Financial Planning Checklist for Selling Your Home
Written By: Ryan Rink, CFP®, EA, ChFC®, CLTC®
Selling your home can be an emotional and complex process. It’s not just about finding a buyer and moving out; there are numerous financial considerations to account for to ensure the sale goes smoothly and is profitable. We’ll discuss some of the financial issues you should consider when selling your home.
Determine the Market Value of Your Current Home
This sounds straightforward, but it’s crucial to understand your home’s market value. You don’t want to go through all the work/preparation to get your home ready for listing and discover you’re unable to get the price you anticipated. A real estate agent will be able to provide a comparative market analysis, which will compare your home to similar properties that have recently been sold in your area. You can also consider getting a professional appraisal done. This can give you an accurate valuation based on various factors like location, size, condition and market trends.
To attract potential buyers and possibly increase your home’s value, you might need to invest in some repairs and upgrades. Some minor repairs consist of fixing leaky faucets, repairing damaged walls, painting and other small fixes. Some major (and more costly) upgrades consist of renovating kitchens, bathrooms, etc. Some also consider hiring professional staging to make a home more attractive to buyers, but this will come at an additional cost.
Realtor Commissions/Attorney Fees
Hiring a real estate agent typically involves paying a commission, usually around 5-6% of the sale price. This fee is split between the seller’s and buyer’s agents. While this might seem like a significant expense, a good agent can help you get a higher sale price and navigate the complex paperwork and negotiations. If you opt out of hiring an agent, consider the potential real estate attorney fees that will need to be paid to close the sale.
Capital Gains Tax
If your home has significantly appreciated in value since you bought it, you may be subject to capital gains tax. That being said, there is a ‘primary residence exclusion’ available. Generally speaking, if the home has been your primary residence for at least two of the last five years, you can exclude up to $250,000 of capital gains ($500,000 for married couples) from your taxable income. Home improvements can sometimes increase your cost basis in the property, but keep in mind these usually do not include general home repairs.
Moving Costs and Your Next Home
Where will you be moving to next? If you plan on purchasing a house/condo, give some thought as to how much your new residence will cost and how you will go about paying for it. Will the proceeds from the current sale be sufficient to purchase the new property outright? If not, be sure to look into financing options and get an idea of what your new mortgage payment may look like. Be mindful of the competitive housing market conditions we’ve seen over the past few years. If your current house sells quickly and for a high price, it’s likely the market is competitive and you may need to pay over the asking price for your next home.
Don’t forget to budget for the cost of moving, which can include:
Professional Movers: Hiring a moving company can be expensive, but it saves time and effort.
Storage: You might need temporary storage if there’s a gap between selling your current home and moving into your new one.
Travel Expenses: If your new home is far away, consider the costs of traveling and transporting your belongings.
The checklist below is a great starting point to review and complete as you go. Please reach out to your Shakespeare Financial Advisor at (262) 814-1600 with any questions.
Selling a Home - Issues to Consider