Put emotions to the side and make me move.

So ya know how last blog post I wrote about investing $100,000 in to our house so we could build an attached two-bedroom apartment? That’s still an option, but so is something else…

SELL OUR HOUSE

Yeah, I just said that. 

We bought in July, moved in in September, and here we are five months later, thinking about putting the house on the market. Is that crazy or what? 

You may or may not recall when we put our offer in on the house this summer, we found ourselves in a multiple offer situation. The other buyers offer escalated up to $378,000. Ours only up to a smidge over $350,000.

Fortunately for us, the sellers took our offer. 

Since move in, we’ve spent about $8,000 making our place a little more homey (new appliances, light fixtures, carpet, electrical work, tree service, etc).

And now, here we are, thinking about cashing in on all the sweat equity we’ve put in to the place.

Turn off emotions and profit:

I’ve been watching the local inventory like a hawk and I’m not seeing much competition out there. There are a bunch of houses for sale in our area for $500,000 or more, but it’s slim pickings for buyers with less than $450,000.

Limited supply is always good for a seller.

I’ve run the numbers and decided if we could sell our house for $425,000 (about $70,000 more than we paid for it five months ago), Girl Ninja and I will gladly pack our bags and hand over the keys.

I don’t want to bother our realtor just yet with an appraisal so I decided to test the waters myself by taking advantage of Zillow’s “Make me move” feature. We listed our house at our dream price, $425k.

It’s been on the site for a few days now and I’ve already received a few soft inquiries. Nothing too serious where I think people really want to buy the house, but I’m encouraged people are taking the time to shoot over emails and ask questions about our property.

Is our house worth $425,000? Doubtful. 

But when inventory is low, and buyers are freaking out because they think interest rates will shoot up very soon, the stars just might align in such a way that we find someone willing to pay us our asking price.

If we did end up selling, we would walk away with $103,000 after commissions and fees. Sounds pretty appetizing to me. We’d then likely rent a two bedroom condo somewhere until the next real estate correction comes; three, five, or ten years down the road.

Buy low, sell high, right?

How much cash would you have to walk away with in order to sell your house right now? Everyone has their price, what’s yours? 

32 thoughts on “Put emotions to the side and make me move.

  1. I bought my condo for $350-360k about 1.5 years ago and I think I could sell my place for around $400-425k. Considering the transaction costs and how much renting would cost anyways (I would end up paying $1,800/month for a one bedroom or moving in with my boyfriend and splitting a two bedroom for $2,500-$3,000/month vs my current $1,600/month owning costs), I would rather stay where I am in my two bedroom condo.

    An interesting dilemma for sure though! At what point will I decide it makes sense to sell? Probably when I don’t want to live in this place/city/state anymore.

  2. Regarding your personal property, I’ve never been too keen on any attempts to try and time the market. Legal fees, stamp duty (in the UK), estate agent fees etc etc are equivalent to trading costs in the stock market and reduce any benefit.

    Also, in the property market, as with the stock market, timing the market is an incredibly difficult thing to do. Yes, there may be a 50% correction in house prices. But that might not come for another 10 years. And, in that time, prices may increase by 100%. Therefore, you’d be looking at the same price as today, but you would have wasted a lot of money renting.

    If your goal is to obtain investment returns, I would first consider taking out the equity via a cheap fixed remortgage and investing the proceeds in other investments with good returns.

    • The only way to ever realize a return and capture a profit is to sell something for more than you paid for it.

      I’m surprised you argue capturing a $30k profit in five months is silly.

      And I hate when people say waste money on rent. You waste money when you own too, on property taxes, mortgage interest, and maintenance/upgrades.

      • I wouldn’t say trying to capture the gain is silly, but it is definitely trying to time the market. How do you know that the market won’t keep going up and your house would be worth $500k in another year or two? You don’t. Sure it could also drop and that’s part of why you’re considering selling, but that’s called market timing and that’s silly. If you otherwise want to leave your house, counting your lucky stars you could sell for a profit is one thing.

        • No it’s not. Capturing the gain is realizing a profit, not timing the market.

          Timing the market would be NOT selling because I think it might go higher.

          Otherwise, when would one be allowed to sell an investment? According to this logic, they can’t sell when they are ahead because it’s timing the market, and they can’t sell when they’re behind because that’s a dumb choice.

          I’m totally confused by your thought process.

          • I’m with Leigh / Moneystepper — think of it like the stock market instead of real estate. Timing the stock market is “this stock is at an all-time high, I’m going to get out now because I think it’s going to drop,” OR “stock is at an all time high, I’m not going to buy now because there’s a market correction coming.”

            In real estate terms, it’s “our house has appreciated significantly in the time we’ve owned it, I’m going to get out now to lock in our profit” OR “We’re going to lock in our profit and wait for another market correction.” There’s no guarantee that your house won’t appreciate another 25% (meaning more “profit” for you), or that you won’t see a 20% increase followed by a 20% drop — leaving you right back where you are now over a 5 year timeframe.

            I’m not saying I disagree with your line of thinking, but what you’re considering is the very definition of trying to time the market — just in real estate instead of stocks. Additionally, your primary residence covers a basic need — shelter — and should be looked at as such rather than as an investment.

  3. Wow sounds like you could probably make some pretty nice money on your house if you wanted. I am wondering if you would be subject to capital gains tax if you did sell since you’ve only lived there a few months? We are looking into selling our home as well but I think you have to live there for 2 years before becoming exempt from the capital gains tax along with a few other requirements. For us, this means not selling our house until August.

  4. Well, $100K is a pretty neat profit. A similar situation happened to me. My current apartment cost me TL 105K back in 2004. 3 months later the broker called me up to say I could sell it for TL 135K. I declined that offer because my main reason to buy was to live in it. Besides unlike you I did not like renting so much. I am glad I declined that offer because the prices continued to increase and I would probably never be able to afford anything here in this neighborhood again. The current prices for my apartment nowadays is at TL 425K and the prices will not be going down anytime soon since this neighborhood became very popular over the years. So, in my case, in 10 years there was no price adjustment at all. Instead, I saved some money over the years and bought another apartment in another city which generates some rental income. I own my current apartment free and clear and have only 3 months of debt on the other.
    I think timing the market is difficult. I never knew I bought my apartment at a rock bottom price till much later.
    In any case, it is your decision but I really like your property and I can see baby Ninjas having a nice time in the backyard:)

  5. Just FYI, that profit would be taxed at ordinary tax rates since you held the property for less than a two years(there are some exceptions so you might want to talk to a tax accountant to see if you qualify). So that could really screw up your taxes next year.

    Not sure how much I would really want to be moving with a baby on the way. Plus I REALLY hate moving in general. Of course I say all this as someone who owns a paid for house, so all I owe is $1200 a year in property taxes.

  6. Might want to look into the “house flipping” laws in WA State. Be very careful, if you make more than $800 in improvements and sell before living there for 12 months and didn’t have the work done by a general contractor, that is illegal.

    “If you plan to ‘flip’ a house, you now have to be a licensed and bonded General Contractor.

    Specifically it applies to an entity who does “…offer to sell their property without occupying or using the structures, projects, developments, or improvements for more than one year from the date the structure, project, development, or improvement was substantially completed or abandoned.”

    http://activerain.com/blogsview/211760/flip-a-house-pay-a-fine-aka-washington-shb-1843

  7. Ah you are just like me. Always looking for the “next” thing to do to get ahead. Its tiring isn’t it?

    Glad I’m not the only one that gets stuck on out of the box ideas like this. The main difference between you and me is that I rarely follow through though.

    • Haha, yeah it’s kind of like a dog when they see something that catches their attention… SQUIRREL!!!!

      I’m always looking for opportunities.

  8. Not sure if it is worth it with capital gains taxes,fees, moving expenses and the time it takes to facilitate selling, finding, and moving to a new place.

    I think your previous scheme of adding the addition has much fewer downsides, and it comes with the passive income potential.

  9. Your goal for the past however many years was to buy a house to raise children in. Has something about that changed?

    • Not true. My goal was to save money for a down payment so we could buy a house if we found one worth buying (which we obviously did). But I’ve ALWAYS said that renting is just as legit as buying. In fact, I’m still not sold that owning a home is really that solid of an idea.

  10. Investing for long term in an addition and selling it for immediate profit in the same week. You are a conflicted soul.

    I think you forgot the part where it really doesn’t matter what you think, but what girl ninja will put up with.

    • Baby is due in June, right? If you did move forward, most people will be looking to close right around that time, or in August (before school starts again). Packing and moving with an infant might be more difficult.

      Again, you don’t know if you are going to have a baby who is easy going, or one that has colic and cries 23 hrs a day. Babies need routine…and that takes time to establish. If you are leaving because of a showing…you could disrupt all of that. You want to get baby to be able to sleep for longer stretches of time…and you could jeopardize it.

      Also, keeping a house show ready is hard enough (and yes, I realize that you can put a clause in that you need 24 hrs notice), but with a newborn? You don’t know how GN is going to be feeling post partum. I know you will be there too, but baby, packing, showing a house…..it is alot.

      I know you look starting your family with a “why does anything have to change” outlook…but it does.

      All that said…if you move forward with a move….do it before baby is mobile!!!! It is a heck of alot easier to do things when you aren’t chasing a little rocket!

  11. I’d have to probably walk away with $250k (which would be difficult to do on a home worth $150k). I bought my home with the intention of never having to move again (previous owner raised three kids and lived there til he died). I hate moving.

  12. A lot of people scoff at selling a house so quickly, since houses have traditionally been such long-term investments, but if it’s the right move for you and your family, it could result in a tidy amount of profit. If you can get your asking price, I say go for it.

  13. Just be careful, Ninja. US tax law (and likely state tax law) counts any profit on a sale of a house owned/lived in under two years as taxable capital gains which could significantly eat into your assumed profit. Be wary: many will advise you that you can do an ‘exchange’ and avoid taxes. This is wrong. That only applies if both the home you are selling and the home you are buying are investment properties. Taking the advice of someone who says it qualifies as an exchange and therefore you don’t need to pay taxes on a sale of a house owned/lived in for under two years could end up costing you big time in taxes and penalties and, possibly, legal fees.

  14. If you get your price then that is great, you said what you’d like to make on the house so if you reach your goal then more power to you. Of course you’d need to find another place to live… But you can always come over to the Eastside and find cheaper housing.

    You’ll need to wait 1 year after purchasing to get long term capital gain (less than a year is short term with is your regular income rate) and 2 years if you want the 500k exclusion.

    Perhaps the best effort would be to find a under priced house to purchase and then fix it up to sell or rent.

  15. hmmm…what’s my price? At this point it’s priceless ;). Currently in a nice spot in the city…huge back yard for the dog…a 20 minute direct route by city bus to my kids high school…a 5 minute direct route by city bus to the university…5 minute drive to shopping…1/2 block to park…10 minute walk to my parents (ages 77 & 80)…garage big enough for hubby’s 5 year car project. At this point in life, we’re not moving.

    We bought 10 years ago — it’s 2.5 times value now. We couldn’t afford to buy into this neighbourhood, let alone nicer ones….well, we would qualify for the mortgage, buy there’s no way we’d buy that high.

    Assuming nothing catastrophic happens within 5 to 10 years — by that time dog will be gone (sniff), kiddo will be done university, and my parents might have moved into a retirement home — then we’ll think about relocating.

    I see our house as a home, a place to live; not as an investment with profits meant to be seized. (When I do the net worth, I never include the house — yes, I’m weird)

  16. $103,000 in 5 months, thats a heck of a return, even if you only get half that, its still a hellava deal! Plus I really like your idea of renting until the next bubble bursts, wise thinking sir!!

    • The best part of home ownership is the amazing subsidy you receive because gains on the sale of your primary home where you have lived for more than two years are not taxed AT ALL by the federal government. (There are a few cases in which you could take advantage of this earlier — one of which is if you get divorced. Is Girl Ninja that flexible? :-D)
      If you sell between 1 year and 2, you have to pay capital gains tax rates on the sale. If you sell before you’ve owned the home for a year, you would have to pay ordinary income tax rates, which are more. I’d wait until you make it past the two year mark, then decide. You’d also have the benefit of knowing a bit more about parenthood and what you want in a home.

  17. Maybe its just me, but lately your blog is turning more into a forum. You tend to just throw topics of discussion out there. One day it is – should i put in 100,000 and make upgrades. Next day it is – oh how about i sell the house. Off course this is your blog and you can write whatever :). I am a long time reader, but these kind of conflicting posts will turn people away from the blog … just my 2 cents.

Comments are closed.