Homes sell fast in a hot market

The Number One Reason to Sell Your Home Now


Is it a good time to sell your home now?  Home sales are hot!  But the number of sales is nonetheless at historic lows, due to low inventory.  For folks who are ready to sell their home but don’t need to buy another one, it’s a no-brainer.  Multiple offers are driving offers way above listing prices.  So, if you are selling an inherited home, or an investment property, or a second home, this isn’t a hard decision for you.

If you are in the market to sell your home now in order move up, however, the decision is not so easy.  Inventory is so limited that many homeowners hesitate to sell only because they aren’t sure they will be able to find their next home.  As Shakespeare said, “Aye, there’s the rub.”

Sell your home now
Inventory is low, but listed homes tend to be turn-key and nice

Inventory is Low

If you are hesitating to sell your home now, it’s understandable.  The low inventory makes it difficult to find the perfect move-up home, having to make multiple offers is a hassle, and getting outbid can be disappointing.  However, there are reasons to believe that this might be an excellent time to sell your home, too.  Let’s take a look.

Top 5 Reasons to Sell Your Home Now


– 5. The Number of Homes for Sale is Increasing

Inventory is low, indeed, but it is increasing.  This is normally a time of year when more homes come on the market anyway, so we are seeing listings of existing homes starting to grow.  More importantly, however, is the new home inventory.  New housing starts dropped way down after the mortgage crisis of 2008, but have been climbing back in recent years.  Today, in fact, Calculated Risk Blog (if you haven’t discovered this yet, please do!) reports that “The inventory of homes under construction at 263,000, is the highest since 2007.”

New home construction has lagged new household formation for the last few years, but builders are responding.  New homes coming on the market this year should bleed off a lot of pressure on existing home sales; good news if you want to buy up and need to sell your current home now to do so.

– 4.  Bridge Loans Have Become Commonplace

One major worry if you sell your home now is being homeless until you find your next home.  Bridge loans, which used to be rare and hard to get, are becoming much more commonly used and more easily available.

Dig Deeper: What is a Bridge Loan?

Many home buyers now use a bridge loan to fund the down payment on their move-up home so they don’t have to sell their existing home first.  Not everyone will qualify, but it’s an excellent strategy if you have equity in your existing home and sufficient income to carry both properties temporarily.

– 3.  Homes Are Appreciating.

g-fees and loan-level price adjustments are rising
Home prices are likely to continue upward

Home prices have risen dramatically in the last couple of years.  To some, today’s home prices may seem expensive.  A year from now, today’s prices will likely look very cheap.  Why is that?

Inventory is increasing, but still low compared to demand.  Home prices are likely to continue moving up until the current backlog of homebuyers is exhausted.  Even then, rapidly rising wages and historically low interest rates (yes, they are still very low from an historical perspective, even if they are off recent lows) may continue to push prices up, even in a balanced market.

An important implication of this is that if you are moving up to a higher-priced home, your move-up home is appreciating faster than your existing home, since the appreciation rate applies to a higher price.  If you are move-up buyer, this is a great reason to sell your home now.

– 2.  Buyers Agents Are Getting Better

When we slid into a robust seller’s market, many real estate agents – who had never experienced bidding wars and multiple offers before – were perplexed as to how to best represent their client, and how to successfully get them into their new home.  Now, most agents have had two or three years of practicing in these market conditions, and they are getting better at navigating for their clients.

In this market, listing agents can easily help you sell your home now.  But no home sells without a buyer.  Buyer’s agents are getting more adept at representing buyers in a seller’s market.

– 1.  Sell Your Home Now, or Pay the Government

Taxes can be a heavy burden
The IRS Taxes capital gains after a $500,000 exemption

Perhaps the number one reason for most homeowners to sell your home now is the capital gains tax.  The money you make when your home appreciates is recognized as capital gains income.  The IRS allows individuals to exempt the first $250,000 of that gain from the tax, however.  ($500,000 for a married couple filing jointly.)

Note: There are conditions you must meet.  See IRS link below and consult with your tax advisor.

So, what happens when your gain exceeds the exemption?  All of the appreciation above and beyond the exemption gets taxed at a rate of up to 20%.  There are proposals to increase the capital gains tax rate back to pre-2017 levels, so it could go even higher.

On top of this, your state may tax capital gains as well.  With the exemptions, if you are a married couple and your home has appreciated by $500,000, if you sell your home now you will owe the IRS nothing in capital gains taxes (if you meet the conditions.)

On the next $500,000 of appreciation, however, you may owe the IRS 20% of the gain, or $100,000.  On the other hand, if you sell your home now and then buy another home, the clock starts over.  The $500,000 gain on your current home is yours free of federal capital gains tax, and the first $500,000 of appreciation on your next home is also free.  (Assuming the tax laws don’t change.)

Consult Your Tax Advisor Before You Sell Your Home Now

Meet with Financial Advisor
Photo by RODNAE Productions from Pexels

I can’t emphasize enough – I’m not a tax expert or advisor.  This is why I’ve provided the resources below, and why I insist you must talk to a qualified tax professional before deciding to sell your home now.

Having said that, if you have been thinking about selling your home, do take a look at how much appreciation you’ve enjoyed so far, and consider carefully how much of that you want to give to the IRS.

Casey Fleming, Author The Loan Guide: How to Get the Best Possible Mortgage (On Amazon)

Mortgage Advisor, Fairway Independent Mortgage

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Resources used for this article:

Calculated Risk Blog: Inventory of New Homes Under Construction

Investopedia: What Is a Bridge Loan?

IRS: Exemption on Capital Gains on Sale of Personal Residence

Forbes: 2021-2022 Capital Gains Tax Rates

This article represents the opinions of Casey Fleming, and not necessarily those of Fairway Independent Mortgage Corp.  This analysis was prepared with the best information available at the time it was written.  Neither Casey Fleming, nor Fairway Independent Mortgage Corp., have any magical insider information about bond markets, real estate markets or mortgage markets that would make economic projections any more reliable than any other source.  No warranty is made that the outcome will reflect the projections in this article, and neither Casey Fleming nor Fairway Independent Mortgage Corp. are responsible for decisions that you make regarding your own choices about your real estate or mortgage or those of your clients.

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Comments (3)

  1. Great article. I’m so glad someone has written about this, especially the part about resetting the tax basis when you reach a certain appreciation level ($500K/$250K).

  2. Casey is Excellent Resource and Mortgage Broker. He is spot on with the advantages of selling now. IF you need a Realtor to consult on your current value and solid sales plan, that is what I can do.
    Valerie Mishkin, Bailey Properties, Realtor DRE #02092111 Phone 831 238 0504

  3. Very true Casey. These factors are so compelling for sellers right now that the typical seasonality in real estate markets doesn’t really matter that much. In fact, in the SF Peninsula/Silicon Valley markets it may be advantageous for sellers to get on the market sooner than the peak spring selling season. As always, thanks for the great information, Casey!

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