FAQ: Should I Wait for Prices to Rise Before I Sell?

FAQ:  Should I Wait for Prices to Rise Before I Sell?

Many Florida vacation home owners are waiting for the elusive promise of higher prices before they sell their second home,  now that for whatever reason their lifestyles have changed.  

Rather than looking at this question emotionally, I always recommend that this question be 

treated like any other financial question and the numbers analysed.

What is the cost of carrying the home?  Mortgage, Utilities, Insurance, Maintenance, etc.  Make a little chart with these figures for the next three or four years.  These numbers will show the homeowner just how much it costs to carry this home

Here’s an example:

In Stuart, Florida a homeowner is paying $1,000 in HOA, $4,000 in Insurance, $5,000 in Taxes and another $15,000 in Mortgage, Utilities are $300 per month,  Maintenance estimate is around $550 per year.  In total, it costs approximately $29,150 to carry this home.

If this were a second home, waiting for the value of this home to go up by almost $30,000 per year is probably an exercise in futility, so in this instance, waiting to sell doesn’t make any sense economically.  (Even if rented out, the net income from rentals would be under $12,000 for a still hefty carrying cost of $17,150.)   

In this example, I’m using a home with a current market value of $400,000.  In order to offset carrying costs and wait for the market, prices would need to rise by over 7% per year or if rented by over 4 % per year if rented.  Now if you think that prices will be rising that rapidly any time soon, then maybe you should wait.  But, I wouldn’t recommend it.  In this case, trying to wait for the market to turn is just going to cost more money every year.

Not all situations are like this. A home, owned free and clear with lower fees, might cost considerably less to to hold.  A hot rental location could possibly generate income.  Every situation is different, so I would recommend working out the numbers and making an educated decision.