You bought a house 2 years ago and now you’re getting the itch to move. Maybe you’ve outgrown the space, would like a different neighborhood, or want a closer commute. You’ve started going to Open Houses on Sunday, feeling out the market. This is what one of my colleagues refers to as the “Torture Tour.” Maybe you’ll find something and want to put in an offer. But what is your current house worth? Will you have enough equity to cover the costs of the sale and still make a profit so you can buy the next house?
Unfortunately, most likely not, unless you are looking to downsize or move to a community with lower home prices. Typically you need at least 3 or 4 years in your current home to realize enough market value appreciation to cover the sale costs such as agent commissions, conveyance taxes, and attorney fees. In today’s market where home prices have leveled off, this is especially true. If you bought a home and put in quite a bit of sweat equity, you may be able to eek out a profit.
If you find yourself in a position where you’ve only owned for a year or two and want to move, call a Realtor and have a Comparative Market Analysis done on your home before you start the “Torture Tour.” This will allow you to understand if you’ll clear the sale with a profit. The Realtor should provide you with an Estimated Net Equity sheet. This will show you if the estimated sales price will cover all of the costs (mortgage payoff, agent commissions, state and local conveyance tax, attorney fees, deed recording fees, paperwork costs, etc.). From there you can determine if you want to sit tight or can start to look.