For many homeowners, their home is the most valuable asset they own.
Photo by Johnson Johnson on Unsplash
But in many cases, it’s also the largest financial obligation they have ̶ one which can be difficult to meet when you lose your job or face rising costs of living. If you’re struggling with mortgage payments and other expenses, then selling your house may seem like an attractive option for generating quick cash. However, in today’s market, there are several factors that will influence whether you’ll find a buyer willing to pay top dollar for your property.
Considering Short Sale? You May Need to Pay Taxes On Any Gain
At Magnet Forensics, we help people sell their homes in short sale transactions all the time; but before putting your house on the market, make sure to consult a tax professional or financial planner. In some cases, you may need to pay taxes on any gain from the sale of your property.
For those who don’t know, a short sale is a process by which homeowners sell their properties for less than they owe on them and the bank agrees not to come after them for the difference between what they owe and what the house sells for. A homeowner has no choice but to go this route if several conditions are met: If selling their home will cover debts that would otherwise go into foreclosure; if they can find a willing buyer and if their lender and creditors agree on terms and conditions.
Think you’re ready to list your house? Consider first:
The housing market in your community
How long your house has been on the market
The state of your home’s interior and exterior (put it in top shape first)
Your asking price compared to other homes listed nearby ̶ is yours priced competitively?
What do you owe vs. what your house is worth ̶ short sale or not? If so, are you willing/able to pay taxes on any gain from the sale of your property?
Finding a buyer can be tough. Making sure you have enough equity in your home is just one requirement that most lenders require before considering you for a loan or working with homeowners who are facing foreclosure or struggling to meet existing mortgage payments. Here are things to consider when evaluating whether selling now is the right thing for you:
The housing market in your community. It’s a popular saying but it’s so true… there are two factors that will determine whether your home is worth what you want for it ̶ the price of homes in your neighborhood and the current availability rate in your area. Keep this in mind when selling, particularly if you’re hopeful about selling quickly. Make sure to compare prices of other homes listed with the ones surrounding yours ̶ not just from neighboring streets, but also from areas that may be close by or on a different side of town. The state of your home’s interior and exterior (put it in top shape first). A well-maintained property can go a long way in terms of making a favorable impression on buyers. If your home is in need of serious repairs or renovations, then it’s best you do them before trying to sell ̶ anything less could make your house hard to sell. Your asking price compared to other homes listed nearby – Is yours priced competitively? Comparing prices with the ones surrounding yours might not be enough if your property doesn’t have an attractive asking price too. You may need to ask for a lower price than what you’re hoping for to attract buyers and lure them into making offers. Your neighbors may not list their properties at anywhere near the same amount as you will still get potential buyers looking around in the area but it’s better than nothing right? What do you owe vs. what your house is worth – Short sale or not? If so, are you willing/able to pay taxes on any gain from the sale of your property? The more you owe on your home vs. how much it’s worth ̶ the more likely you’ll be required to pay capital gains tax (or federal income tax) that will depend on your existing situation and where you stand with your debt. You can avoid paying these taxes if you’re eligible for exclusion or if the difference between what you owe and what your house sells for is less than $250,000 if filing single; or less than $500,000 if married filing jointly.
After considering everything mentioned above, here are some other helpful tips:
Manage expectations – With all things considered before putting up your house for sale, there’s one more factor to consider: what you hope to get out of it. How much do you need? Will that figure cover your debts and living expenses until your next job is secured? Or will the proceeds from the sale of your home be enough to put a down payment on another property?
Helpful resources ̶ Before making any decisions, contact your lender(s) and creditors so they can guide you through this process. Also, talk to a real estate agent who specializes in short sales or foreclosures who can help you manage expectations and prepare for all possibilities. Other professionals such as an appraiser or tax consultant may also come in handy depending on your situation.
Help others – If you have to sell, why not consider donating some or all of your sale proceeds to a worthwhile charity? This will put your house on the market more quickly and free it up for another family who can benefit from owning their own home.
Selling a home always has its challenges. But by understanding the process and taking the necessary steps to protect your best interests, you can minimize these challenges and move forward with a positive outcome. This is a critical step that will ensure better days ahead.
You may consult and get a free cash offer for a New York house.