As Southern California’s housing market grows hotter and hotter, many homeowners can’t help but wonder whether they’d be wise to hurry up and sell. Particularly if you’ve witnessed other homeowners in your community make a nice return, you’re likely wondering, when is the time right for me? It’s a question our agents face often—even for clients who have purchased their current home recently.

But here’s the thing: as is the case with so many opportunities that present themselves to homeowners, there is no one-size-fits-all prescription for the proper way to pursue this one. It might be that “flipping” your recently purchased home is a solid financial decision, and it could be that you’d be better served to stay put for a few years. It’s critical that you proceed with the advice of a trusted real estate professional—your financial health depends on it!—but below, we’ve outlined some points to bear in mind as you explore your options.

1. CONSIDER THE TRADITIONAL ‘FIVE YEAR RULE.’

Got plans to pay down the principle on your mortgage in a rapid fashion? Go ahead and skip this section—you’re one exception to this particular rule. But if you’re like most people, and made a down payment of 20%, it’s likely you’ll need to wait 5 years for the math in favor of selling to check out.

2. DON’T FORGET ABOUT THE COSTS ASSOCIATED WITH SELLING.

It’s safe to plan conservatively and expect to pay about 10% of your home’s price in total selling costs. Why? Well, there’s commission fees, closing costs, title insurance, taxes and neighborhood fees … the list goes on. You might get lucky and look at closer to 5% of your home’s price in fees—it simply depends on your unique situation. Either way, there really isn’t a way to sell your home without incurring costs which could offset any potential gains.

3. AND DON’T FORGET ABOUT CAPITAL GAINS.

We don’t need to remind you that when you earn money, it’s taxed. Similarly, when you gain money by selling property, that’s to be taxed too—and depending on the return you’re looking at, its accompanying tax bill could be uncomfortably high. Which is where capital gains exclusions come into play. If you’ve owned and used your home as your primary residence for the last 2 out of 5 years, you can exclude up to $250,000 from your “income”—if you’re filing single.

If you’re filing a joint tax return with your spouse, the amount you can exclude goes up to $500,000. Unless you’re in the military or qualify for another exception, this can be done only every two years. Regardless of your situation, it’s advisable to check with an accountant to make absolutely certain you qualify for an exclusion before you make any moves.

Likewise, when it comes to any decision involving real estate, you can never go wrong by enlisting the help of an expert—someone who has spent their entire career helping clients make decisions with both the short and long-term in mind. Contact a First Team Real Estate agent today to explore your options!

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CALL US AT 888-870-1142