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How to Decide When to Sell Your House

First of a three-part series on selling your home.

April 30, 1989|ROBERT J. BRUSS

Today is always a good time to buy sound, well-located real estate at the right price. But, yesterday was a better time to buy and tomorrow will be a worse time. "If only I had bought that property a few years ago I would be rich today" is a common refrain.

Deciding when to buy real estate is easy; picking the time to sell is much more difficult.

Often an owner should wait to sell until local and national economic conditions are right. Fortunately, real estate goes up (but sometimes down) in market value slowly, so owners usually don't find their property values have changed overnight, as can happen to investors in the stock market.

The long-term trend for real estate market values is up. But there are peaks, valleys and plateaus along the way.

Consider, for example, the property owners in Houston who saw realty prices gradually dropping a few years ago, but they held on, figuring the local economy would get better and realty prices would rebound. Unfortunately, it hasn't happened, yet. However, the smart owners saw the downward trend starting and sold before their real estate lost much value.

Here are five considerations to help decide when to sell your real estate:

Consider your personal situation: If your personal situation is changing, perhaps due to job transfer, divorce, death, birth, illness, unemployment or other family situation, selling your home and investment property might be a necessary decision.

For example, if a job promotion requires moving across country, then the sale of your old home would be wise unless you plan to return to the area and have someone to manage renting your property while you are away.

However, because you can never own too much real estate if you are moving within the local community, keeping your old home for use as a rental may be a sound decision.

Keep up with local economic conditions: When you notice local businesses laying off employees and not hiring new workers, with a rising unemployment trend, that may be the time to sell.

To illustrate, consider the many industrial towns in the Northeast and Midwest "Rust Belt" where factories closed and real estate values fell because people were moving out of town rather than into town.

Watch national economic conditions: The national economic indicators, such as interest rates, unemployment, home sales and productivity should be read cautiously. While they indicate national trends, your town may be completely different due to local economic conditions.

For example, the nation is currently doing very well economically. But, the oil-patch states continue to be in the doldrums, while diversified areas, such as most of California, are booming. Although the national economic statistics look good, rising mortgage interest rates could quickly dampen the enthusiasm of home buyers who are very important to the construction and home-furnishings industries.

If you spot adverse local trends, no matter how good the national statistics, today might be the time to sell your real estate.

Consider local real estate opportunities: Because real estate is a very local business, often unaffected directly by national trends, property owners should evaluate local opportunities carefully.

For example, if property values are rising in your community and the long-term trend looks good, then fixing up your property, refinancing its mortgage to take out tax-free cash and holding rather than selling might be the wise decision.

On the other hand, if local businesses aren't expanding and are laying off employees, home values are almost certain to stabilize or even drop.

Don't be stubborn: Too many real estate owners ignore the facts until it is too late. For example, if you spot an adverse neighborhood trend developing, such as rowdy drug dealers moving in, that may be the time to sell before it is too late.

Or, since real estate values move slowly, if you notice property values dropping, such as happened in Houston, that is the time to sell while you still can make a nice profit.

However, if you see lots of home-improvement construction taking place, that is a good sign the neighbors are improving their property values and plan to stay.

On the other hand, if you don't see any improvement construction or if city services such as street cleaning are declining, that may be a signal it is time to sell and move to a neighborhood where owners are improving their properties and cities provide adequate services.

Finally, consider the quality of the local school district because it usually plays a big part in residential property values. Families hesitate to move to areas where the schools are bad and the students get poor scores on standardized tests, and property values are hurt. Of course, there are a few exceptions where population pressure keeps property values up despite poor schools.

Deciding when to sell is a much harder decision than deciding when to buy. But smart property owners keep informed on national and local real estate trends, so they can spot any adverse developing property trends. Just as there is a time to buy real estate, there is a right time to sell. The difficulty is knowing how to spot that best time to maximize sale profits.

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