An article from NBCNews.com recently described how consumers still think that a home is a part of the American dream. Despite everything that happened and the way a lot of consumers lost their homes in the last recession, it is apparent that people still longed for homeownership. According to the article, owning a home represents the economic dream. Even the last recession was not enough to erase that.
A lot of people faced a financial nightmare like never before when the housing market crashed. As the Americans lost their jobs, they thought that they can sell their homes to recoup their losses with the equity they have built on it.
But we all know that was not what happened. when they lost jobs and found out that they can only sell their homes for less than the value that they expected. The crash led to the loss of the wealth that they thought they have built.
As people start to invest in their homes once more, you need to know how to utilize it so it can help you grow your personal wealth. If you do it right, you can actually get your house to support you. After all, any real estate is an investment. If you time it correctly, you can benefit from cashing in on your home.
5 signs leading to a home sale that can boost your personal net worth
Although you are benefitting from your home while you are living in it, you can really feel its financial worth when you decide to sell it. This is a common practice for a lot of people if they want to earn money. They live in their home for a couple of years and when they are ready, they sell it for a better home. That new home is not necessarily a bigger one – but one that fits their current lifestyle in a way that the old house didn’t.
Instead of using your home to consolidate debt, you may want to profit from selling it. That way, you can get the cash without being in debt. You can decide if you use that money to pay off your debts (or a portion of it) or you will reinvest it.
Before you can decide what to do with the money, however, it is important to determine if it is the right time to earn money from selling your home. There are certain signs that will guarantee that the transaction will produce you with a hefty amount of profit.
Selling a home in a sellers market is what you should look for. Here are 5 signs that will help you determine if you will profit from the sale of your home.
Rise in home interest rates. First of all, if the average rate for a home loan is rising, you can expect that it is a good sign to sell. As the rate increases , so will the price of your home. This upward trend typically pushes some buyers out of the market. If you sell your home at the right price, buyers would be scrambling to purchase it. You can benefit from having a lot of offers. Just make sure that you will not wait for the rates to get really high. That can end up losing too much buyers because they cannot afford it. According to the data from FreddieMac.com, the average rate for a 30 year mortgage right now is at 4.33% – which is still relatively low but it is expected to rise by 2015.
High selling price. An increasing home price in the market is a clear indication that you can earn money from selling your home. It is a great time to get some buyer to purchase your home so you can make some profit from the sell of your house. By the start of 2014, the prices are still increasing but the growth is slowly decreasing.
Low inventory. When the demand is not high but the supply is, that could mean the prices of the supply will be driven low. But if the supply is low, you can expect that the prices can increase because of a higher value and still people will opt to buy it. So if the inventory in your area is low and a lot of buyers are looking to purchase a home, you can sell your home at a higher price because it is expected to have a greater value. If the supply of home is at 6 months, that is a good sign for the real estate market. Anything lower indicates a seller’s market.
Faster days on market. When homes for sale have shorter days on market, that means a home for sale is sold quickly. This is a good sign that a lot of buyers are snatching homes. This is another indication that you should sell your home. If the homes are staying longer in the market then you can expect that not much buyers are grabbing homes. As of December 2013, the average days on market is at 72 days. That is generally still a good duration – although it is an increase of 56 days from November. Of course, you have to note that in winter, the sale of homes really decrease. Take into consideration that factor.
Purpose of the house. After all of the four are checked out, you may want to consider why you got the house in the first place and why you want to sell it. Is it because you want to pay off a debt or you simply want to downgrade to a smaller home to cut back on your expenses. These are also indicators that you need to sell your home. Make sure that you check your motives for the selling to ensure that you will not let your emotions get in the way of your decision making.
Once you have considered all of these factors, you should be able to make a smart decision about whether or not you can earn money from the sale of your home.
Tips to use your home sale profit to generate more income
Of course, the actual profit from the sell of your home will be multiplied if you learn how to use it properly. Here are some tips that you should know when you have successfully gained profit from your home.
Understand your tax benefits. First of all, you want to know the tax benefits of selling your home. According to the data from Realtor.com, you can avail of some tax benefits if you qualify for the provisions stated in the Taxpayer Relief Act of 1997. The law states that you are allowed to keep capital gains from the sale of your home by up to $500,000 (married) or $250,000 (single). This can be availed if the home has been your residence (not rented out) for at least two years of the past 5 years.
Invest in a new home. One of your options with the sale amount that you got from the home is to invest it in real estate again. You can split the profit to buy a smaller home for yourself so you can live in your home rent-free. The rest of the amount can be invested in another home that you can rent out or flip (buy and sell) for profit.
Pay off debt. Another way that you can do to the money that you got from the sale of the home if to pay off any debt that you owe. That could help you eliminate the need to waste money on interest rates. You can really let your house help you manage your debt – you just have to learn how to do it.
While you can earn money from your home, you need to be very careful about how you will use the money. Make sure that you are smart about how you decide to spend it.