A seller that purchased a home in the last year came to us about selling their home due to being relocated out of state. This Arizona seller asked us, “Do I have enough equity in my home to sell now and not lose money?” Unfortunately, with the current market conditions in the Phoenix Real Estate market – and this seller’s short time of making mortgage payments – the seller is looking at a loss of $20,000 to $30,000.
In most areas of the country and when selling Phoenix Arizona Homes, the costs of selling a home run between 6% and 7% of the sales price. For example, a home sold for $250,000 would actually net a seller $232,500 after 7% in real estate fees, meaning the cost of sale is $17,500. In order for a seller to break even after expenses of the sale, the seller needs one of two scenarios to break even. The seller must own the home long enough to make enough mortgage payments to cover the expenses or the seller must be in a real estate market where enough appreciation occurred to cover the expenses.
If the home owner’s financing is a 30-year mortgage at 5.5%, then after five years a home owner has made enough mortgage payments to sell the home. According to www.amortization-calc.com, a seller will have $18,491 in home equity after five years or only owe $231,509 on the home.
If a seller is in an appreciating market where annual appreciation is 3%, then a home owner will gain enough appreciated value in three years to sell. In our case, with a $250,000 purchase, the three-year appreciation will bring the house value to over $273,000, allowing for $23,000 in costs to cover the sale.
Unfortunately, appreciation is a rare occurrence in the Phoenix MLS since 2005. If cases arise where the homeowner can no longer continue to make mortgage payments a short sale is a good option to consider. Many Phoenix AZ Realtors are now capable at processing such transactions and many Phoenix Homes for Sale are closed as short sales. More information can be found at www.MyAZHouse.com on short sales.
Are you considering a sell of your home soon? Here at the Thompson Group our goal is to equip our sellers with knowledgeable and professional promotion of their home. Would you like to learn more, or do you need Market Analysis of the value of your home? Contact us at www.ThompsonGroupAZ.com or 480-776-5214.
