When the time comes to consider selling a vacation home, you should try to treat the sale as a business transaction. Usually, the sale is not as emotionally charged as the sale of the home where you live. A sale of your vacation home requires you to think strategically and prioritize certain financial aspects of the sale.
Top 5 Things to Remember When Selling A Vacation Home
If you are thinking about selling your vacation home, you will benefit by giving the sale some careful planning, and take whatever time you have available to think it through. Here are some of the most important things to consider:
Evaluate the Tax Implications of a Sale
One of the biggest considerations in the sale of a vacation home is handling the tax obligation you will have on any gain you realize on the sale. Before you list the home for sale, make sure you understand the type of property you own and the potential capital gains taxes you will owe upon a sale. Once you have this information, you can plan more clearly about listing it, how to market it, and the timing of all of it.
Your capital gains tax liability may vary based on whether your home was a second home/vacation property or a rental property. The IRS considers a second home a “personal capital asset.” You’ll be taxed on the profits of the sale in the same way you are when you sell other assets, like shares of stock. If you have owned the vacation home for more than a year, you’ll owe long-term capital gains taxes. On the other hand, if you have owned the property for less than a year, you’ll pay short-term capital gains taxes. On short-term capital gains, you will be taxed at the same rate as your ordinary income tax rate. For that reason, most taxpayers should wait at least one year after purchasing a second home before selling it.
If your vacation home is a rental property, you can qualify for some deductions and write-offs. You must talk to your tax accountant about your tax exposure before you set a sales price. If you are planning to purchase another rental property after selling your current property, you may want to consider doing a Section 1031 exchange.
Determine the Right Time to Sell
Now that you know what your tax picture looks like, you can figure out the best time to sell. You can maximize your sale price if you sell when the market is hot. For example, you will probably sell your beach property faster and at a better price if you list it during the peak of the beach season. If your property is not a seasonal property, consult your real estate agent about the best time to sell homes in the area. For example, in some locations, summer is the best time to sell because parents with children will not have to disrupt a child’s school year.
When you are planning your timeline, make sure to budget enough time to get the home ready to show potential buyers. A realistic timeline that takes advantage of market conditions and gives you time to prepare it for showing may require you to wait several months or even a full year before you actually list it.
Of course, if the property is rented, getting it ready will require you to accommodate your tenants. A lease may restrict your ability to list and show it, and local laws may affect the amount of notice you have to give your tenants.
Do Proper Staging
Stage the home to appeal to vacation buyers. Hire a professional stager who knows how to stage vacation homes in a way that appeals to your potential buyers. Also, don’t neglect the importance of hiring a professional cleaning service to keep it dusted and looking fresh and clean.
Price It Right
Find the “goldilocks” listing price when selling a vacation home. If you set it too high at the outset, you could end up dropping it more than you would if you had you priced it right the first time. On the other hand, if you set the price too low, you could lose money that way as well. The best price will most likely be at or below the fair market value for your house. That will price the home competitively and get the most buyer attention possible without pricing is so low that you lose money.
Work with an Experienced Real Estate Agent
Find a real estate agent who specializes in vacation home sales and your particular market. Remember, the real estate agent’s job is to get the best possible price for your home. An agent who is experienced with vacation home sales in the local market is the best way to find a ready and able buyer for your home– fast. The agent should be able to set the price, advise you on what you need to do to get your home sold quickly and guide you through the entire process. It will make the selling experience as stress-free as possible.
Reach Out to the Katie Zarpas Group
Before you list your vacation home, be sure you consult with the real estate professionals at the Katie Zarpas Group for more information. Their agent, Katie, is an expert in the market. Let the team get you started on the process of selling your vacation home.
The Katie Zarpas Group does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisers before engaging in any transaction.