Making Money on the Sale of Your Home
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Here's your money briefing for Friday, October 8th. I'm J.R. Whalen for The Wall Street Journal. For a lot of people trying to sell a home right now, the phone starts ringing almost as quickly as they put out the for sale sign. But even in this hot housing market, many sellers face the cold reality that making money off a sale can be a struggle.
So people feel stressed considering, am I missing out on a big opportunity by not putting my house on the market right now? Am I missing out on a big profit?
So what numbers should you run before even considering putting a home up for sale? Our personal finance reporter, Julia Carpenter, has been talking to economists and homeowners about that, and we'll talk to her about it after the break.
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It might look like home sellers have it easy in the current housing market, but many face a minefield of challenges in trying to come out of a sale ahead financially.
Why are homeowners stressed about selling in today’s hot housing market?
WSJ personal finance reporter Julia Carpenter wrote about the roadblocks that are facing sellers even in the frothiest of housing markets. Julia, thank you so much for coming on the show.
Thanks for having me.
So, Julia, why is this question of when to sell causing so much stress among homeowners now?
Thank you so much for having me. Yeah, let's talk about some of those things.
Let's start with calculating whether a homeowner would make money on a sale that sounds more complex than simply just your home sale price versus the cost of the home that you want to buy, right?
People looking to sell are concerned about a couple of things in addition to the sale price that they could potentially get on their current home. They're thinking about where they'll live next. A lot of people are concerned this is a buy high, sell high situation. So you may sell your home at a very high price, but then be stuck buying a new home at a very high price. There's also tax implications. If you haven't been living in your home for longer than a period of time, you may be hit with a pretty big tax bill if you have capital gains on your home, for example. People are also thinking about the closing costs that come with this. Anyone who's been to a closing knows that there's a variety of fees and other transactions that can come as a result of that.
Okay, so there are a lot of numbers below the sale prices to consider. You spoke with economists who say one of the first things homeowners in this position should do is calculate the sunk costs from when they originally bought their house. What are sunk costs?
Sunk costs are the expenses you incur when you first purchase your home. So these can be things like the closing costs that I first mentioned. Those come at the closing when you were purchasing your home. These can also be things like private mortgage insurance. Maybe you didn't put down 20% as a down payment when you first bought your home, and so you were paying private mortgage insurance for a period of time. These things are going to be harder to recoup when you sell your home.
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