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Should I Sell Now?
Business Oct 03, 2019
Monrovia home on Colverleaf. - Courtesy photo / Heidi Bloks
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By Heidi Bloks, Realtor, Berkshire Hathaway Home Services Golden Properties
As a Realtor, and a Monrovia native, I am often asked the question, “Is this the right time to sell?” Looking at the numbers, the answer is yes. California median prices have reached an all-time high and single-family homes had the biggest gain in 10 months.(1) Locally, as of Oct. 1, there are sixty-two homes active on the market in Monrovia. Prices range from $485,000 to $4.89 million. The average price per square-foot is $512.68. There are an additional thirty-three homes in escrow. Twenty-one homes sold in the month of September compared to thirty in August. The average days on the market is 31 days and the average price per square-foot is $531.76. This is up from last year’s $508.43 per square-foot. The average list price is $715,660 with an average sale price of $722,131. (2)Pair that with interest rates below 4% and you have an optimal time to sell a home in Monrovia.
Although it is a great time in general to sell, do you think it is the right time for you? For most of us, our home is our largest financial investment. Therefore, before deciding to put a sign in the front yard, pause and ask yourself a few questions. First, if you sell, where will you go? I am sure it is no surprise to anyone that California is one of the most expensive states to live in. As the cost of housing continues to rise, sellers are finding it more and more difficult to find a replacement home that provides what they want at a price they can afford. Many are deciding to stay put and wait. Because of this, the market has seen historically low inventory for the past 3 years. With less on the market for buyers to bid on, prices have risen. More buyers than sellers equal higher prices.
Another factor to consider before you think of selling your home is how much equity you have in your home and will you be subject to capital gains tax. Equity is the amount your home is worth minus the amount you owe on it; your gains. If you sell a home and do not reinvest, you may be subject to capital gains tax. To determine what your taxable gain is, take the sale price, minus what you paid for it, the costs accrued to sell it, and the repairs and upgrades you put in the home. Anything left is your gains (profit); and it may be subject to capital gains tax. Through the Taxpayer Relief Act of 1997, a married couple, filing joint taxes, has a $500,000 exemption from long term capital gains tax and an individual has a $250,000 exemption. To qualify, you must have owned your home and used it as your main residence for at least two years of the 5-year period before you sell it. And, you must not have excluded another home from capital gains tax in the 2-year period before selling the home. (3)
In most states, the exemption is large enough to cover any capital gains tax. Not here in California. We are blessed with high equity build up on our homes; but we also must pay for it. If you have owned your home for 20+ years, you will most likely have additional equity that is subject to capital gains. This one aspect alone has kept many seniors from selling their family home and moving to a smaller, easier to manage home or a facility. And, I am sorry to say, for many, this dictates their retirement plans. However, it is not one tax fits all. There are exemptions, requirements and different tax brackets. Thus, if you are thinking of selling your home, talk with your CPA or financial advisor first, before doing anything else. Then, if the numbers look right, talk with your Realtor who will put together a selling proposal that is customized to fit your needs and timeline. The whole process of selling will be much less stressful, and can even be enjoyable, if you have all the facts before you make the move.
Source 1: CAR, California Association of Realtors
Source 2: FLEXMLS
Source 3: Nerdwallet.com
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