You Sold Your Home and Made a Huge Profit…Now What?

You did it, the hard part is over. After all of the open houses, home repairs and negotiations you have finally sold your home, congratulations! Unfortunately the work doesn’t stop now that escrow has closed. Keeping in touch with those closest to you, performing some due diligence and exercising strategic wealth management throughout the post-sale process can save you time and peace of mind in the long run. Here’s what should be next on your to-do list after handing over the keys:

Spread The Word

Remember to send change-of-address notices as soon as possible. The recommendation from the U.S. Postal Service is that you complete your change of address 30 days before the move. After alerting your local post office it’s time to share your good news with friends, family and clients if necessary. The hard part is over so have some fun with this and share the good news of your sale while including important new contact information with those closest to you.

Don’t Forget About Tax Season      

Regardless of when you close the sale of your home it will surely affect you once tax season rolls around. It is extremely important to keep copies of all paperwork related to the closing and settlement. Come April 15th you’ll need all of the documentation for the proceeds and expenses from the sale. Beyond the basics, you should also keep a paper trail and receipts of any improvements and prior purchases made throughout the selling process. The IRS will likely allow you to add the cost of improvements to the base cost of your home during the time you owned the home, which is very helpful, especially if you have a sizable capital gain.

In addition to holding onto important documents it is imperative to stay on top of tax laws. These vary from state to state and are ever-changing so you’ll want to keep current to avoid any fees or penalties in the future.

Avoid a Rebound Relationship

Before you decide on purchasing a new home it’s a good idea to take another look at your personal finances. Even if you made a profit on the initial sale of your home things can change quickly and if that happens you may need to adjust how much you can afford to pay for your new home.

It is also important to think about what your needs are from an agent in buying a home, since it’s certainly different than your needs as a seller. Buying and selling require different skills and, for example, if you are moving to a new area, you may want someone familiar with the community.

Finally, be sure to choose your next home carefully. Take your time exploring a variety of areas and housing options that meet your needs and your family’s needs as well. Don’t feel pressured to buy just because you sold your home. It’s better to take your time purchasing your next home. Many people rent for a while and invest the profits from the sale of their home while taking the time to review their options.

Make Your Money Work for You

If you are left with a profit after making your next purchase or if you decide to hold off on buying another home for a period of time, you will need a safe place to put your money. The average savings account has a measly 0.06% APY (annual percentage yield, or interest), and many of the nation’s biggest banks pay rates as low as 0.01%. After all of the hard work you put into the sales process wouldn’t you want your profits to do more? More often than not, thoughtful and strategic wealth management can help put your hard earned money to work for you after the sale.

If this final process seems overwhelming enlist a financial services professional that is current on financial markets to help you plan a longer-term pay day for your recent sale. Set clear goals for your investment whether they are allocation of assets or creative reinvestment options. A popular option for many is investing the money in a money market mutual fund or an exchange-traded fund (ETF) that offers a reasonable rate of return. These may be good options for those who do not have a professional on their side as money market funds and ETFs offer daily access to their money and check-writing privileges. Alternatively, our previous blog has three great options to invest in real estate that have potential for a healthy return.

Regardless of what you decide to do with the profits from your sale the important part is to have a plan. We can keep you in the loop with industry insights, Southern California’s hottest neighborhoods, and more ways to make your money work for you by subscribing to our blog via the button to the right.