How do I figure out the next step in deciding to sell my home to the market or to a uniquely interested buyer?
You decide whether the improvements will result in a net higher price.  You also need to figure on how long the house will be on the market and the cost of carrying the home, unoccupied.  Some people would prefer the quickest sale. Others would wait to get the highest price. If you sell to a known buyer, you avoid using a real estate agent. If you plan to sell on your own and avoid the agent, there's a bit of effort dealing with the public, especially those who just want to look at houses with no real interest in buying. (As an agent, I can tell you, there's nothing like talking for nearly an hour, and then figuring out these people are from 1/2 mile away, but just attend every open house in the area.) "We considered similar big renovations when putting our house on the market. The answer turns out to be pretty simple; unless you do renovation-type work as your day job, or have really good friends in the residential contracting business, sell as-is. You will virtually never get back the full price of bringing in a gen-con to renovate any space in your home; you do that when you want to spend the extra to make your home exactly what you wanted, so you can live in it for decades and get the enjoyment out of it. If you're trying to turn a profit with the renovation, like house-flippers do professionally, you look for easy repairs/renos, buy good-looking but inexpensive materials, and do the labor yourself. Whether you sell to the market or to a specifically-interested buyer is your call, but I will caution you that a specifically-interested buyer is going to be looking for a deal, or a steal.  When marketing our house, we met with three different realtors. The first one was very overoptimistic about what we could list for (basically assuming that we could get the same price as a fully-upgraded version of our same floor plan with a pool out back). She also had a to-do list a mile long, and my wife and I both noticed that she looked very apprehensive about the house when looking around, even as she reassured us that selling it would be no trouble. We eventually realized why she was so apprehensive, and fired her before we got even halfway through her to-dos, which included major landscaping, new kitchen floors and countertops, etc, which would have cost us thousands and would not have gotten the house price even close to the target. The second one took a look at our half-finished refinish and told us to stop everything we were doing to update the minor stuff like paint and fixtures, saying we were putting lipstick on a pig; she would market the house to some cash buyers she knew personally, for about 80% of the list price our first realtor quoted, and implied that we should be kissing her boots for finding us a buyer willing to take the house off our hands at all. During the tour, she pointed out ""problems"" with the house that weren't even there, like foundation issues such as sloping floors, in an attempt to scare us into going with her strategy. We sniffed that out pretty quickly, showed her the door at the end of the initial consult and never called back. This, by the way, is the kind of thing you want to avoid; unless your home is really dilapidated or torn apart with unfinished major renos, it should have decent value on the market and you shouldn't have to resort to a cash buyer looking for a flip or a rental property on the cheap. Just like Goldilocks, our third choice was just right. He saw all the same comparables, toured our house, and recommended that we offer about $20k less than the fully-upgraded version (but still about $20k more than the second realtor was estimating), targeting a ""real"" buyer and not an investor or flipper, but at a price that would make the lack of upgrades more acceptable. We finished the paint and finish projects we started, brought in a weekend's worth of scheduled showings, and our house was under contract for full price within 3 days, giving us the extra $20k worth of down payment to put into our new house. In summary, I highly recommend a realtor, because the one we eventually listed with worked his butt off on the business side while we fixed up the house. However, make sure you find the right one; realtors are ultimately in business for themselves, and their ultimate interest is in getting your house sold and getting you into a new one. That is what gets them paid. Some of them will do it the right way, working the deal with other realtors and their prospective buyers to get you what you need. Others will take the easy way out, at your expense, either giving you bad advice about how to present and price your home so that you end up on the market for 6 months with no offers, or handing your house to their business buddies at a discount."
You don't say why you want to move. Without knowing that, it is hard to recommend a course of action. Anyway... The sequence of events for an ECONOMICAL outcome in a strong market is as follows: (1) You begin looking for a new house (2) You rent storage and put large items into storage (3) You rent an apartment and move into the apartment (4) The house now being empty you can easily do any major cleaning and renovations needed to sell it (5) You sell the house (and keep looking for a new house while you do so). Since the house is empty it will sell a lot more easily than if you are in it. (6) You invest the money you get from selling the house (7) You liquidate your investment and buy the new house that you find. If you are lucky, the market will have declined in the meantime and you will get a good deal on the new house in addition to the money you made on your investment. (8) You move your stuff out of storage into the new house. There are other possibilities that involve losing a lot of money. The sequence of events above will make money for you, possibly a LOT of money. Thank you very much for this thoughtful response.  In my opinion the judges care more about the why behind your valuation rather than a how.  Anyone can use a formula, but it takes so much more to understand why to use the formula.    Personally, the 'why' is going to be the toughest part for me understand and wrap my head around.  Once again thank you for the advice and the tip. I see your remarks regarding Zillow, but would add a question. Why not look only for recent sales? If you find homes similar to yours with recent sales, that's similar to how the appraisers do it. I've refinanced many times and each time, I looked at sales within three miles of my house. I hit the appraised price very close in my estimate, high or low compared to Zillow, but used transaction data from there.just my thought.  I chose a random neighborhood, and this was the first house I clicked. The main view shows last sale date, so I'd obviously suggest the OP look for more recent ones. If turnover is that low in his neighborhood, I understand, but the comment that transactions aren't listed is factually incorrect. I'd like my 2pts back. :) "Firstly, the agent doesn't work for you. He works for himself.  It's in his interest not to get you a house at the lowest cost but to sell you a house. The higher the price the higher his commission is, or the higher the probability that the seller will sell it meaning less work for him. It depends on the market what price you should give. If I were you, I would do my own research about this area and not just trust the agent's assessment of it being a ""seller's"" market. Not sure where we are talking about but as you know, house prices have fallen a lot in the last few years and the economy isn't doing that well. It also depends on yourself. Every house is different and there's an emotional attachment to buying property. How much do you really want this house? Would it matter if you didn't get it? Are you prepared to keep looking? If this is your dream house, then maybe it is worth offering a bit more to ensure that you get it. If not, and you are prepared to wait, then yeah, I would shoot a little lower and see what they say. One thing I will say though is generally even if you give them a low offer, unless they're getting lots of other offers or they have to sell urgently, alot of the times the seller will come back and try to negotiate with you anyway. After all, it's business and they're there to get the highest price." "Pre-edit, Pete mentioned that he feels real estate agents would (a) like you to buy as much house as you afford, and (b) would love to show you three houses and have you choose one.  As a real estate agent myself, I believe his warnings were understated. As with any industry, there are good and bad people. Agents are paid to move houses. If the median US home is under $200K, and commissions average say 5%, the $10,000 to be gained is split between the buyer brokerage and selling agent. The $5000 to each is then shared with 'the house.' So, this sale would net me $2500, gross. Move one a week, and the income is great, one per month, not so much. Tire kickers will waste an agent's time for a potential decision to wait another year and continue renting. Their obligation is to tell you the truth, but not to offer financial advice.  Remember the mortgage crisis? It seems the banks and brokers aren't watching out for you either. They will tell you what they'll lend you, but not what you can afford. These numbers are worlds apart.  I strongly recommend a 20% downpayment. The FHA PMI calculator shows that a 90% LTV (i.e. a 10% downpayment) for a $100K house will cost you $1200/yr in PMI. Think about this. For the $10,000 that you didn't put down, you are paying an extra $1200 each year. This is on top of the interest, so even at 5%, that last $10,000 is costing nearly 17%. If you can't raise that $10K (or whatever 10% is on that house) in cheaper funds, you should hold off. Using the 401(k) loan for this purpose is appropriate, yet emotionally charged. As if suck loans are written by the devil himself.  ""Buy the biggest house you can""? No. I have a better idea. Buy the smallest place you can tolerate. I have a living room (in addition to family room) that has been used 3 times in 20 years. A dining room we actually use. Twice per year. When your house is 50% too big, you pay 50% more property tax, more utility bills, and more maintenance. Closing costs, commission, etc, isn't cheap, but the lifetime cost of living in a too-big house is a money pit." First thing, ask your real estate agent who should have been involved in writing the contract, and can explain your options regarding the contingency. That being said... The inspection report is the decision point. For every issue/problem mentioned you have decide: Ignore; have the seller fix; have the seller give you money to fix; have the seller drop the price; or walk away. Minor things you can have the seller fix. They need to be done, but they can be done by the seller.  Expensive things that are difficult to estimate the price in advance should also be done by the seller. The difficultly estimating the cost to repair will make it risky for you to negotiate a price break.  Getting a credit of $1,000 when it ends up costing you $20,000 is something you want to avoid. For items that you want to do the fix yourself you want money at closing to do them, or ask for a price break. Items in this category include replacing an appliance. You can take the money and get exactly the one you want, or let the seller of the house buy one that has the least options and won't match the color. Buyers also take this option when they were going to renovate soon anyway. Walking away. This happens when there is a large expensive issue that is hard to fix. Or a very large list of mid-size problems. Issues in this category can include foundation cracks, major electrical problems, extensive leaks, mold. It can also include beautifully constructed additions that aren't up to code and were done without permits and inspections.   Which category is your Radon in? You need to ask your agent, and read the inspection report. The agent can explain your options, and how likely the seller will be to agree. They can also tell you how likely you are to not lose the deposit if you do walk away. My question is... how is this new value determined?  Does it go off of   the tax appraised value? The tax assessors values are based on broad averages and are not very useful in determining actual home value. The most defensible valuation outside of a sale is a professional appraisal, real-estate agents may or may not give you reasonable estimates, but their opinions are less valuable than that of a professional appraiser. Additionally, agents hoping to land you as a client (even if you tell them you're not trying to sell) could be motivated to over-estimate. In many instances a few opinions from agents will be good enough, but if there is any contention a professional appraisal will be better. Should you, prior to your death, get an independent appraiser to   appraise the value of the property and include that assessment of the   properties value with the will or something? The real-estate market fluctuates too much to make having an appraisal done prior to your death a practical approach in most circumstances. You could make arrangements so that an appraisal would be scheduled after your death. Here's a good resource on the topic: Estimating the Value of Inherited Real Estate "I would strongly try to influence circumstances so that buying is feasible. That means: Buy something where it is likely that you can resell it at the same price or even higher - or, at the least for significantly more than ""total cost of ownership - rent payed elsewhere"". For example, if it is in an area where you have good reasons to assume that prices will go up in the future. Or if the object needs refurbishing and you are sure that you can do it yourself. You will, no doubt, sell it later. You will near certainly not live in such a small house for all time. So the question of ""whether"" you will sell it is moot. So, when you have a potential house to buy, you will have to calculate everything very carefully, with an estimate of how long you will stay. You need to make your calculation as optimistic/pessimistic as you like (this is more a question of your character). Whatever calculation comes out better, wins. It goes without saying that if you miscalculate (for example, overestimating your ability or time to refurbish; forgetting to calculate non-obvious costs of refurbishing; being surprised by hidden damage to the object; misjudging the price development in the area) you run a considerable risk. So, the question of whether you are able to calculate the risks correctly will need to influence the calculation itself (add 20% or whatever risk buffer if you are not sure, etc.). But the potential is for you to have a very good start in the whole financial game of your life. Your house will likely be for a considerable time the biggest single part of costs in your life, and getting that under control from the get-go is a huge benefit." Market value and assessments are two different things. No matter how amical the agreement seems on buying and selling, the future could result in damaged relationships without an absolute sale. I would strongly recommend getting into an agreement to split the purchase of a house as a means to save money. If it's too late, sell immediately. "First piece of advice: fire your agent.   A pushy agent is a bad agent.  From what you've told us, he's actually given you poor advice regarding mortgage interest rates.  Rates are already at historic lows.  That and the precarious state of the world economy mean that further rate cuts are more likely in the near term. Second piece of advice: While more information on the real estate market you're in would help,  going in at asking price is rarely a good idea.   Sale prices from ""the last few years"" are not relevant to what you should pay, because the last few years include a financial crisis caused in large part by the bursting of a housing bubble.  They could be even less relevant depending on your location because of a spike in foreclosures in certain areas of the U.S.  There was already a ton of housing inventory before, so an increase due to foreclosures is going to depress prices further.  Now that banks are finally practicing the due diligence they should have been all along, your ability to be pre-approved for large mortgage amount puts you in a strong position.   Use a tool like Zillow or Redfin to see what properties in that area have sold for over the past six months.  You should also be able to see a history of what prices the particular property you're interested in has been offered and/or sold at in the past.  Also check and see how long the particular property you're interested in has been on the market.  If it's been on the market more than 60-90 days, it's priced too high." THANK YOU so much! That is exactly what I was looking for.  Unfortunately I'm goign to be really busy for 7 days but I'd love to tear through some of this material and ask you some questions if you don't mind.  What do you do for a living now? Still in real estate? Did you go toward the brokerage side or are you still consulting?  What's the atmosphere/day-to-day like? Ok maybe I should have went into further detail but I'm not interested in a single point estimate to compare the different options.  I want to look at the comparable NPVs for the two different options for a range of exit points (sell property / exit lease and sell equity shares). I want to graph the present values of each (y-axis being the PVs and x-axis being the exit date) and look at the 'cross-over' point where one option becomes better than the other (i'm taking into account all of the up front costs of the real estate purchase which will be a bit different in the first years).  i'm also looking to do the same for multiple real estate and equity scenarios, in all likelihood generate a distribution of cross-over points.  this is all theoretical, i'm not really going to take the results to heart. merely an exercise and i'm tangling with the discount rates at the moment. Shop lots of houses.  Find at least three you want and start by offering a low price and working your way up.  Your risk is that houses you would have liked get bought by someone else while you are negotiating, that is how you discover how much you actually have to pay to get a house.   Brokers only get paid if a deal closes.  That is their incentive to get you a better price.  If they know you will buy a different house unless the one they are selling gets your business, then they will work to make that happen. "Do you still enjoy living in your home? Can you afford the mortgage payments? Is there a reason for you to move, such as a relocation for work, or your third kid is on the way and your current house is already crowded with two? Those questions are more important than ""Is my home worth more than what I owe on it"". Ultimately, it's your home. You probably chose it for more than just its price, and those qualities should still make it valuable to you in some way beyond the monetary value which goes up and down with the market. You have a few options:" Both seem to be reasonable. To decide you need to guess if the value of the house will go up or down between now and when you sell. If you think the value will go up - reach a calculation agreement now. If you think the value will go down - wait until the house is actually sold. So ya pays yer money, and ya takes yer chances... I think I understand the two scenarios Unless you are absolutely confident that you understand both scenarios - make sure your lawyer gets involved and explains them to you until you do understand.