing costs for home sellers?
- Next Steps: Get Help and Save Thousands
- FAQs About Selling a House
The Home Selling Process: A Step-By-Step Guide
Below, we've outlined a step-by-step overview of the home selling process, including time estimates, tips, and links to more in-depth resources. It's worth mentioning that every home sale will be different — that includes both necessary steps and timeline.
To get a more accurate sense of your personal home selling journey, speak to your realtor.
Typical Time Required: 1-3 Weeks
1. Deciding to Sell Your House
It may sound a bit obvious, but the first step in selling your house is deciding that now is the right time — for you, personally — to do it. That means you need a clear understanding of your financial health, your budget, your home equity, your long-term goals, and the time you have to invest in a sale… and that's before even considering the housing market itself. Selling a house is a big decision and a big job; don't let yourself make it in haste.
If you don't have the luxury of deciding when to sell — i.e., you have to to sell quickly — check out our comprehensive guide on selling a home fast here.
> Deeper Dive: How to Decide if You're Ready to Sell Your House
2. Research Your Market
Once you know you're ready to sell, make sure your market is ready for you. You can optimize your potential gains by timing local and national market conditions, selling in the right season, using sites like Zillow to roughly gauge your home's worth, or even performing a full Comparative Market Analysis (CMA) to understand the average sales prices and days on market of comparable properties (known as “comps”). Note that a good listing agent will typically offer up a CMA and advice for free, as part of an initial consultation.
> Deeper Dive: Gauging Local Housing Market Conditions
3. Find a Great Listing Agent
Working with a professional real estate agent is the easiest, fastest, and most profitable way to sell your home, so skip this step at your own peril. (If you're committed to going at it alone, at least check out our advice on selling without a realtor.)
Note that not all agents are created equal. You'll want to look for an agent experienced in your market by reading reviews online, attending open houses, seeking recommendations from friends and neighbors, asking intelligent questions (i.e., “how long do your listings generally take to sell?”), and taking advantage of an established referral service, like Clever.
> Deeper Dive: How to Choose the Right Real Estate Agent to Sell Your Home
4. Determine a Listing Price
If you've enlisted a top listing agent to help sell your house, their first crucial task will be to determine the optimal listing price for the property. Ask for too much and your house will grow stale on the market; ask for too little and you're leaving money on the table. Finding the sweet spot between these extremes — meaning a sales price that fetches a desirable profit at a reasonable time on the market — requires a knowledge of comparable properties and a keen sense of the market.
> Deeper Dive: How to Price Your Home to Sell
5. Prepare Your House for Sale
If you're buying a used car, you eye up every flaw you find and use it to bargain down the price. Scratch on the side? Take off $200. Stain on the backseat? Another $50. Burnt out taillight? Why, that'll cost you $150 to replace at the shop, even the good one your friend's cousin gives you a deal at.
The same principle applies to property sales. Giving your house a fresh coat of paint, steam cleaning the carpet, and touching up all the little cosmetic issues will not only strengthen your bargaining position, but will freshen up your house and make it seem more valuable to buyers.
Depending on the state of your property — and especially if the issues you find are more than cosmetic — this will likely be the most time-consuming step of the pre-listing process.
> Deeper Dive: Preparing a House for Sale
Pre-Listing Home Prep Checklist: Inside and Out
Decluttering is the first step in getting your home ready to sell, but cleaning and repairs are a close second. Lingering smells and stains can dampen potential buyers first impression. Start with the interior and work your way out.
- Check the floors. Consider replacing your carpet if it's more than seven years old or if it has stains, and smoke or animal smells. There are few worse things than walking into what you hope to be your new home and have the smell of animal urine or cigarette smoke greet you. If you have hardwood floors that need resurfacing, get it done. New flooring goes a long way to make the space feel fresh and new.
- Paint the walls. Neutral colors are always a good choice.
- Sweat the details. Small tasks, like dusting any remaining furniture and cleaning the windows inside and out, really make the house feel taken care of.
- Make any necessary repairs. Now is also the time to fix anything that's been on your to-do list for a while. The last thing a home buyer wants is to have a list of repairs that need their attention right after they move in.
Make sure you don't go overboard with renovations, however.
“The biggest mistake I typically see sellers make when they're preparing to sell their house is dumping their money back into their house that won't bring them a good ROI (return on investment),” Hays says.
“A few examples that will give you a positive return are: interior and exterior paint, landscaping, flooring (carpet, resurfacing hardwoods), and a deep professional cleaning.”
A 2012 Texas A&M survey found that curb appeal can up sales prices by 17%! Since the exterior is the first thing potential buyers will see, take some time to make it shine.
- Declutter. Get rid of any garbage and put away toys and other items that may be cluttering the space.
- Pay attention to ground cover. If you don't have a lawn or nice looking ground cover, consider getting one.
- Plant flowers. Adding a touch of green to your home makes the property feel natural and can be very attractive to buyers.
If you're on a budget and want to sell your house quickly for a good price, Hays recommends a few must-dos:
“Landscaping (make the curb appeal the best possible), deep-deep clean (make sure to get the animal smell out if you have one), remove debris from the roof and gutters, and pressure wash the home and driveway if necessary.”
Total Time Required: 2-8 Weeks
1. List Your Home
It's hard to sell your home if nobody knows it's for sale. The majority of properties are discovered through the Multiple Listing Service (MLS), which is a comprehensive database of listings throughout the United States. The only catch is that this service is curated exclusively by real estate agents; if you're selling on your own, you'll have to list on FSBO sites like Zillow or pay a flat fee to an agent who can list your property on the MLS on your behalf.
> Deeper Dive: The Ultimate Real Estate Listing Checklist for Home Sellers
2. Stage Your Home
While preparing your home for sale means getting it into a shape suitable for showing off, staging your home is full marketing discipline in and of itself. Experienced real estate agents know how to make every room look its best (and biggest, and brightest), highlight your home's most appealing features while downplaying its drawbacks, and convince potential buyers of your property's incredible potential — and value.
|Did You Know? On average, professionally staged homes sell for 17% more than non-staged homes. What's more, 95% of staged homes sell in just 11 days or less — 87% faster than their non-staged counterparts.|
> Deeper Dive: How to Stage a House to Sell
3. Marketing Your Home to Buyers
After listing your property on the MLS, a real estate agent will typically run a full marketing campaign to catch the eyes of potential buyers. This could include everything from standard lawn signs, fliers, and social media posts to more advanced techniques like professional photography, drone videos, and virtual tours. Marketing is no exact science, but the extent of your campaign should depend on your property, location, and the demographics you're hoping to attract.
> Deeper Dive: Creative Tips for Marketing Your Home
4. Show Your Home
Once you're in the market — you're in the market. At this stage, you should keep your house fresh, clean, and ready for a short-notice showing at any time. Keep your clutter and valuables tucked away so you don't have to tidy up every time your Realtor calls.
And on the weekends, setting up an open house is a great way to generate buzz while giving potential buyers a chance to look and linger.
Yes, showing your home is a hassle, and yes, it could potentially go on for weeks or months. But if you're selling at the right time for the right price — and following the advice of your Realtor — the offers will start rolling in before you know it.
> Deeper Dive: Showings and Open Houses
Total Time Required: 2-5 Weeks
2. Review Offers
You should expect that every offer you receive on your home will need some negotiating, but you don't want to start those serious talks unless you expect serious results. Your Realtor will be able to advise you on which leads seems promising and which are likely a waste of your time.
A few things to keep in mind when separating the wheat from the chaff:
- Motivated buyers start with strong offers.
- Buyers with mortgage pre-approvals are well prepared and ready to negotiate.
- If they're selling their own house, they're probably serious about buying yours.
> Deeper Dive: How to Tell if a Prospective Buyer is Serious
Negotiation is an art form, and this is the stage of the selling process where your Realtor will really prove their worth. While they handle the nitty-gritty back and forth, you can help shepherd a successful deal by being confident in your home's value, amenable to reasonable concessions like purchasing a home warranty, and — most importantly — willing to walk awayfrom any offer that doesn't meet your requirements.
> Deeper Dive: 8 Real Estate Negotiation Tips for Home Sellers
4. Fill Out a Disclosure Form
Though the specifics of seller disclosure laws vary from state to state, you're required to disclose any issues with your property that your buyer should be aware of. That means any problems — that you know of — with the property rights, water supply, septic and electrical systems, structural integrity, potential pest problems, and the like. You'll probably also have to disclose any past violent crimes on the property as well as its potential for natural disaster damage.
You aren't necessarily required to back up your disclosures with a home inspection. Your buyer will be doing one of those anyway — and you can be sure they'll note any issuesyou weren't aware of.
> Deeper Dive: What Has to Be Disclosed when Selling a House?
5. Sign a Purchase Agreement
Once negotiations have ended, it's time to formalize the deal. But, though signing a purchase agreement with your buyer is a big step worth celebrating, you still have a ways to go before the deal closes.
The purchase agreement will include the agreed purchase price, closing and possession dates, closing cost allocation, earnest money (the buyer's good faith deposit), any — critically — the contingencies that must be met before the sale finalizes. Resolving these contingencies, which include items like the buyer's successful inspection, appraisal, and financing, will take up the remainder of the closing process.
> Deeper Dive: What Is a Real Estate Purchase Agreement? An In-Depth Guide
Total Time Required: 4-6 Weeks
1. Open Escrow and Hire a Title Company
In real estate, a third party escrow account is used to hold money (like the buyer's earnest deposit) and documents (like the sales contract and deed) while the deal closes; in other words, while all purchase agreement contingencies are resolved.
The title company is another third party whose job is to verify you own the home, issue title insurance to the buyer, and make sure there are no outstanding mortgages or liensthat could make things tricky for the buyer.
Your real estate agent will help arrange both a title company and an escrow service; in some cases, the former will also provide the latter.
> Deeper Dive: Title Company and Closing Agents: The Ultimate Guide
2. Home Inspection and Appraisal
Almost all purchase agreements will include inspection and appraisal contingencies, meaning the buyer will have your home professionally evaluated before committing to the deal. If the inspection turns up any undisclosed issues or necessary repair work, prepare to return to the negotiating table.
Similarly, the buyer's lender will require a separate appraisal to guarantee their investment into your home is a sound one. They'll expect the sales price to match the value of your home as determined by their appraiser, so any discrepancies could result in delays and — once again — renegotiation.
> Deeper Dive: 7 Home Inspection Tips for Sellers
3. The Final Walk-Through
A couple of days or hours before the final signing, the buyer will take one last look at your property to make sure that all agreed-upon repairs have been made, that there's no new damage (say, from you moving out), and that they're 100% sure they want to go through with the deal.
If an issue does arise — or if the buyer gets cold feet — this is their last opportunity to delay or cancel the sale. If that happens, you may at least get to keep their earnest deposit as compensation.
> Deeper Dive: Final Walk-Through Checklist
4. Sign the Title Documents and Close Escrow
This is the moment you've been working for: both you and the buyer have fulfilled your agreements, all contingencies have been resolved, and now it's time to sign the final closing documents and officially transfer ownership.
More importantly, now it's time to get paid; the escrow service will transfer you the full price of your home pretty much immediately. But remember that you have to turn around and pay your remaining mortgage balance, realtor fees, and other closing costs before pocketing your profit.
> Deeper Dive: Closing on a House: An In-Depth Guide
5. Move Out!
Take one last wistful look at the inside of your home. Pass the keys to your buyer and make them promise to take care of the ol' place; she'll take care of them right back. Crack open a cold one or a bottle of bubbly to ring in the occasion.
Then scram — unless you negotiated a special arrangement like a rent-back agreement, you're expected to move out immediately once the deal is done.
> Deeper Dive: The Ultimate Moving Guide
How Long Does it Take to Sell a House?
While the previous section lays out the home selling process linearly, it's worth noting that there's a lot of overlap between the different stages. Overall, you can expect the full process to take between 2-4 months; the current average in 2019 is 68 days. How long your specific sale will take depends on your property, location, local market conditions, and other key factors.
Timing the Market
In a seller's market, you'll have no shortage of offers and should be able to wrap up your sale within as little as a month or two. In a buyer's market, your selling process could be lengthened by a slow trickle of offers — and might depend on what you're willing to settle for.
Unfortunately, you can't always time your sale to the ideal temperature of the housing market — especially since you'd have to consider local, state, and national fluctuations. However, if you have a bit of a window to play with, you can likely take advantage of seasonal trends or key policy decisions (think tax cuts and lower mortgage rates) that minimize your time on market while maximizing the profit on your sale.
For example, research shows that early May is the best time to sell; listings from the first half of this month sell on average for $1,600 more, six days faster than normal. You can even hone in the best day of the week: Saturday listings see 20% more views their first week on market than Tuesday listings. Though note that like everything in real estate, these optimal dates depend on location, location, location.
What's the fastest way to sell a house?
Selling to an iBuyer is by far the fastest way to sell a house. Qualified sellers can typically get an all-cash offer within 24-48 hours, then close within 10-14 days of accepting it.
A few things to keep in mind if you're considering an iBuyer as an option:
- You'll get a fair price (or close to it), but you'll have to pay a service fee. These can range anywhere from 6-14%, but typically end up being between 7-9%.
- Most have strict criteria about the types of homes they'll buy — e.g., post-1960s construction, less than 0.5 acres of land, in relatively good condition, etc.
- Because these companies are a relatively new phenomenon, most only operate in a handful of markets across the U.S. For example, Opendoor, the largest iBuyer by far, is only active in 20 U.S. cities as of November, 2019.
Tips for Selling Your House Fast
Whether you're in a buyer's or a seller's market, there are a few rock-solid techniques you can use to raise your chances of a fast, successful home sale:
- Set the right price. You won't attract many bids if your home is overpriced — especially if the market is saturated with comparable properties. Perform a Comparative Market Analysis (CMA) to determine a reasonable listing price and attract serious offers.
- Prepare your home for sale. To give your home a competitive advantage in the market, you should perform cosmetic repairs and minor renovations before listing. This will help your home pop while proactively addressing issues that could otherwise deter buyers.
- Stage and market your house professionally. Professionally staged homes sell an average of 87% faster than non-staged homes — and they fetch higher prices, too. Advanced marketing techniques like professional photography also make your home stand out in a crowded marketplace.
- Work with an experienced real estate agent. Clever Partner Agents are full-service real estate agents from major brokerages like RE/MAX, Keller Williams, and Century 21. These top-rated agents can not only save you an average of $10,000 on your sale, they can sell your house 2.8x faster than the national average.
Speeding Up Your Time to Offer
While you can't control what kind of offers you receive on your home, you can sweeten the pot for potential buyers in a number of ways:
- Make impactful improvements and repairs so your buyer can settle in right away.
- Price your home competitively with the help of a real estate agent.
- Keep your home clean and tidy; ideally, have it staged professionally.
- Be flexible with open houses and showings.
- Consider accepting buyer-friendly clauses like sale and settlement contingencies.
Accelerating the Closing Process
Once the purchase agreement has been signed, it takes an average of 42 days until the sale finalizes (as of May 2019). This is mostly down to the buyer, who needs to apply for a loan, coordinate a home inspection, wait for a property appraisal, and endure the underwriting process.
As the seller, you can do your part to speed up this process:
- Get a pre-listing seller's inspection to avoid time-consuming surprises.
- Be up-front about any property liens and title issues.
- Be willing to negotiate if the lender's appraisal comes in low.
How Much Does it Cost to Sell a House?
Each stage of the selling process comes with its own set of costs, and it's important to be aware of these so as to figure them into the profit of your sale. All in all, expect to pay anywhere from 4-10% of your final sales price in listing costs, agent commissions, and closing costs.
Repair, Improvement, and Staging Costs
Expect to Pay: 0.5-2% of final sale price
If your house needs any repair work, you should either fix it up before listing or expect a lower offer in light of the buyer having to do the work themselves.
While the cost of these critical repairs can't be avoided, you have a little more leeway with the cost of cosmetic improvements. If you're willing to invest some cash or put in a bit of elbow grease, these preparatory improvements — which could be anything from a new coat of paint to more efficient appliances to, simply, a freshly-mowed lawn — can drastically improve your home's appeal and help attract a higher price.
|Fun Fact: In 2018, average home improvement spending among homeowners was $7,560. The top three improvement projects were bathroom remodels (average cost: $2,406), new flooring ($1,985), and interior painting ($734).|
You can also have your house professionally staged to give it the best chance of success and to see your profits soar. On average, staged homes sell for 17% morethan non-staged homes — and they do so 87% faster. For a standard staging fee between $400-600, that can mean an incredible return on investment.
> Learn More: 6 Low-Cost, High-Value Renovations & Repairs
Expect to Pay: 4-6% of final sale price
As the seller, you're responsible for paying both sets of realtor commissions on your sale — to the buyer's agent as well as your own. These fees are drawn from the final sales price of your home and typically range between 5-6% of that total value, split equally between both agents.
That means if you sell your home for $300,000, you're on the hook for about $18,000 (6%) in Realtor commissions. Ouch.
Thankfully, there are a few ways to cut down this cost. You can shop around for low-commission real estate agents, negotiate with your Realtor for lower fees (and likely reduced services), or even ask your buyer to share part of the commission as a contingency of the sale — though note this effectively raises the price of your home. You can also forgo a Realtor entirely and cut your commission obligations in half, but your savings would be severely undercut by the difficulty of listing For Sale By Owner (FSBO).
There's an even better option. If you sell with a Clever Partner Agent, they'll provide full Realtor services for $3,000, or 1% commission on sales greater than $350,000. At a sales price of $300,000, your Realtor fees would run you just $12,000 — a full $6,000 less — for absolutely no extra work or negotiations on your part.
> Learn More: How Much Are Realtor Fees for Selling a House?
Closing Costs for Sellers
Expect to Pay: 1-3% of final sale price.
In addition to Realtor fees, home sellers wind up paying about 1-2% of their sales price in the form of miscellaneous closing costs. Though these costs will vary from sale to sale, they commonly include items like:
- Escrow fees
- Mortgage payoff fees
- Transfer taxes
- Capital gains tax
- Prorated property taxes
- Homeowners' and title insurance costs
If you're selling with a real estate agent, part of their job will be keeping your closing costs as low as possible. Generally, the buyer will be responsible for the lion's share of these costs — about 3-4% of the sales price.
Next Steps: Get the Help You Need to Sell Your House (And Save Thousands)
Clever Real Estate is an innovative real estate referral company that connects home sellers across the United States with low-commission real estate agentsin their local market. These Clever Partner Agents are top-rated Realtors from major brokerages like RE/MAX, Keller Williams, and Century 21 — but they've agreed to work at a significant discount for clients they connect with through Clever.
In fact, Clever Partner Agents provide the full swath of seller's agent services for a flat fee commission of just $3,000, or 1% if your home sells for more than $350,000. That works out to an average savings of $10,000 compared to a traditional Realtor.
If you're ready to sell your house, just fill out the form below for a no obligation consultation with a Clever representative. We'll answer all your questions and set up interviews with as many agents as it takes to find your perfect match. And if you decide not to move forward with our recommendations, that's okay too: our referral service is 100% cost- and pressure-free.
Top FAQs About How to Sell a House
How can I sell my house quickly?
Nobody wants their home sale to drag on for months, but sometimes a quick turnaround is absolutely critical — maybe you're moving cross country for a new job or you've already closed the deal on your new house.
Whatever the reason, you have a few options if you really need to sell fast:
- Sell to a traditional cash buyer. Cash buyers and property flippers are a popular choice among sellers who need to sell fast or are trying to turn over properties in need of heavy repairs and renovations. These companies will typically buy any type of property in any condition and move quickly, but you'll likely end up leaving a considerable amount of cash on the table — offers typically come in between 30-50% below market value.
- Sell to an iBuyer. These high-tech companies are, by far, the fastest and most convenient way to sell a house. Sellers can get an all-cash offer within 24-48 hours, and closing timelines can be as quick as 10-14 days. What's more, most pay fair prices for the homes they buy (or close to it). That said, sellers will have to pay a built-in fee (typically 6-14%) in exchange for this service. What's more, these companies have strict criteria for the types of homes they'll buy and currently operate in only a handful of major cities across the U.S.
- Sell your house at auction. Though unconventional, putting your home up for auction is a good way to guarantee it sells within the time frame of your choice — typically between 30 and 90 days. But as with cash buyers, you're paying for this convenience. Expect to fetch less than your home's true market value (bids start about 10-15% below it) and pay a good chunk of the winning bid to the auction service in fees.
- List with a real estate agent experienced in quick sales. The best realtors are experts at getting offers quickly for the best possible price. And once that offer comes in, your agent can help speed the closing process along and accommodate your accelerated timeline.
What are the closing costs for a seller?
The seller's share of closing costs is significantly less than the buyer's: generally 1-2% of the sales price compared to the buyer's 3-4%.
Specific closing costs and responsibilities will vary from sale to sale, but in general the seller can expect to pay costs like:
- Title insurance fees
- Transfer taxes
- Notary and attorney fees
- Loan prepayment penalties
- Prorated utility costs
But remember that sellers are also on the hook for paying all realtor fees — even those of the buyer's agent. Traditional, these costs can range from a steep 6% to a steeper 8% of the sales price. When you list with a Clever Partner Agent, your realtor fees can total just 4%, or lower.
Where do I start when selling my house?
Selling a house is no small feat — it takes a lot of time, money, and hard work to do right.
Before you start, you should have a realistic picture of your financial situation, your ability to take on a major project, and your goals in selling. Do you want to move because you need more space? Are you looking to turn a tidy profit in a hot market? Do you just want a change of scenery? Whatever you're hoping to gain from the sale, make sure it's worth the time and effort involved. And ask yourself: have you lived long enough in your current house that selling it makes sense?
Once you're ready, do some research into your local housing market and comparable properties in your neighborhood. This will help you determine how long the selling process could take as well as how much you stand to profit from a sale.
With this knowledge in mind, you can begin to shop around for a real estate agent experienced in your local market. Read online reviews, ask questions, and find a match you feel comfortable working with. This is likely one of the largest financial transactions you'll ever make; the more prepared and confident you feel going in, the better your chances of success.
Can I sell my house on Zillow?
Zillow is popular, publicly-accessible real estate marketplace that lists millions of properties for sale or rent across the United States. Anyone can list their home on Zillow's database and, indeed, this is a smart part of any selling strategy that aims to get your property in front of as many eyes as possible.
Listing exclusively on Zillow — in other words, using the site to sell your home FSBO — is a decidedly less savvy move. Though there are no fees to do this, you'll find yourself competing against thousands of other properties, many of them repped by professional realtors, for the small sliver of Zillow's browsers who are genuine, motivated buyers. In return for this opportunity, Zillow sells your information to third-party lead generation companies who keep your phone ringing with offers from realtors. In other words, steel yourself for a lot of hassle and a small chance of payoff.
Zillow also has an iBuying branch called Zillow Offers; they'll send quick cash for your house with the goal of flipping it for far more than they paid. Avoid this: a top listing agent can sell your house quickly without undercutting your profit.
What are the documents required to sell a house?
Home sales require reams of paper in the form of contracts, statements, reports, records, and the like. No matter which side of the table you're on, your real estate agent and attorneys will take care of the brunt of this paperwork.
But you're not fully off the hook. If you're selling, you'll need to provide or at least be aware of documents like the following:
- Original sale contract
- Repair and maintenance records
- CMA report
- Listing contract with your Realtor
- Home title report
- Disclosure statement
- Purchase offer and purchase agreement
- The deed to your home
How long should you live in a house before you sell it?
Unless you're pushed into moving early by a new job, divorce, or other life event, you should live in your house until you've built enough equityto avoid selling at a loss.
Just how long is that? A good rule of thumb is to sell your home no sooner than 5 years after moving in, but you can get a more precise number by understanding your equity:
Equity is the percentage of your home's value that you own, as opposed to the percentage of the value that your mortgage lender owns. When you buy a new property and put down 20% to qualify for a mortgage, your equity is exactly that: 20%. The lender owns the remaining 80%, but as you make regular mortgage payments your equity creeps up while your lender's stake in the home drops down.
By the time you've paid off your mortgage in full, you own 100% of your home's value. And if that value has appreciated in the years since you initially bought the house, congratulations! The difference is yours to keep as profit when you sell.
But this works both ways: if your home is worth less than what you owe on your mortgage, you have what's called negative equity — meaning you'd lose money on a sale no matter what. And even if you have enough equity to break even, you still need to profit enough from a sale to pay realtor fees, closing costs, moving expenses, and cover the 20% down payment on your next home.
Luckily, figuring out how much equity you have is simple: just subtract your current mortgage balance from the current market valueof your home. If you have enough to cover the costs of selling — and ideally pocket a little profit besides — go for it. If not, you should probably wait a little longer to sell.
Should I sell my house before buying a new one?
When you sign the final papers on closing day, your buyer will expect to take ownership immediately — so you should have new accommodations in place before handing over the keys.
That doesn't necessarily mean you need to buy a new house first, but it's not a bad idea if you can afford it. That way, you won't have to go through the stress of moving twice or the pressure of buying quickly.
On the flip side, paying two mortgages at once can be stressful in its own right — even if it's financially feasible for you. If you do have to sell your house before you can put money down on the next, it's often a good idea to start your search early to minimize the time gap between selling and buying. Real estate is an investment: the longer your money is out of the market, the less you stand to gain.
How best to time your new home purchase will depend on market conditions as well as on your personal situation (like your ability to rent or stay with family while searching for a new place). If you're in a buyer's market, your best option might be to insist the sale of your current house go through before you buy your new one. This is called making a contingent offer.
How much will I profit from my home sale?
How much profit you'll earn on your home sale will depend on the original purchase price, your outstanding mortgage balance, and the final sales price. In addition, you'll have to factor in your selling costs and any maintenance and repair work you've done since buying.
Take this simple example: Say you bought a promising fixer-upper 10 years ago, put in some sweat equity, paid off most of your mortgage, and now you're looking to sell. Here's how you could calculate your profit on the sale:
|Original purchase price||$150,000|
|Total 10-year improvement costs, including repairs and maintenance||$60,000|
|Outstanding mortgage balance||$40,000|
|Total selling costs, including Realtor fees and closing costs||$10,000|
|Final sales price||$350,000|
The difference between the final sales price and your original purchase price is $200,000, which is how much your home has appreciated since buying. But what you're looking for is your profit, meaning you have to subtract all the costs it took you to get there: in this case, improvement costs, your mortgage balance, and selling costs, which add up to $110,000.
So your total profit on this sale is $200,000 - $110,000, or a tidy $90,000.
You'll want to talk to your real estate agent to understand how much you'll profit on your home sale, which is undoubtedly more nuanced than this simplified example. You can also use what's called a seller's net sheetto estimate your profit in more detail.