When you’re selling your house, it’s essential to walk away with the right amount of profit. How much money you make on the sale depends on various factors, including how much equity you have in your home, the original purchase price, the balance of your mortgage, rehabs you’ve done, and current local market conditions. This article will give you an idea of how much money you should aim for when selling your house.
What’s Your Current Equity?
If you’re selling your house in order to move up to a bigger and better home, then you’ll want to make sure you have enough profit to put toward your new home. Equity in your current home is the key here. If you have a lot of equity, you’ll likely still be able to make a good profit, even if your sales process is lower than you might have expected. That’s because you have less mortgage to pay off, which means you’re cutting off pay interest, and you can walk away with your original investment and then some!
If you don’t have much equity but are trying to profit from the sale, you may have less flexibility to accept lower offers. That can be fine for some people who can afford (literally) to wait to sell. For those who need to get out quickly, this can create a lot of pressure and stress.
What Was the Orginal Sale Price House?
The original purchase price of your home is also important when considering how much money you should make from selling it. If you bought your home at a great price, then even if you don’t have much equity, you may still be able to sell it for a good profit. On the other hand, if you bought your home at an inflated price, you may not be able to make much of a profit, even if you have a lot of equity.
What’s the Mortgage Payoff Amount?
Your mortgage payoff amount is another important factor to consider when figuring out how much money you should make from selling your house. If you still have a large outstanding mortgage balance, then you won’t be able to keep all of the proceeds from the real estate transaction. However, if you’ve paid off most or all of your mortgage and have a low mortgage payoff amount, you’ll be able to keep more of the profits from the home sale price.
Granted, you’ll still have closing costs, prorated property taxes, and realtor fees that you pay to your real estate and the buyer’s real estate agent, or you may have attorney fees, but you’ll likely walk away with more cash from your home’s sale price than you would’ve if you had to pay off most of your mortgage. If you haven’t lived in your home for a long time, your loan terms are spread out, or if you have a high-interest rate, you may have a higher loan balance to pay off than you’d like.
What Improvements Have You Made?
Rehabs can also affect how much money you make when selling your house. If you’ve done any major renovations or repairs, then you might be able to sell your home for a higher price and make a bigger profit. However, major improvements don’t always yield a profit. We’ll expand on this briefly to explain exactly what we mean here.
Some people are quick to assume that if they completely renovate their home: gut the bathroom, re-do the kitchen, put in brand new wood floors, and stuff like that, they’ll automatically increase how much they’re asking for their home’s purchase price, and they’ll able to get so much more money from the home sale. However, this isn’t true in a lot of cases.
Here are a couple of reasons why:
Sales Price Depends on Comparables
If you’re in an area where the comparable home prices are still low, meaning other people have not renovated, you are driving a hard bargain to try to sell a prospective buyer a similar home at a way higher price than the others around it. Sure, you can be a trendsetter and set a good example for your neighbors by upgrading your home, but why be the first? You’re not probably not going to get the price you’re asking if everyone around you is still selling for less.
Just because you add new finishes doesn’t mean you’ve improved the home’s integrity. You can’t put a gorgeous new kitchen in a home that is falling apart at the seams. Be realistic about what you’ll get out of what you put in.
It often doesn’t make sense for homeowners to invest the money and sweat equity to make improvements if they cannot recover the costs upon sale. We’ve seen this recently with high prices of lumber and building materials. They’ve been a factor in driving up home prices, but that’s only because the materials are so expensive, to begin with. Know your local and national economy, and ask your realtor to assess your home before making improvements.
If you’re tempted to do something like take out a home equity loan in the hope of rising to meet the median home sale price and fair market value of more updated comparables around you, pause and ask your real estate agent or mortgage lender if they think that’s a good idea.
Are You in a Seller’s Market?
Finally, local market conditions also influence how much money you can make from selling your house. Is now a good time to sell? If the housing market is hot in your area and there are lots of buyers looking for homes due to low mortgage interest rates, low property taxes, or some other factor, then you’ll be able to sell your house for a higher price and make a bigger profit. However, if the housing market is slow in your area and there aren’t as many buyers looking for homes, you may have to sell for a lower price and not make as much of a profit.
To find out what your current market looks like and potential buyers are looking for, you need to keep up with current real estate news from a reliable source like TheMLSonline. They have their finger on the pulse with the latest Minnesota real estate market updates.
How Much Can You Sell Your Home For?
When you’re selling your house, it’s essential to keep all of these factors in mind to walk away with the right amount of money. Equity, original purchase price, mortgage balance, rehabs, and local market conditions can all affect how much profit you make from selling your home. If you consider all of these factors, you’ll be able to sell your house for the right price and make the right amount of money.
To find out how much you can sell your home for, given all the above factors and more, go to TheMLSonline’s website and use their free home valuation tool. They can also connect you with a realtor or lender who can advise you on how you can get the most out of your home. Contact them today!