🔑 Key takeaways:
Right now might be a good time to sell your house because the real estate market is hot.
The national average selling time is just 13.4 days, and the supply of homes in the U.S. is currently at a 10-year low. Decreased supply is driving higher prices.
Sale prices have risen 11.3% from March 2020 to March 2021.
But knowing when to sell your house isn't as simple as knowing the market — it depends on your motivations as a seller.
For example, if you're selling in order to purchase a new house, you might be at a disadvantage if you're trying to buy during a strong market. If you need to relocate for a new job, maybe you don't have the option of waiting, which means that you can at least cash in while the market is strong.
The best way to know your house's worth is to speak to an experienced realtor and find out what's going on in your local real estate market.
Clever connects sellers with local agents from top brokers, like Century 21 and Keller Williams, who will represent you at pre-negotiated discount rates. You'll get expert advice and only pay 1% (or $3K) in listing fees.
You'll also need to figure out how you're going to sell your house — either on your own (for sale by owner or FSBO for short) or with the help of a real estate agent.
A FSBO sale might be easier than usual in a hot real estate market, but an agent will be able to help you price your home accurately and expose it to more buyers — possibly netting you more money.
Should I sell my house now?
🚚 Reasons to sell your house now
🛑 Reasons to sell your house later
Reasons to sell your house now
The real estate market is strong
Selling now could allow you to take advantage of a seller's market. You'll likely receive a fair price for your home without having to wait too long for the right buyer to make an offer.
The market might be this strong in 12-24 months, or it might start to trend down — it's impossible to know.
Many home sellers listing right now are benefiting from strong demand. Motivated buyers are often paying above asking price to beat out the competition, and they're less picky about the state of the houses they're buying.
You need cash for your next house
If you're planning on purchasing a new home, you'll need cash for the down payment (5-10% is typical) and all of your closing costs (3-5%).
You might have to sell your current home to qualify for your next mortgage and have enough cash on hand to make a downpayment. Home buyers often have a sale contingency when they make an offer — this just means that your offer isn't valid unless your old home sells.
Even if you weren't planning on selling your home and buying a new one, sometimes life circumstances — like a new job, family illness, or financial hardship — don't leave you with much of a choice. If you're in one of these situations, the good news is selling now will likely net you a great price for your home.
Interest rates are low
Interest rates on loans are at a historic low, so if you were already thinking about buying a bigger house or relocating, it's an excellent time to make a move.
Rates on 30-year fixed mortgages, for example, are the lowest they've been in decades.
Of course, you could also refinance your current mortgage to get lower monthly payments, if reducing costs is your main concern. If you've recently refinanced your mortgage — like many people did in 2020 — you might be better off financially if you stay in your current home for a few more years.
Make sure you know what you can afford by speaking to a mortgage specialist before you put your old home on the market.
How fast are houses selling in my area?
The national average selling time is just 13.4 days, but it varies quite a bit by city and region.
The map below shows selling times for major cities across the country. If you want to know more about how quickly houses are selling in your town or neighborhood, consult a local real estate agent.
Continue to build equity in your home
Equity is the difference between your home's worth and what you still owe on your mortgage.
Staying in your home longer means you get the chance to keep building equity. As you continue to make payments on your mortgage, shrinking the amount you owe, the market value of your home may also rise. When you're ready to sell, you'll likely walk away with more money after all of your selling costs and the remaining mortgage are paid.
For example, someone who bought a $250,000 home five years ago and sold it today might still owe $212,000 on their mortgage, which would have to be paid off with their profits from the sale. But, if the owner had been in the house for 15 years, they might only have $110,000 left on their mortgage.
💰Equity vs. selling costs: The break-even point
Most home sellers need to be in their house for a couple of years before the profits from selling it can offset their selling costs.
When you first purchase a home and start making payments on your mortgage, most of the payments go towards interest, so it takes some time to start building up equity.
Add to that the significant costs to selling your home — sometimes as much as 10%.
For example, a home seller who paid $250,000 for a house would either need to sell for approximately $275,000 to cover all closing costs, or already have paid off $25,000 (10%) of the mortgage to break even.
You've owned the home for less than two years
Waiting for the two-year mark before you sell your house could save you thousands of dollars thanks to a capital gains tax exemption.
When you sell a home, you're responsible for paying capital gains tax on any profit. The IRS calculates capital gains taxes using the same tax rate that's applied to your income tax.
However, if you've lived in a house for more than two years, there's a $250,000 capital gains tax exemption, or $500,000 if you jointly own the house.
You don't have money for selling costs
Selling a home actually costs money. Selling costs can be approximately 10% of the sale price, and include things like:
- Repairs (varies)
- Realtor commissions (6%)
- Closing costs (1-3%)
Some of these costs, like realtor commissions and closing costs, won't cost you anything out-of-pocket because they can be deducted from the sale price. Other selling costs, like repairs, might need to be paid upfront.
If you need to spend a few thousand dollars on repairs before you list your home, but you don't have any money saved up, it might be best to wait until you're in a better position financially.
You're not ready to make a long-term decision
Selling your house in a seller's market means you'll likely get a great price, but you still need somewhere to go.
If you're buying another house, you'll have to face the other side of a hot real estate market: high prices.
With so much demand and competition from other buyers, you might have to pay top dollar to get into your next home. This might not be much of an issue if you plan on staying in your next home for a while since home values generally appreciate over the long term.
However, if you're trying to buy a new house with the intent of selling it again in just a couple of years, you might have a hard time making a profit. Prices right now could be at their peak, and you also may not have enough time to build equity
Should I sell my house on my own, or with a realtor?
In general, for sale by owner (FSBO) sales are more difficult because you have to:
- Do all of the marketing yourself
- Negotiate with buyers on your own
- Set a price without the input of a real estate professional
It might be easier than usual to sell your house without an agent since the market is currently so strong. However, an agent will probably be able to get more money for your home by pricing it competitively and negotiating on your behalf.
Agents work in real estate for a living, so they know how to maximize a home's value and help home sellers meet their goals.
Won't it cost more to work with a real estate agent?
Not really. Realtor commissions are typically 6%, so people often think they can save a full 6% by selling their house themselves. But that's not how it works.
The 6% commission a seller pays gets split between the listing agent and the buyer's agent, so even if you sell FSBO, you'll probably have to pay 3% to the buyer's agent — and you might not get as high of a sale price as you could using an agent.
If you want to save money on commission, work with a Clever partner agent for a flat fee of just 1% or $3,000 — saving you thousands while still allowing you to work with a real estate agent.
FAQs about selling a house
How long should I wait to sell my house?
There's no universal answer, but the longer you've owned a house, the more money you might be able to walk away with when you sell it since you'll have had time to build equity.
If you've owned your home for less than two years, you'll have to pay capital gains tax on any profits, which could offset a high sale price.
Is now a good time to sell my house?
There's a strong demand for houses right now because inventory is low — so now might be a good time to sell your house if you want to get maximum value.
However, it really depends on your goals and next steps. If you're going to buy another house, the profits you make from selling in a peak market might be canceled out by the high cost of buying in the same hot market.
What is the average time that a house is on the market?
In the last twelve months, the average home was listed on the open market for just 15 days (as of May, 2021).
However, the average closing time of a sale is 30-45 days, so factor that in and think about the entire home-selling process.