Limited housing inventory and record-low mortgage and refinance rates have created a booming housing market. Market trends show that house prices are commanding top dollar and rising at their fastest recorded rate. In May 2020, home values were rising at a rate of 1.6% year-over-year. Today, the rate of appreciation is almost 10 times higher.
In this strong sellers market, it’s much better to be a seller than a potential home buyer. Here’s what you need to know if you plan to sell a home in 2021.
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You may not have to make pre-sale improvements
Sellers often make small home improvements or repairs to entice buyers when preparing to sell their home. Some of these improvements typically include switching out outdated kitchen appliances, updating fixtures or giving the walls a fresh coat of paint.
In this competitive market, homeowners can sell as-is, which means the potential buyers agrees to buy the home in its current condition. Selling as-is in a competitive market saves time and money. You can save that money instead and you won’t have to wait for repairs to your home before hitting the market.
Your home will sell quickly
The housing market is being fueled by two main factors: low inventory and low interest rates. According to the National Association of Realtors, properties typically sold within 18 days of their real estate listings as of late March — a record low for time on the market.
For those thinking it's time to buy, it means the competition is tough; however, it’s the best time to sell for a premium. Make sure you have your next home already lined up before listing your home on the market. If you’re ready to buy a home or refinance, visit Credible to compare mortgage lenders and rates.
It’ll be hard to buy a replacement home
While it seems like homes are selling easily in 2021, buying a one is a different story. Finding a home to replace the one your selling will likely be difficult and it could take a while.
If you’re selling and buying a home at the same time, a home sale contingency is frequently included in the sales contract. With a home sale contingency, homeowners can make an offer on a new home that’s contingent on the sale of their current home. If their house doesn’t sell by the specified date, the contract is terminated. This protects you from paying for two homes at the same time.
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If you just refinanced, you may want to wait to sell
Over the past year, low mortgage rates prompted millions of homeowners to refinance their homes. If you just refinanced, you may want to wait before listing your home.
While there is no law saying you can’t sell your home after refinancing, it may not be beneficial for you. When you refinance your mortgage loan, you must pay closing costs on your new loan. Common closing costs include:
- Application fee
- Origination fee
- Credit report fee
- Appraisal fee
- Inspection fees
- Attorney review and closing fees
- Title search and insurance fees
While the average closing costs to refinance a mortgage hovers around $5,000, costs vary. You can typically expect to pay between 2% and 5% of your total loan amount. Recovering these costs after refinancing can take a few months, which is why it’s often suggested to wait a couple of years before selling your home.
As home buying demand remains strong and interest rates are at historic lows, sellers can command rising prices in the current housing market. While home sellers have the upper hand, you’ll still need to consider how the market will affect you if you’re buying a replacement home. Keep an eye on the housing market as you’re deciding whether selling a home in 2021 is the best choice for you.
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