We talk to a lot of potential sellers who are trying to find the right time to sell. For most it is a life choice, either downsizing, upsizing or moving to a different area. But, there is also an element of market timing for some that is usually a waste of time and effort.
If you think you might sell your home sometime in the next year or two, you might be asking: Will my home be worth more if I wait?
That seems to makes sense, but there are a host of problems with that logic. In general, if your home price goes up in value with the market, other homes that you might want to buy also go up in value. So, the only times you might want to time the market a little, is if you plan to downsize or change locales.
Better questions to ask might be more macro in nature. Interest rates are rising again and so are the level of home foreclosures. We also know that Baby Boomers are at the front-end of a long-term selling cycle.
Could those things lead to a lot more homes on the market in coming quarters and years? Is that likely to flatten home price appreciation? We think “probably.”
If you are a seller, right now there is are very few sellers, so you might want to list sooner than later if you have that flexibility. We discussed the emerging Milwaukee area home market earlier this year.
The Milwaukee Market Still Favors Home Sellers
Let me be clear, Greater Milwaukee isn’t suddenly a bad market for homeowners. MLS numbers from July show Greater Milwaukee homes are still averaging a $400,000 sales price, and homes are still moving quickly. Sellers still have leverage in many parts of the market.
Also, at the same time, there’s signs that buyers are getting a few more choices. Inventory is up almost 11% from this time last year and new listings are up a bit over 16%. That doesn’t mean the market flipped, we are still squarely in a seller’s market, but it also shows us that more homeowners are ready to sell, which is leading to slightly more competition.
Start With Your Position Today
Before deciding “yes, it’s time to sell” or “no, I’m going to wait” you want to do what we call a net sheet.
The number your home sells for vs what you actually put in your pocket can swing drastically. The net sheet tells you what you put in your pocket after closing costs, agent fees, title fees, mortgage payoff, taxes, prorated utilities, holding costs, etc. Once you know that, you have a base to compare to later.
I do net sheets with every one of my clients, and I just had one recently where doing the net sheet uncovered “hidden” costs that they had that they weren’t thinking about. We went through all the numbers, and they had recently taken out a short-term loan using their house as collateral. The issue wasn’t the loan itself it was the interest. When we went over what they were going to pay in interest to hold the loan and the house it ate up almost all of the potential upside of waiting to sell til next year.
Doing the calculations now and then doing the calculations for the future saved my clients 10’s of thousands of dollars that they weren’t even considering.
Ask What Actually Gets Better
If your main reason for waiting is just: “I think prices will go up,” then you’re making a bet on the market. It might be true that the price of your home will go up, but really instead of thinking just about what future prices might look like you really want to be thinking what conditions could change or conditions you can change to make your home appeal to a broader set of buyers. This will drastically increase your chances of selling for more.
Ask whether your home’s condition will be better in six months. Will you finish a project that buyers will actually value, or will your personal timing become easier because of work, school, retirement, or another life change?
Speaking of life changes 89% of homeowners sell because they’ve had a life event or something change where moving makes sense. Less homeowners are selling to maximize profit; so, if you have the flexibility to even ask the question of “do I sell now or later” consider yourself fortunate, not all homeowners get that luxury.
Another thing to ask is what will your competition be in six months or a year? Will more houses be for sale in your area? Will less? And how does your home standup against others that may be sitting on the market right next to it? These are probably the most important questions to be asking.
Unfortunately, one article isn’t able to answer all of those for you. Each home is different and there needs to be a real deep dive to give you those answers.
The point is not that you need every answer today. But you do need to know what you’re waiting for. There should be a reason beyond hoping the market goes up.
Use The Next 6–12 Months Wisely
Waiting can absolutely improve your selling position, if you are using your time well. Maybe you have peeling paint, worn flooring, an overgrown yard, deferred maintenance, any project that a buyer may notice right off the bat. Those projects can affect how buyers compare your home to the other choices they have.
That doesn’t mean you need to remodel the kitchen or start spending money everywhere. Really, it’s usually less time efficient and less cost effective to do those remodels. You don’t want to throw dollar after dollar at projects that aren’t going to give you a return or help position your home.
To get the most bang for your buck and time you want to do projects that enhance the overall appeal of your home while not going on a tangent and fixing things that don’t need to be fixed.
I was working with a seller a while back and he was giving me a tour of his home, and he kept pointing out projects that he wanted to do before selling. There isn’t anything wrong with doing projects that need to be done, but he was pointing out things that would just cost him time and money and not really help him sell.
We’d stopped at the kitchen, and he started telling me he wanted to gut the kitchen and make it more modern so that he would get a big return. Now here’s the thing, some kitchens do need a remodel, but his kitchen was functional. I brought him down from gutting the kitchen to doing some meaningful changes (changing fixtures, doing a deep clean, changing the dented door on the fridge instead of the whole fridge) that only cost a few hundred dollars, but still gave him the return he was looking for.
The advantage of looking at potential projects six to twelve months ahead is that you have choices. You can get estimates, prioritize work, spread expenses out, or decide not to do anything at all.
Watch Your Competition, Not Headlines
One of the biggest mistakes I see homeowners make is following national housing stories too closely. National numbers can tell us the direction of the housing market nationally, but real estate is really a local game. Things that are changing in Arizona, don’t affect the housing market here.
This is also applicable on a micro scale. Take Greater Milwaukee, that is still a “macro” market. A home in Oak Creek is not competing in the same market as a home in Brookfield. Even two similar homes on opposite sides of the same city can have different selling positions because of their neighborhood, condition, school district, lot, layout, or 10’s of other factors. So, when looking at your specific competition you really want to look at homes that are as local as possible and as similar to your home as possible.
Look at how many similar homes are for sale, how quickly are they are selling, and which homes sit. Keep an eye on price reductions, and how much choice buyers have in your micro market.
Don’t Forget Where YOU’RE Going
Most homeowners aren’t selling just to sell, like I mentioned earlier 89% are moving because of a life event or change in lifestyle. This second half of the equation matters just as much as the sale price of your current home. If you are buying another house, downsizing, relocating, or changing your monthly housing cost, we need to look at all sides.
You could gain $10,000 by waiting for your current home to appreciate but spend more than that getting into your next one. On the other side waiting may give you more cash, reduce another debt, improve your financing, or put you in a much better position to make the next purchase.
That is why I would never make a timing recommendation based only on what I think your current house could be worth next year. Your sale is one transaction, but your overall move is the bigger financial decision. Sometimes the best selling decision only becomes obvious after we look at what happens after your home closes.
So, Should You Sell Sooner?
Maybe. It mostly depends on you, not a guess about the market. But, given tightening interest rates and rising foreclosures, if you have the flexibility to sell into a seller’s market, you might want to do that.
If selling sometime in the next year is already likely for you, I really don’t think you should spend the next six months guessing what the market will do. You should build a net sheet, take a look at your competition, and take a look at your future housing needs and evaluate.
If you’d like help deciphering whether or not a move now or a move down the line is better reach out to us. This is what we specialize in. We want to help you make the best move possible. You don’t have to be ready to sell. In fact, that’s the point.