Thinking of Selling Your Home? Here’s Why It’s a Great Idea
(Bloomberg Opinion) -- If you’re wondering whether to sell your home this year — especially with the seasonally hot spring market approaching — I’m here to encourage it.
Amidst the homebuying frenzy of 2020, a number of people in my audience, as well as friends and family, asked me whether it was “smart” to sell their home. As they watched neighboring houses sell fast and fetch above-asking prices, they got hit with some serious FOMO.
In other cases, people were concerned about not having access to enough cash in the event of getting laid off and wondered whether it might be wise to sell, bank their equity and rent for a while to stay liquid.
And then there were some soon-to-be empty nesters who were already thinking about downsizing in a few years and became tempted to accelerate plans given the hot seller’s market. Was this their best chance to cash out?
I often found myself saying, “Yes.” And in 2021, my answer (for the most part) remains the same.
Of course, selling your home is as much a life decision as it is a financial one, and there’s a great deal to consider before putting a “For Sale” sign on your lawn.
But if you are already leaning toward selling and want to be further persuaded, you’ve come to the right place. Here’s my rationale for listing your home and some advice for gaining the most out of your move.
Selling leads to optionality. The biggest benefit to selling is that it can buy you more options in life. Sure, it’s nice to visit real estate sites and see your home “estimate” rising, but it means nothing until you sell and activate the equity. The question to ask yourself is: What can selling afford me that is more important than living in this house right now?
For some the answer is ... nothing. Maybe they’re super comfortable in their home and have no goals that require having more cash in the bank. They can make their mortgage payments comfortably and have enough in savings to cover financial upsets.
For others, selling can unlock more meaningful life opportunities, more financial security or both.
Whether your goal is to increase savings and sleep better at night knowing you can weather a financial storm; or to invest more so you can retire comfortably; or to move where the cost of living is less or launch the business you always dreamed of because life’s short — selling and tapping your equity could be the key to advancing your life in the ways that matter to your happiness and sense of security today.
Strike while it’s hot. I’m not one for timing markets, but if you had plans to move in the next few years, now could be a more financially advantageous time to do it.
Last year, the pandemic pushed many to flee crowded cities and seek refuge in the suburbs. The already low housing supply added pressure to many markets, and bidding wars became the norm. In our New Jersey town, for example, many homes sold after the first open house and for 20% to 50% above asking price.
The market is expected to remain brisk this year across the country. Real estate website Redfin, for example, predicts there will be more home sales in 2021 than in any year since 2006, and San Antonio, Tucson and Tampa will be among the hottest U.S. markets for buyers.
Selling doesn’t mean you’re a sell-out. We have a bit of an unhealthy relationship with real estate in America, which is to say that we consider buying a home a “dream” and we insist that prices will only go up, thus a home can be a long-term wealth-building tool. For someone who’s pondering a sale, there may be a feeling that you’re “giving up” on future gains. Not to mention it can be emotional to vacate the place that’s housed so many memories.
Case in point: When my husband and I made the decision to sell our Brooklyn apartment, it took about a year for me to feel emotionally ready to list it. This home was where we began our first day of married life. It was where we raised our babies and celebrated birthdays, job promotions and nine years of memorable moments. We contemplated “holding on” to the house and finding a way to continue raising our family in the city, but as I’ve written, the financial and mental costs began to outweigh the benefits.
Would the home continue to appreciate over the next decade? It was quite possible. But we were not willing to wait. We knew that although it was difficult to sell, the promise of a better life (for us) in the suburbs would make it well worth it. We cashed out and began to build the next chapter of our life with the proceeds.
Rent next. Selling requires having a place to live in the aftermath. Maybe you have aspirations to buy again? Here’s my advice: Don’t rush into your next big purchase. Take some pressure off yourself and rent for a while to buy yourself time and liquidity. Or, rent forever! It’s your choice.
This tip is mainly for those who need the equity in their home to help them afford the next purchase. It’s difficult to line up the closing dates of both a sale and your next purchase, so take comfort in knowing you can always just rent for a year or so and take that time to better research and plan your next buy.
That’s what we did in between selling our Brooklyn apartment in Feb. 2020 and moving to the suburbs later that year. We found a short-term rental not too far from where we originally lived in Brooklyn, so the kids could attend the same school until the summer and we could maintain some of our routines. We took the subsequent months to scour the market for our next home. Renting gave us liquidity, flexibility and the chance to transition with a bit more ease.
Need more convincing? Rent prices are down in many parts of the country, so you can get more bang for your buck.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Farnoosh Torabi is a financial journalist, author and host of the "So Money" podcast.
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