In our previous post we covered some general guidelines about selling your home soon after buying it. In this post, we’ll delve into some further details on what factors to consider when you are deciding whether or not to sell your house shortly after purchasing it.

It’s possible to sell your home at anytime, but a good rule of thumb is to wait at least two years to sell your home after purchasing it. This way you can avoid paying taxes on up to $250,000 worth of profits from the sale of your home (or $500,000 if you’re married).
 
In the event that you have no choice but to sell, you can be prepared by doing a little math to figure out if you will lose money by selling early. This preparation will reduce stress and help you know what to expect.
 
The first step is to determine the fair market value of your home. Knowing how much your home is worth will let you know how much you could gain or lose from the sale.  

An experienced real estate agent is a big help, as they will be able to look at comps of other houses in the neighborhood and do market research analysis to help determine the best price.  

To get an idea of what houses are selling for around you, click here.  To get full market analysis on your home contact me. 
 
Next, be sure to subtract your estimated closing costs from the expected sale price of your home. Closing costs can take a significant chunk out of your profits, this is particularly true when you buy and then resell a home quickly. Both buyers and sellers have to pay closing costs, although it’s typically more expensive for sellers. For buyers, the closing costs are usually 2% to 5% of the price of the home. The settlement statement will tell you the total amount you paid for your home, including closing costs. For sellers, closing costs will depend on the following categories:

• Prorated property taxes
• Prorated HOA fees
• Agent commissions
• Title insurance
• Escrow fees
• Attorney’s fees

 
 
Then, also subtract the projected costs of preparing the house for sale and the mortgage payoff amount from the projected sale price. Even a relatively newly purchased house may need touch-ups prior to resale. Research done by Zillow suggests that most sellers spend about $6,570 on work done by professionals to prepare their homes for sale.

Cleaning, painting, staging, lawn care and moving costs are all typical expenses for sellers. In terms of mortgage payoff, for homeowners who have owned their homes for less than two years the payoff amount won’t be much different from the amount that was originally financed. Since the earliest payments on a loan go towards interest and not principal, sellers in this position will not have made much progress on paying off the loan principal. Typically, they will not break even from the sale of their homes. The only way to break even or make a profit is if the property has gone up in value since the time it was purchased.

There are several other things to be aware of when deciding to sell a home early.  Here are three additional factors to selling a home early.

Homeowners who have lived in their home for at least two years as a primary residence do not have to pay capital gains taxes on the first $250,000 worth of profits from the sale (or the first $500,000 for a married couple). However, if you are selling your home prior to having lived there for two years, you may have to pay capital gains taxes on the profits of your sale. Your income tax bracket and the amount of time you’ve owned the home will determine your capital gains tax rate. There are some cases where you would be exempt from paying capital gains taxes, even if you’ve lived in your home for less than two years, for example, if you were to move due to a natural disaster, death, or unemployment.

If you sell your home soon after buying it, some lenders will charge a prepayment penalty  so they can compensate for the loss of interest payments since you will be paying of your loan so quickly. Different loans have different terms. You may have to pay a percentage of your remaining loan balance, a percentage of the interest you owe, or a flat rate. Many loans do not include prepayment penalties, so it’s not always an issue. In the case of FHA loans, there are never prepayment penalties.

Nowadays buyers can easily look up a home’s listings history on real estate websites. So, if you’re selling your home less than a year after you bought it, potential buyers may wonder if there’s a problem with the home. It’s necessary to make it clear why you are selling early, such as a need to relocate, to avoid lower offers on your home.



Source: https://www.realtor.com/advice/sell/sellers-must-pay-closing-costs-too/ 
https://www.zillow.com/sellers-guide/how-soon-can-i-sell-my-house-after-purchase/

Once you have purchased a home, you can sell it at any point that  you want to. However, that is not always advisable. How can you tell how soon it is a good idea to sell your home? There are a variety of factors involved, including whether you will lose money, have capital gains taxes, or owe mortgage prepayment penalties. We will look at all the factors involved in considering how soon it is wise to sell your home after buying it in this post and our next post.
First, some general information about selling your home a short time after buying it.

Most homeowners live in their home for an average of 13 years before selling it, according to the Zillow Group Consumer Housing Trends Report 2018. However, there are a number of scenarios in which a homeowner would need to sell a home much sooner. Here are a few:

• Relocating for a job- your career might cause you to sell early if you move for a new job
• Health reasons- unexpected health issues may necessitate liquidating your assets for cash to pay bills or live on
• A change of heart- you may find that the home you bought is not a good fit for you after all
• Change in family structure- a new birth, a death, or kids moving out of the house mean changing needs for your home
• Changing financial situation- your mortgage or property taxes might become too expensive for you
• Seller’s market- your home may have increased in value quickly and you could make a nice profit selling it

Generally, selling in less than a year is not worth it. If you only need a place to live for a year or less, it may be a better decision to rent. Even if you can sell a home for the same amount you bought it for, you may still be losing money. You must consider all the expenses involved in buying and then selling a home, including the costs associated with buying, costs associated with selling, moving expenses, and equity.

The breakeven horizon is the amount of time that it takes for buying to be more worth while financially than renting. It is not a static amount, but varies for different homeowners in different parts of the country. 

The breakeven horizon is based on a mortgage with a 20% down payment and monthly payments on a 30-year fixed-rate mortgage, with current interest rates for a homeowner with a 680 to 740 credit score. The breakeven horizon also considers market appreciation rates, taxes, insurance, closing costs, maintenance, and HOA fees for condo owners. The breakeven horizon is a tool that will help you determine how soon after purchasing you can sell a home without losing money. Just remember that breakeven horizons vary around the country, but the national average is 2 years and 3 months. For more detailed information on the breakeven horizon in different locations around the country, check out this 2018 report by Zillow. 

This of course is market dependent.  We can't predict what the market will be like in the short term.  However, if you wait long enough, the market has always historically gone up.  Therefore, I always advise people to plan on 7-10 years as a safe time frame to own.  In addition I advise people to be flexible because the main way people can lose money is if they have to sell.  In most situations, waiting to sell will allow you to come out free and clear or make a profit. 

Zillow.com and Nerdwallet.com also feature  handy Rent vs. Buy calculators that you can plug a few numbers into and determine at what point you would be better off owning than renting. 

Yes, it is possible to sell before you reach the breakeven horizon and still make money. Here are a few instances where this is possible.

• House flipping- you’ve made important upgrades to the home in a short period of time, increasing it’s overall value
• Hot seller’s market- the value of homes in your area has increased rapidly since you purchased your home
• A great deal- maybe you purchased your home in a foreclosure or under other circumstances where you got a great deal and can sell it for a profit

We’ve covered some general guidelines about how soon after purchase you should sell a home. In our next post, we’ll delve into some more details that will help you assess your individual situation and decide whether or not you should sell. Stay tuned for our next post!


Sources: https://www.zillow.com/sellers-guide/how-soon-can-i-sell-my-house-after-purchase/, 
https://www.nerdwallet.com/mortgages/rent-vs-buy-calculator

The Stonewall Jackson Inn of Harrisonburg is currently undergoing a revitalization. Located downtown at 547 East Market Street, the historic establishment is under new ownership as of August, 2019. A former dietician and a businessman, Becca and Joel Graham are breathing energetic new life into one of Harrisonburg’s hidden gems.  

Last Thursday, November 14th,  the Harrisonburg Homes team had the opportunity to attend a lovely open house at the Stonewall Jackson Inn, featuring wines by Brix and Columns Vineyard, hors d’oeuvres by Sub Rosa’s Kirsten Moore, and home goods by Lineage Goods. Visitors had the opportunity to tour the house and chat with Becca and Joel. 

Built in 1885 as a single family mansion, the home was first turned into a bed and breakfast in the 1990s. Featuring 10 bedrooms of different sizes and configurations, the house is cozy and intimate. Each room is named for a different historical figure and is uniquely decorated, for a boutique feel. Rooms combine antique furniture and decor with modern conveniences, including a thermostat in each room and free wifi. For a hint of luxury, beds are appointed with 600 thread count sheets and each room has a naturally scented Lineage Goods candle. Rooms range from $149 to $189 per night  for two people and include a gourmet breakfast. Rooms can sleep from 1 to 4 guests and bed sizes range from king to twin depending on the room. ​

Selling your home is a big step. How do you know you’re ready to sell your home? Here are 8 signs that you’re in a good position to sell your current home and buy a new one.

Equity is the difference between what your house is worth and what you owe on your mortgage. So if your house is worth $300,000 and you owe $200,000, then you have $100,000 of positive equity. Most homeowners have positive equity in their homes, but it’s possible to have negative equity if your home is now worth less than what you paid for it. How much equity do you need to sell your home? Unless you have to do so to avoid foreclosure, don’t sell your home unless you can sell it for more than you bought it for. In terms of what you need to buy a new home, it’s best to have enough money from the sale of your current home to make a 20% down payment on a new home and to be able to pay for closing costs and moving expenses.

The best case scenario for buying a new home is that you are financially secure, with no debt outside your mortgage and enough cash in an emergency fund for at least 3 months of expenses. However, it is possible to carry some debt outside your mortgage and still be approved for a loan for a new home. Lenders will look at your DTI, or debt to income ratio to decide if you’re eligible for a loan. A favorable DTI is less than 43%. To figure out your DTI, add up all your monthly debt and divide it by your monthly income. For example, if your monthly debt is $500 and your income is $3,000, then your DTI is 16%. ​

In order to get the most out of the sale of your current home, it may be necessary to make some upgrades. Typically, the best places to invest money are in paint jobs, the exterior of the house, and upgrades to the kitchen and bathrooms. Home improvements aren’t a must-have, but having the cash on hand to update your home and maximize its value is a good sign you’re ready to sell.

While you may be financially in good shape to sell your home, it’s also important to assess whether or not you are emotionally ready. Can you handle the criticism of your home that potential buyers may make without taking it personally? Are you ready to let go of the memories that you created in your home? Are you prepared to put in the work to get your home ready for the market and keep it ready to show for weeks or months? These are some of the questions you will need to answer in order to determine if you’re emotionally ready to sell.

Whether you need more space to accommodate new family members or you’re ready to downsize, it’s important to assess whether your current home fits your needs. Changes in your family size or lifestyle indicate that you’re ready to sell.

Do some research and find out the state of your local market. If you're in a seller’s market, meaning that demand for homes is greater than the number of homes available, it’s a good time for you to sell. In a seller’s market you’re likely to get multiple offers on your home that are competitive and you’ll be able to make money off the sale of your home, which is always the outcome you want as a seller.

In summary, to determine if you’re ready to sell your home, you’ll want to take stock of your financial situation, your emotional situation, and the state of the local market. If these three factors are all working in your favor, it’s a sure sign that you’re ready to make the move of selling your home.

Sources: https://www.zillow.com/sellers-guide/thinking-of-selling-your-home/
https://www.daveramsey.com/blog/ready-to-sell-your-home

October 2019 sales were not quite as strong as October sales in 2018.  With low inventory levels, we are still in a sellers market.  Is this a blimp in a year of strong sales?  Or, are we starting to slow down for the winter? 

At this point, we do not have enough data to indicate a slow down the market.  If you are thinking of buying or selling in the near future, reach out to me so we can discuss strategies to achieve your goals in today's market. 

It’s fall and right now there’s starting to be more leaves on the ground then there are in the trees. It’s time for Harrisonburg’s annual leaf collection. Read on for details on getting your leaves collected in Harrisonburg. 

The following information comes from harrisonburgva.gov.

Leaf collection begins Monday, November 18, 2019. The City is separated into the east and west sections with leaf trucks assigned to each section on alternating weeks. In the heavily forested areas a specific truck is assigned for leaf collection. 

The City of Harrisonburg Public Works Department will be starting the annual curbside leaf collection on November 18, 2019.

Leaves are vacuumed up Monday – Friday for four weeks excluding Thanksgiving and the day after Thanksgiving. Leaf collection continues for four weeks with the following schedule, weather permitting:

West Side of Main St. & Forest Hills  
East Side of Main St. & Fairway Drive

November 18 - November 22
December 2 - December 6
November 25-27 (excluding holidays)
December 9 - December 13

*During the above dates, streets will be done only once per week.
 Guidelines for collection:

• Citizens are asked to rake their leaves out to the curb or the edge of the roadway. 
• Leaves will not be picked up if there is excessive grass, limbs, branches, trash, etc. mixed with leaves.  No exceptions. 
• Leaves need to be raked to the back of the curb, not to extend more than five feet into your yard. 
• Please do not rake leaves into the street. 
• Please do not park vehicles around leaves.

 
Before and after these dates, place your leaves in a biodegradable bag or 35 gallon container with no liner for assigned Wednesday pickup. (See Yard Debris and Bulk collection.)  Once the annual collection is complete, there will be no limit on contained leaves that are set out for Wednesday pickup through December 30, 2019. Leaves not properly placed for pickup will be subject to a violation fee.  Citizens can also bring bagged leaves to the Recycling Convenience Center during operating hours.

​If you have any questions, you can call Public Works at 540-434-5928.


Source: https://www.harrisonburgva.gov/leaf-collection-schedule

Last week the Federal reserve lowered interest rates. This has an impact on homeowners and homebuyers alike. What do lower interest rates mean for you? Read on to learn more!
​
Recently the Fed lowered interest rates by a quarter of a point. This is the third time in a year that the Fed has made such a move, which is meant to boost the economy. There is a potential upside and a potential downside to this move for homeowners and homebuyers. The upside is that lower rates often result in cheaper loans. The downside is that in the event that the economy actually weakens, lenders will be more conservative with loans in that they will be less likely to offer a loan and may charge more for it to try to make up for their risk. This is according to Richard Barrington of MoneyRates.com.

There is a complex relationship between the Fed and mortgage rates. Several factors affect long-term fixed mortgage rates, including the economy, the Fed’s decisions, and inflation. “Fed rate cuts have very little direct correlation to long-term fixed mortgage rates. We have seen mortgage rates moving in the other direction of the rate cut or not moving at all in the past,” says Shashank Shekhar, CEO of Arcus Lending in San Jose, California

However, according to Tendayi Kapfidze of LendingTree, mortgage rates have been steadily going down for nearly a year. Bankrate states that the average 30-year fixed rate mortgage is now under 4%.

The deputy chief economist of CoreLogic, Ralph McLaughlin, said, “Mortgage rates this low at the end of an economic cycle is nearly unprecedented, and may be very well keeping the housing market — and U.S. economy — afloat,”

For homeowners, this makes it a good time to refinance their homes at a lower rate. Greg McBride, chief financial analyst at Bankrate, states that the average homeowner could save about $150 a month. ​

On the other hand, there’s a clearer correlation between interest rate cuts and adjustable rate mortgages and home equity lines of credit. These financial instruments drop in price when the Fed lowers interest rates.

Homeowners with adjustable rate mortgages could expect to benefit by their rates dropping, although they may not see this right away because ARMs are only adjusted once a year.

Another benefit of the Fed’s recent rate cut for homeowners is that it will be less expensive for them to borrow money from a home equity line of credit or make payments on an existing HELOC. Since HELOCs can be adjusted within 60 days, borrowers will see more immediate benefits.

In short, homeowners and homebuyers are likely to both benefit from the recent drop in interest rates by the Fed in this market, but overall the Fed’s movements of interest rates affects different financial instruments differently.


Sources:https://www.cnbc.com/2019/10/30/heres-how-the-fed-rate-cut-affects-you.html
​https://www.bankrate.com/mortgages/federal-reserve-and-mortgage-rates/

​In my last post on buying and selling a home at the same time, we looked at some scenarios in which it’s best to sell your existing home first and then buy your new home. But there are also scenarios in which it’s advantageous to buy first and then sell.

Let’s look at two examples of scenarios in which it can be better to buy first, and some steps to take to help you plan it all out.

If you have the funds available to buy a new home before selling your old home, you should take advantage of this fortuitous situation. There are several reasons why it’s a good idea to buy first in the event that you can manage it. Buying first can be the least stressful way to move for a few reasons:

1. You can shop at your own pace for the next home without the pressure of lining up closing with your current house. 
2. You don't need to find temporary housing and can move once. 
3. You can stage your vacant house for maximum marketability
   
4. You don't have to have to keep your living spaces clean for constant showings. ​

​Identify and liquidate your assets to be able to make a good offer, also have documentation that you have the funds available

1. Make an offer
2. After you move out of your old home, stage it and put it up for sale
3. Once you sell your old home, put the money from the sale back into the accounts you used to buy

In this scenario it makes sense to buy first because it will be easy to get an offer accepted in the slow market and easy to sell quickly in the hot market.  This can happen in Harrisonburg/Rockingham when moving from houses at the median sales price to more expensive neighborhoods.  Statistically, there are less people competing the further away you get from the median sales price. 

People can shy away from this option because you will be hold two mortgages for a period of time.  Some clients are more comfortable with this than others.  If you are considering this as an option I would be happy to meet and discuss timing this move.  Each situation is unique.  Depending on your desire to move slowly, clean, and stage we can get the property marketed quickly.  Since I do my own marketing, I can typically be flexible to get the house on the market in a timely manner after it is ready.

Pricing plays a larger role in how quickly the property will sell once it hits the market.  However, in a hot market, good marketing and correct pricing can result in a quick contract.  The contract can then likely be negotiated for a 30 day settlement.  So, it is possible for you to only hold the two mortgages for two months.  We of course would want to be prepared for unexpected circumstances and be okay with it potentially taking a little longer. 

For homeowners who don’t want to worry about having two mortgages at the same time, there’s another option, which is making a contingency offer.  This can be a nice safety net if you really do not want to hold two mortgages for any given amount of time.  Some sellers may not be willing to enter into this type of contract but it is not completely uncommon in a sellers market. 

1. Do renovations and repairs on your current home ahead of time so it will be ready to sell
2. Make an offer on the new home, if you need to make a contingency offer, ask for 60 days
3. Put your current home on the market after you’ve purchased the new home and moved in
4. If you do have trouble finding a buyer, you can rely on a bridge loan or a home equity line of credit to help you cover your expenses in the interim. For recommended lenders, email me

Although it can require more cash on hand, for many homeowners there are still some situations in which it’s better to buy first and then sell later. Here is a look at some pros and cons of buying before selling.

• You have somewhere to move as soon as you want to
• You only have to move once, saving money on moving costs and storage
• You can take as long as you want to buy a home  you really love

​Feeling pressure to sell quickly may cause you to take a lower offer than you would otherwise

• Contingent offers are less competitive
• You may have less cash available to make a competitive offer than you would if you sold first
• If you decide to rent your current home, that brings its own challenges, and it can be more challenging to try to sell your home with tenants living there

Now you have the case for buying before selling, as well as the case for selling first, which we laid out in our previous post. There’s no one right decision, as it depends on your unique situation. So weigh the pros and cons, and go with your gut instinct.

​Sources: https://www.trulia.com/guides/selling-buying-house-same-time; https://www.zillow.com/home-buying-guide/buying-selling-at-the-same-time/