The Smart First-Time Home Seller's Guide (2015)
Chapter 1: Making The Decision To Sell – Important Considerations
There are many reasons people choose the permanent solution of selling their homes. Some have too much or too little space to suit their needs, while others feel the need to relocate to be closer to family or friends. Facing financial turmoils and clearing debts are more pressing reasons many find themselves choosing to sell. Sadly, one of the most common reasons is divorce or the breakup of a relationship. Couples find themselves boggled down with attachments to their former partners and therefore need to sell in order to move on with their lives. Perhaps a person's spouse has passed away and that person wants to downsize or has inherited a property to sell for cash. This is known as bereavement. Some people are in very poor health and must opt to sell their homes because it is no longer suitable for them to live independently. Repossession is another reason a person may decide to sell, faced with the peril of clearing the debts they owe. Houses are not all made to last and many overwhelmed home owners find themselves burdened with devastating repairs. They simply have no way to fund the expense, let alone face the upheaval process.
All around the world, people are pushed by happenstance to do things they would never resort to otherwise. When facing the choice of selling your most precious financial asset, swelling emotions can narrow your view of the situation. Sometimes you can only make sense of the most obvious option that shoves its way into your mind. Before making a major life decision like selling your home, or any major decision for that matter, you have to consider all of the alternatives at your disposal. Rarely is there only one solution to a given problem and the following examples will prove so.
Here are some possible alternatives relevant to their corresponding situations to further support the importance of researching every available resource. If too little space is the issue, consider borrowing more in order to extend your current home. Try expanding out into the garden, down into the basement, or up into the loft space. If too much space is the issue, consider the financial benefits of renting out a room or even multiple rooms. The flip side is that you will have to be cautious and therefore selective about the individuals you allow to live under the same roof. Try to rent to people you already know you are compatible with. When meeting a new potential roommate, never appear weak minded or emotional. Crooks will use every vulnerability against you once they spot obvious signs of insecurity. If you emit confidence and portray a person not to be messed with, crooks will be more reluctant. There is a flip side to everything, but becoming a good judge of character is a life skill to take with you after the renting experience.
If relocation is necessary, consider keeping your home and renting it out. You may be able to obtain a “buy to let” mortgage or, if your current house is mortgaged, your lender may be happy to allow you to rent out, though usually at a slightly higher interest rate. Similarly, if you have inherited a property this might be a desirable option. It is important to remember that, in addition to your mortgage provider (if applicable), you will need to inform your buildings and contents insurer if you make the decision to rent out your home.
If you are having financial difficulties, consider changing your mortgage, such as extending your current term to lower your monthly payments, or remortgage to release some equity in your home so you can borrow a little more. Talk to your lender and think cautiously before changing your mortgage. Be certain that if you decide to increase your mortgage that you will be able to afford the monthly repayments. If you can, renting out a room can be a helpful accommodation here as well, but keep in mind that any rent you collect may be taxable depending on how much you receive.
For the elderly, having to move can be a detrimental loss. Luckily, if you are older, a lifetime mortgage could be the answer to your prayers. A lifetime mortgage is a certain kind of equity release loan based upon the value of your house. It allows those eligible to receive a lump sum or a regular income, but not without the stipulation of paying interest on the additional loan which is later added to the original loan amount. You still own your home and the loan is eventually repaid when your house is sold in the future. Keep in mind, however, that the interest accumulated is compounding, which means interest on the previous years' interest. There is a risk that the loan could grow to exceed the value of the house. However, any extra value derived from the property after being sold is paid to the appropriate heirs in the event of that person's death. Always know the specifications before choosing any alternative course of action.
A home reversion loan is another alternative some may find suitable. This allows you to sell all or part of your home to a company in exchange for a lump sum of cash, a regular income, or even both. While under a set lease, you retain the right to live in your home peacefully until the day you die. Usually, you can choose to sell between 25% and 100% of your property, but the amount you receive in return will be considerably less than that of the market value. The amount will depend on your age because the older you are, the more you receive. A beneficial proposal for those unable to uproot and sell through the market.
Some people have the option of “house-swapping” or “part-exchanging”. Today, millions of people are all interconnected via the Internet. An endless stream of information and networking connects people from all corners of the world, allowing new possibilities the chance to uproot and expand. There are swapping websites that specialize in bringing people together who are willing to participate in this interesting way to avoid getting caught in a chain or paying estate agency fees. Technology continues to provide us with more innovative ideas as we strive to solve all of life's problems, from opening a bottle of wine to closing the sale of a home.
Now can you start to see why it is so important to do your research and to discover what options pertain to your own happenstance? These alternatives only skim the surface as a reminder of the magnitude of information and reliable services available to suit your needs. You are not alone in this fight and you have the ability to learn the techniques to come out on top. So now that you know what tools exist to help you make a definite decision, are you ready to start the process of selling your home? It will involve hard work and a willingness to follow the provided guidelines vital to success.
So you have decided to sell your home. This is not a task that can be done by yourself. So where do you begin? Before you thrust the gear into full throttle, there are some things you need to be sure about.
Timing is a good place to start. If you are not pressed to sell immediately, you can choose to sell when demand is high to give your property the best chance on the market. Typically, demand is high in Spring, early Summer, and Autumn. If possible, avoid the middle of Summer and the holiday seasons in Winter.
Take the time to soak in the wider picture. Again, this will mean doing your own research to see what is happening in the housing market, both nationally and locally. Take note of what other sellers are doing and study top dollar houses recently sold on the market. Be aware of interest rates and the attitudes of current lenders.
Thoroughly research what is happening locally. Too many “For Sale” signs cluttering your area can ultimately put off potential buyers and drive house prices down. With luck, you may live in a location that appears immune to national trends and has a consistently buoyant market. Though this will not always be the case, you still hold the power to sway the odds in your favor. You will have to decide whether or not you want to invest in another home. The market will tell you if buying another house is plausible.
If you plan on buying and selling, a strategy most home owners find ideal, you have three main options: buy and sell at the same time, sell first, or buy first. Each will effectively generate a different outcome with different concerns. Timing is an important consideration in the application of any one of these options.
The first and most common scenario is to buy and sell at the same time. Whether you can manage to sell your current house or acquire the home of your dreams first is often a matter of planning and preparation. With a bit of luck, it can be done, but keep in mind that it can be stressful trying to sell and buy at once. Once you have found the house you want, you are going to want to step it up a notch and speed up your sale.
The second option is to sell first. This will allow you to be in a stronger negotiating position when you get around to buying, seeing as you will be chain free and have a clear idea about what price you can afford to offer. However, remember that you may end up having to rent an apartment, or other lodgings, while you are on the hunt for your new property. You may have to move twice and deal with storage payments, as all of your possessions will need to be kept safe while you sort everything out. Remember that prices may rise in the meantime. If renting is something you are unwilling or unable to do, you have the option of specifying to buyers that you will only accept an offer under the condition that you are able to find a suitable place to buy. This will involve delicate negotiation skills.
The third scenario is to buy first. This can lead to being put under a lot of pressure to sell your home quickly. You want to avoid the sheer expense of owning two homes at the same time and having a bridging loan to pay. Most lenders will refuse to give you a mortgage on your new home unless the other is being sold or you can prove you have the capability to keep up with both mortgages. For most people, one mortgage is enough, so this option is not the most ideal to the majority of home owners.
Be sure to budget for your sale and see where you stand. The costs associated with closing a deal alone are great, so renovating and repairing your home before the sale will require precise budgeting. Do not fret about the details now because this guide is about to explore the secrets to the least expensive, most appealing secrets to draw in buyers with a completely transformed home. For now, here is something to consider first on your journey to flip and sell a home while saving money.
All sellers are required by law to get an EPC. This stands for Energy Performance Certificate. An EPC shows you exactly how much energy a building uses. This helps home owners lower their energy bills and live more comfortably by making their homes more energy efficient. You must contact an accredited domestic energy assessor who will perform the assessment and provide the certificate. You can do this online at www.epcregister.com or through the phone book.
You have to make sure you know how much selling your home will cost you. Fees vary, but do not underestimate them because they tend to add up quickly. An Estate Agent's fee is payable when a real estate agent sells the property and contracts have been signed. Solicitors' fees are required as well. A solicitor is needed to guide you through the legal aspects of selling your home. This is called conveyancing. Costs vary, so always request a quote and make sure to ask if it is a fixed price because costs accumulate fast if there is a dispute or query on the paperwork. If you have chosen to buy and sell, some solicitors will provide you with a discount for handling the conveyancing for both.
You may also have to deal with current Lender's fees. Be sure to check for early repayment charges or any administrative fee payable provided you repay your mortgage. There will also be Removal costs which will vary depending on the amount you need to move, how far away you are moving, and whether you choose to use a professional firm. Depending on the circumstances, there can be Rental costs, bridging loans, and storage charges as well.
Generally, if you have lived in your home and it has always been your home in the time since you have owned it, you will not be forced to pay Capital Gains Tax on any revenue gained when you sell it. However, there might be some liability if the property you are selling is not your main residence or you have used part of it for business use. Business use such as using a room as your office, taking in lodgers, or letting out all or part of your home.
However, the profit you make upon selling your home produces capital gains, which are subject to capital gains taxes. Fortunately, a lot of sellers can avoid paying these capital gains taxes all together. Thanks to the Taxpayer Relief Act of 1997, you can exclude up to $250,000 in capital gains. Married couples can exclude up to $500,000 in capital gains. This means that if you bought a house for $100,000 and later sold it for $300,000, you would have $200,000 in capital gains completely tax free.
The final and most important consideration if you are going to sell your home for top dollar is hiring someone to assist you. Contrary to what others may say, selling a home is not something that should be done solo. Hiring a professional agent will give you the best chances of success. You will be able to sell your home quickly and have the most current tools and professional knowledge on your side.