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How To Be Financially Fit When Selling Your House

Posted on: September 13th, 2016 by , No Comments

financially fit

Want to learn how to be financially fit when selling a Denver house?

To be Financially Fit selling a house in Denver, Colorado involves two questions you must ask yourself: “Do I have enough equity in my home to support the idea of selling and moving elsewhere? And are my finances in order?”

The Cost of Selling Your House to be financially fit

The first thing to do is get in contact your lender, look at your loan balance online, or on your most recent statement you received in the mail. This way you have an accurate price on how much you owe on your mortgage. Skip down to the preparing phase if you owe little to nothing to your mortgage.

Next you must include any second mortgage or home equity loan or line of credit in your loan balance calculation. Then factor in if your home loan has any pre-payment penalties that you need to include, this should be stated on your loan document.

Then it is important to conduct your own comparative market analysis to get a good idea of what your home is worth in the current market. This average can be found using Zillow. Compare your home to homes within 1-mile radius that have sold in the last month. Always make sure that the number of bedroom and bathrooms are the same, and the square footage and condition of the home is similar.

Once you have the final number of your home value you then subtract what you owe from the estimated value to get a gross of your equity. Note that there is a difference between gross equity and net equity. Gross equity is the difference between the market value of your home and the amount you owe to the lender. While net equity is the gross equity less the costs for selling the home.

Financially fit Gross vs. Net Equity

To calculate net equity make a list of closing costs you expect to incur and subtract that total amount from gross equity. Closing might include:

  • Appraisal
  • Home inspection
  • Staging
  • Repairs/touchups
  • Closing costs
  • Real Estate related legal fees
  • Title insurance
  • Moving expenses

For example, if your home is worth around $300,000 and you owe your lender $200,000. Your gross equity is $100,000. If you estimate closing costs to be $30,000 including an agents 6% commission of $18,000, net equity will be $52,000. Of course, if you sell your home without a realtor than you retain the commission they would earn.

Financially fit Net Equity

Once you have calculated your net equity and your financial goals, here are some markers to consider as you utilize that information whether you are in a good financial position to sell your home.

If your equity is at least 20% of your home value then that is a good start to know that you are financially fit to move forward with the sale. Between 10-20% is a little tighter but should work if you get an offer close to your asking price.

If your equity is under 10% selling will be a challenge unless you are not planning to buy your next home and you don’t need cash in the exchange. When your numbers are tight it is always a good idea to save money by not listing your home with a realtor because their commission turns into your equity.

Remember when you move forward in the sale of your home you must know the asking price that is right for your financial situation. Do not accept any offer below that price unless you will still have equity that is acceptable in your situation.

Having negative equity is called being “underwater”. If you’re in this situation but still need to sell your home you will have to find a way to pay the difference between what you owe and your final sale price. Some homebuyers will be able to cover what is owed if they are interested in buying your house as an investment. But otherwise you may have to take out a loan for this situation.

Selling and Buying at the Same Time

In most cases when selling a home you will be interested in buying a new home at the same time. It is important to get an idea of the current local mortgage interest rates to be financially fit. That way you are not in the dark when applying for a new home. Do research online or contact a local bank for this information. At this point, you will also need to know if your credit score is at a good rate to apply for a loan on a new home.

For sale by owner is a cost effective way to hold onto the most equity in your home. This strategy is often used for people who want to avoid realtor commissions. But you can also avoid making costly repairs. The best way to sell your home yourself is to find a real estate buyer who pays cash for properties as a investment.

Adam Buys Houses Company has been trusted by many home sellers due to various situations. Even if you are not financially fit we can help people avoid foreclosure. Read more about our tips on our blog or call us today at 303-558-5843 with any of you questions.

 

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How to Sell Your House to an Investor in Denver Colorado

 

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