Should I Sell My House Right Now? When to Hang On

Dated: July 24 2022

Views: 43

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Many Washington homeowners reached a point where they decided they wanted to sell their place a little too far behind the curve.  With the rise of interest rates, homeowners in Washington are faced with either reducing pricing by tens of thousands of dollars in many cases compared to what they could have captured 12-18 months ago. So what are we to do?  Is there a better alternative?

Many homeowners are looking for financially helpful solutions and few industry professionals have taken the time to think outside of the box.  You CAN maximize your equity on your property without getting dragged into never-ending punitive contracts that hinder the property owner more times than not.  Here is an example.

When Donna bought her bungalow three years ago, she knew it was a starter home that gave her tax advantages over renting.  Her two-bedroom, two-bath home was the perfect space for her at the time, but she knew as she got older, got married, and started a family, she would need more space and amenities to suit a growing family and lifestyle.

Donna had assumed she would just sell her current home in order to make that happen. But when she had to relocate and the market was not as good as she had hoped, she wanted a better option. It came to her attention that it could be smarter to hang on to this property instead.  She talked with Meg at LookyLooRealEstate.com and got the answers she needed to make the best decision for her situation.

Here are four times renting out your house might make more sense than selling it—take a look to figure out whether it might make sense for you, too.

1. You don’t need to sell your house to buy your next one

“The first thing you need to ask yourself is ‘Do I need to sell this house because I need the money for something else?'”

Many homeowners sell their current house to finance their next home, but this isn’t the case for everyone. Most often, lenders will accept your status as a landlord with proof of a lease agreement in order to offset the debt (your existing mortgage) with the asset (the rent payment) helping you to keep your growing equity in a rental property AND buy a new home. 

Or maybe you paid off your old house long ago, and you have the funds upfront to get a new mortgage. In this case you should also consider seller financing and find out about all of the hidden savings on capital gains taxation as well as how to earn 150% - 200% on the same property you would have sold using a lender.  Many people with existing mortgages can also profit from selling under contract. 

Or, maybe you’re planning on renting your next place, or buying using FHA 0 Down, USDA or VA (all 0 down payment programs) and you don’t need a lump sum from your home sale for a down payment. There are many, many scenarios that one would be remiss in not considering a seller financing option for.

If you don’t need to sell your house to get into your next one, you might consider renting it out for a while so you can enjoy some passive income—then sell later when interest rates stabilize and there are less tire kickers in the market. Perhaps you are PCS'ing for just a few years and would love to return to your current home.  Renting to another person who loves your home can be a win-win situation for all parties.  I have had quite a few people even purchase the home they have rented when it comes time to sell.  

Bottom line is that if you are not in a tight or desperate situation, renting can make a lot of sense for many people and gives you the gift of time. There are quality rental programs (like ours) that give homeowners ALL of the benefits of professionally procuring the right tenant without any of the monthly management fees taken out of your profit

This savings allows you to choose from the very best tenants at a fair price for both parties, meaning less turnover to the property and more care given by the tenant.  Sadly, traditional property management can oftentimes be an incredibly expensive scam without much recourse for the property owner or the tenant who both acted in good faith. They literally have a monetary incentive not to treat your tenants well! Costing you more money in lost rents, higher turnover and more fees paid to the property management company. 

Tenants who are not gouged due to expensive contracts property owners signed not knowing they had other choices, and property owners who are not forced into expensive binding contracts, typically have the highest profits and best rental experiences!

2. You’re able to qualify for a second mortgage

You may not need to sell your current home to buy your next, the real question is whether you can qualify for an additional mortgage

There are traditional lender rules that a second home needs be 75 miles away from your current residence. All of your income (including rent proceeds) will go into a formula that determines your debt-to-income ratio (DTI) which the traditional lender uses to calculate how much they can extend to you in credit. 

NOTE: If you want to be prequalified with a top notch, trusted lender just let me know.  We can have answers for you quickly to allow you to make fast decisions for maximum flexibility and freedom.

3. It’s a bad time to sell your house in terms of the market

Another bonus to renting rather than selling? It can give you the opportunity to be strategic with the timing of your sale, which is important because if you list your house at the wrong time, you could be risking big money.

If you haven’t been in the house very long (so the investment hasn’t had time to appreciate) or if the market isn’t good when you decide to sell, you might not be making the profit you could be getting if you wait for a better time.

To find out if you’ll make money off the sale if you list your house now, check out the value estimate of your home and find out what comparable houses in your area have been selling for. Of course, home estimates and comp prices are no guarantee of what your house is worth, but they will help you get an idea of what ballpark figure you’re looking at.

Then, calculate how much it will cost to sell the house—you’ll want to factor in repair fees, other fees such as septic, HOA, sales tax, the fee for a real estate agent—and see how much of a profit you’ll actually make on the house. If you won’t be making much, or if you come out at a loss, you might consider renting it out for a while instead.

“Timing the market to gage the best time to sell can be such a stress relief. No one wants to feel like they are giving away hard earned equity because of momentary market uncertainty."

Renting it out for a year and taking a look at the market and your home value later could make this waiting game pay off big.

4. Your house is in a good renter’s area, and renter-ready

If you’re in a big city or an area where lots of people would like to rent, or near a university where plenty of students are looking for off-campus housing, you could make a good amount of money renting out your place. So much of real estate is about supply and demand, so if there’s a big market, your home could be a great cash cow for years to come.

Next, ask yourself if your home would be attractive to renters. Some features could make your home especially valuable as a rental property, while those interested in buying may have different needs. Is your home clean, smelling good and move-in ready?

TIP: We have affordable residential cleaning and light pressure washer services available to help get you there!

Renters are on a tight time frame and often need to be able to unpack quickly and set up housekeeping so they can get started with the needs of life's commitments.  Buyers can sometimes have a little more flexibility and may make an offer on a home (typically for less money) knowing that they will have to do some work but may be closing escrow on dates in the middle of a month rather than on the 1st, giving buyers a longer view of the situation and will simply negotiate for less money paid in lieu of inconveniences that they have a lot of time to work out.

Whichever way you think of going, it is important to know that you do not have to be forced into long, expensive property management contracts wherein their are plenty of reasons for concern that you may have an adversarial and costly relationship that will negatively impact you.

1) If you don't need to sell your house in order to buy one, you may be giving away 10's of thousands of dollars that you may never get a chance to recoup on another sale. 

2) You may be able to buy a second property using the rental income to offset the debt of your current mortgage allowing you to build income and wealth in a relatively passive manner that could benefit you for generations. 

3) In an unstable sales market, renting a property to responsible, quality tenants can be a boon that covers all of your expenses and you ride out a momentary low point and have the option to decide to keep it as a cash cow to supplement income or to strike while the market is at it's highest point and make a killing.

4)  As many people are migrating away from the larger cities there are many options available for quality tenants who now work remotely and have more time on their hands and interest in taking quality care of even large homes and estates down to small comfortable homes.

I hope you found this information helpful in considering all of the options.  If we can be of help to you in leasing, selling or if you need light residential clean up, we are happy to talk with you about your specific needs and answer all of your questions.

Blog author image

Meg O Harrison

Serving my clients with diligence and integrity throughout our relationship is the cornerstone of my business and always will be. The relationships with extraordinary people under seemingly  ordi....

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