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We bought our house around the bottom the market from the last crash in late 2010. Now we have decided that now is the time to sell. The goal is to try to time the top of the market. You can get lucky with this, but no one really times the market. But it doesn’t hurt to try.
We have an advantage since valuing real estate is what I do and know well. Even with that I have been expecting the market to go down since last year. I personally thought that it was time for a correction. Inventory has been extremely low for the last few years and values have been continuing to creep up.
Now there are starting to be extended marketing times and price reductions. Of course this varies from area to area and where you live might be different. To me this is a sign that we will start to see values drop.
Is this the top of the market?
The funny thing about real estate is that it takes time for the market to actually start to change in value. This is because there is the time that it sits on the market before an offer comes in. The price might be reduced here. Then when the offer comes in the offer might be lower, but nothing is closed on so it doesn’t affect the actual market yet.
The time that has passed could be a month or two. Now once under contract we need to wait for the mortgage process that could be another 4 to 6 or even 8 weeks. The whole process is 2-4 months from the time it was listed if not longer.
Once it is officially closed that final value is what will start to be used to determine the value of new houses coming on the market. This means that if values are starting to slow now we might not see that affect until early next spring.
Should we have waited to sell?
We had considered waiting until spring thinking that might actually be the top, but since we know better than that, we are doing it now. We could also be entirely wrong and the values could hold steady for another year. Although it doesn’t feel likely.
The thing is that the stock market is overdue for a correction. When home builders become concerned with where the market is headed and how it will affect the number of home buyers they slow down building. This in turn causes layoffs of construction workers which has a ripple effect through the economy.
This is nothing new. It has happened many times and will happen again. The timing is the tricky part. This is why we are selling now.
So what is our game plan?
We are buying a manufactured home. It is priced as long as our house was in 2010. Although smaller and without a basement or garage, but what can you do. The plan is to stay there for a year to two years at most and wait for the values to drop. We will watch the market and when we see a decent deal on a house we want we will buy. We will try to time the bottom of the market, but know that won’t be possible either.
In a perfect world we would be able to know when the right time will be to sell and to buy again, but this is no perfect world.
So should you consider selling right now?
If you own a home you must get updates from your local agents. Also not just one agent. A value of a home is an opinion. It doesn’t matter if it is from a real estate agent or an appraiser. It is just their opinion. For example, one person might give a deck a value of $2,000 and another gives it $5,000.
If you find that the agents you speak with are seeing a slowdown in your area you may want to consider selling. The tricky part is where will you go? You could do as we are doing and buy a cheap place for a short term living arraignment.
Renting a place could be another option. It wouldn’t likely be as cheap as your house payment was, but if the gains from your sale help cover it and you buy another house at a lower price it might work. You will need to work out these numbers for yourself.
Worst case you could stay with relatives if you have any that are open to it. That would more than likely make your living expenses cheaper, but it could be uncomfortable for a full year. Also if you have a lot of stuff you might need a storage unit and that would add to costs.
One last thing to consider
If you find that you are still under water on your mortgage, as many people are, this might be a real problem. At the end of the year the forgiveness of the debt incurred from a short sale is ending. This means that right now there is not enough time to get a short sale done in time to qualify for the tax forgiveness. If you do a short sale at a later time the amount that is shorted will be sent to you as a 1099 from your lender and you will have to pay income tax on that amount.
If you have some funds and might be able to make up the difference of what you owe and what your house is worth you might want to talk to an agent about that. You will also want to consider selling it yourself and saving the commissions that the listing agent will charge you. There are flat fee real estate companies that will put you in the mls and will get the same exposure that you would listing for full commission.
While it is great to have someone handle the process for you, the costs add up. Those costs might mean the difference between you being able to sell now or not for many more years. If you are happy to stay where you are then by all means stay.
If you are thinking that you need another place for whatever reason then this might be your last best chance for to move awhile. This is not an easy process. Moving sucks ass. But you need to think about this from a financial standpoint. Unless you plan on being in your house for 20-50 years or more carefully consider your situation and how your finances could benefit.
