How to time a real estate transaction
Timing Real Estate Transactions: When should you buy or sell a home?
All too often we see consumers basing decisions on trying to time the market, and we often hear that it feels like an overwhelming sense of “what should be done”. When buyers and sellers try timing real estate transactions based on market trends it can lead to big gains, but it can also yield missteps and major regrets. Furthermore, it doesn’t help that throughout the real estate industry the majority of consumers are rushed through the process by an inflated third party of salespersons.
Whenever you find yourself chasing “perfect timing” it’s all too easy to overextend or come up short on your specific goals. Yes, timing is everything, but it’s not the only thing! We prefer the mantra that 'proper preparation and clear goals complete the trifecta of perfect timing in real estate'.
An issue that impedes a well-timed and profitable transaction is the knowledge capital gained through experience. Many consumers don’t have experience buying or selling real estate until later in life, and at that point their experience encompasses only a handful of transactions with mixed results. Yes, there is a learning curve with real estate, but we believe in arming sellers and buyers with all of the information they need in order to make these large decisions.
Timing Real Estate - Planning
The perfect time is when it works best for you. The perfect outcome is the one that serves your interests first. It’s the foundational elements of planning and preparation that we want to guide you through so that you can achieve your goals sooner.
In previous posts we spoke about lifecycle stages and how important it is to begin the process of understanding your current financial situation while learning how to plan for your future. This is the main factor in timing real estate transactions. Purchasing your own home is a huge step towards building your personal equity and knowing when and how to take that step is what we’re here to help you with.
We hear numerous clients say they wish they started sooner in life. Hindsight is 20/20 but in the moment it’s challenging to know where to begin.
At Aalto we’re trying to change that so you know what questions to ask (and equally important is who to ask) and when.
First, you’ll want to take a quick assessment of your personal situation. Map out the key details and write them down. It’s wise to have a 10 year horizon when considering an investment, so look at your situation from both ends of the spectrum. Where are you right now? Where do you want to be in 10 years? When you focus on these two endpoints it's easier to align with the timing that’s right for you. Take this approach and you will draw your goals to you instead of chasing boom and bust cycles in the market.
As you map out your situation and your timeline we also want to encourage you to connect with a trusted financial advisor and get pre-approved for a home loan. Knowing what kind of financing you’re qualified for will help clarify the next steps of looking at prospective listings and living situations and help you start planning and saving if you are not yet able to obtain a loan.
Lifecycle stages: When should you buy or sell a home?
Where you are in your current lifecycle stage will impact your ability to invest as well as shape your specific goals. The real estate industry has become emotional and glamorized in the last decade, oftentimes leading to the consumers' needs not being put first. Whether you are a first time buyer or a seasoned homeowner, it is important to stay on track with your plan and timeline and not be tempted to make decisions based on the plans of the middlemen involved. It can be very stressful when you feel like you are being talked into a home if you have not planned your process. Remember there is a plan and a timeline that fits your needs and not the other way around.
Timing Real Estate - Tips
You should be happy with the home that you’re buying assuming that you can’t do anything to it or could possibly have to sell sooner than planned. Before you even think about renovations, upgrades, or major changes to a property consider this - be happy with the home as it is in case you are not able to do any work or would be financially ok if you sold sooner due to a life change. Until you go through the actual process of renovations and potential permit process, there is no guarantee you can do anything you want to the property. You should consider the time it would take to do any work, what the value will be after completion, and if you are comfortable financially spending the money and paying the property tax reassessment based on the improved value. Many homeowners don’t consider these things during their purchase and end up unhappy with the house they bought because the work they wanted to do is not possible or realistic. Or they get a job transfer and have to sell before they planned to. It’s important to think about these things and plan accordingly so that you are not caught blindsided and have to make a forced decision.
It’s good to have creative visions for your home, but remember the home makeover shows can be more than misleading. Where you don’t want to find yourself is in a situation where a $100,000 kitchen remodel went way over budget, disrupted your lifestyle, and didn’t increase the value of your home. Remember that markets shift and trends change.
If you’re a single working professional it’s prudent to look at a place to live and begin to see the investment potential. Condominiums might be a good entrance into real estate, and buying a place with fewer maintenance costs and reasonable HOA’s will help keep costs down as you begin to build equity in your new property. This can be a huge head start not just in building equity, but also in gaining experience. Remember that it’s the experience coupled with sound decision making that draws “perfect timing” to you.
If you’re married or investing with a partner make sure you’re on the same page well before you enter into an investment. Get crystal clear on your wants, needs, goals, and expectations. When you take the time to communicate this upfront it will benefit the timing of your transaction and you won’t be rushed. Remember that you never want to be in a position of making a decision because you have - you want to be in a position to make a decision because you want to!
A good rule of thumb is to have a 10 year horizon when considering an investment in real estate. If you err on the side of being conservative, a 10 year plan will allow you to work with the highs and lows of the market during that timeline. A lot can happen in 10 years, but if you take the steps now and start practicing sound investment decisions you won’t be waiting 10 years to jump in on the next cycle.
Lastly, we recommend getting advice from people you trust and respect that have had long-term success owning and purchasing real estate. Be weary of overzealous, overly opinionated friends and family members. Take note of people that claim to be experts but don’t take the time to listen to you, and remember that most people you encounter in the real estate process are looking to gain your business and profit off of you and your transaction. Partner with trusted and experienced professionals who listen and successfully guide you on the path towards your goals.
Remember, this is your process and timeline - no one else's!.
If you have any specific questions please share them with us at firstname.lastname@example.org. We’d love to hear from you, and we’re here to help!
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.