Thinking of Selling Your Home? Take this Seller Litmus Test

You may be thinking of selling your home but are still deciding whether you’re in a good position to make a move. Yes, there’s a lot to consider, but there are some simple financial, market, and life meters that can act as a litmus test to help set your course.

In this brief post, we’ll provide nine initial “Am I ready?” questions to ask first if you’re thinking of selling your home. We’ll also share handy tools and calculators to help you in your planning.

1. How fast are homes selling in your neighborhood?

Checking how quickly homes in your area are selling is one way to gauge your market’s temperature. A quick turnover can signal strong demand, potentially leading to a faster sale at a favorable price. You can check real estate websites or consult with a local agent to get an idea of average days on market and recent sale prices.

You can also use online tools like HomeLight’s Recently Sold Homes pages. Use the map to navigate to any state or city. The software will automatically load listings marked as “Closed” and indicate the selling price. You can also view other homes for sale in your neighborhood. (As you navigate, pause to allow the site to load new markers.)

Keep in mind that an active market in your neighborhood doesn’t necessarily mean you should rush into selling — your personal readiness matters just as much.

»Learn more: How Long Does It Take to Sell a House?

2. Are you moving for size, location, or costs?

Determining why you’re moving is a key factor in the home-selling litmus test. Are you downsizing to cut expenses, moving to a more convenient location for family or work, or upgrading to a larger home?

Each objective can shape your priorities and help you set realistic expectations for the sale. Understanding your motivation will also assist your agent in tailoring the home-selling process to your needs, whether it’s selling quickly or maximizing profit.

»Learn more: When to Downsize Your Home: 10 Signs It’s Time to Sell

3. Do you have profit-level home equity?

When thinking of selling your home, an obvious goal is to make a profit. Selling your home at a profit starts with knowing your current equity. This is directly connected to what you’ll walk away with after covering your mortgage balance and other obligations tied to your home, including selling costs. If your equity has grown substantially, it could be a great time to sell.

However, if your equity is slim, you might need to wait until your property’s value increases, or at least have a clear plan for covering any financial gaps between your mortgage payoff and the sale price. To get a better profit snapshot, try HomeLight’s Net Proceeds Calculator.

What is the 5-year rule?

The 5-year rule is a general guideline many homeowners follow when deciding whether to sell their home. It suggests that you should live in a home for at least five years before selling to build enough equity and offset transaction costs, such as closing fees and real estate commissions. Thinking of selling your home before five years might mean you’ll break even or, worse, lose money on the sale, depending on market conditions and the initial costs of buying the home.

»Learn more: Proceeds vs Profit: How Much Will I Make Selling My House?

4. Can you afford to prepare your home for sale?

Even in a seller’s market, buyers still expect homes to be in good shape. This means you’ll likely need to invest both time and money into cleaning, repairs, and even staging.

Be realistic about your ability to prepare the home for sale — can you afford the upfront costs of getting the property market-ready? If not, some home-selling strategies allow for lower upfront investment, but they might also lower your final profit margin. Options include selling your home as-is on the open market or selling directly to a “we buy houses” company.

Thinking of selling your home but no money for repairs?

If you’ve run the numbers and you know you don’t have the money needed for repairs and upgrades, HomeLight’s Simple Sale platform can connect you with the nation’s largest network of cash buyers looking to purchase homes as-is. Answer a few questions about your home and selling timeline, and you’ll receive a no-obligation all-cash offer in 24 hours. If the offer works for your situation, you can close in as little as 10 days.

»Learn more: How Much Work To Do Before Selling a House: 3 Levels of Prep

5. Will your debt-to-income ratio permit a new loan?

As you make plans to sell and move, it’s important to check if you’ll qualify for a new mortgage to purchase your next home. While you may have qualified with your original home loan, lenders will look at your current debt-to-income (DTI) ratio to determine if you can handle additional debt. This ratio compares your monthly debt payments to your income, and most lenders prefer a DTI of 43% or lower for mortgage approval.

If your DTI is too high, you might need to pay down some debts or increase your income before applying for a new loan. Getting pre-approved for your next mortgage before selling can help you plan ahead and avoid surprises or delays. You’ll also want to monitor your credit score.

To get a better idea of how much of a new home you can afford and to make budgeting plans, try HomeLight’s Home Affordability Calculator.

»Learn more: Pre Approval vs Pre Qualified vs Underwritten Pre Approval

6. Do you have a down payment for your next home?

Selling your home will likely give you some cash to put toward your next property, but you’ll want to get a clear picture of how much down payment you’ll need. According to the National Association of Realtors (NAR), the typical down payment for repeat buyers last year was 19%. Using a median home price of $420,000, 19% would be $79,800. However, NAR reports the overall median down payment last year was 15%, and a typical down payment for first-time buyers was only about 8%.

Keep in mind that a larger down payment can mean lower monthly payments and less interest paid over time. If you don’t have enough, you might need to adjust your home-buying budget or explore programs that offer down payment assistance.

You can estimate how much you should put down on a home and review your loan options by using HomeLight’s Down Payment Calculator. You can also try our Closing Costs Calculator so you know what other selling expenses you’ll need to plan for.

»Learn more: What’s A ‘Typical’ Down Payment on a House?

7. Can you afford the cost of moving?

Moving costs can sneak up on you, and they can add up quickly. According to moving.com, for a 2-3 bedroom house, the average cost of a local move is $1,250. The average cost of a long-distance move is $4,890.

You’ll need to consider costs like professional movers, rental trucks, temporary housing, storage fees, or overlap in rent or mortgage payments. A moving cost calculator can help you plan ahead and budget for these expenses.

Depending on your situation, you may choose to sell many of your household items before you move.

»Learn more: How to Sell Everything in Your House Before You Move

8. Should you buy before you sell?

One of the biggest challenges when thinking of selling your home can be timing — the need to buy a new house before selling your current one so you know you have a place to live. Most people in your position need the equity and sale proceeds from their current home to make a move. One solution is the modern Buy Before You Sell program.

HomeLight’s Buy Before You Sell program offers the peace of mind of knowing you won’t be without a home and you’ll only need to move once.

How does HomeLight Buy Before You Sell work?

This modern solution unlocks the equity in your current home to streamline and simplify the entire buy-sell process. You can make a stronger, non-contingent offer on your new home and only move once. Watch the short video below to learn more.

»Learn more: How to Buy a House Before You Sell Yours (Without the Hassle!)

9. Do you have a great agent? Get started today

A great real estate agent can make all the difference when selling your home. From setting the right price to marketing your property and negotiating offers, a skilled agent will guide you through each step of the selling process.

You’ll want an agent with a high sale-to-list ratio, a metric that measures the final sale price of a house against its original listing price. (This means the agent can make you the most profit.)

HomeLight’s Agent Match platform connects you with top-performing agents in your market who specialize in selling homes like yours. We analyze over 27 million transactions and thousands of reviews to help you have the right agent by your side. You’ll have the expertise and support needed to sell your home smoothly and profitably.

»Learn more: When to Contact a Realtor to Sell Your House

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