Once you close on your home sale, you can walk away and celebrate, right? Well, not exactly! After you sell your house, you certainly should celebrate, but you have more things to think about, from tax prep to buying your next house. In “House Selling for Dummies,” authors Eric Tyson and Ray Brown lay out things you can do to save money and increase your peace of mind, post-sale.
You’re going to need to do something with any proceeds you have left from the sale. Plus there are tax implications to consider, and if you haven’t already, you need to think about where you’re going to live long term.
Here are some tips from Tyson and Brown that can help guide you.
1. Keep copies of all paperwork related to the closing and settlement
Although it might be tempting to shred the paperwork or put it in storage, you’ll want to have it handy for April 15. When you file your taxes, you’ll need documentation for the expenses and proceeds of the sale. And after you file your return, you’ll want to keep the paperwork in case you’re audited.
2. Keep proof of improvements and prior purchases
This is for tax purposes, too. The IRS allows you to add the cost of improvements to your home’s cost basis during the time you own the home, which is nice if you have a sizable capital gain. But to use this tax provision, you need to keep receipts for everything you spent on home improvement.
3. Stay on top of tax laws after you sell
Because tax laws constantly change, you’ll want to keep current to avoid losing money. For example, a recent law allows you to exclude from tax a significant portion of the profits from the sale of your primary residence.
4. Put your proceeds in a money market fund
If you sell and then don’t immediately buy, you’ll need a safe place to put your money. A money market mutual fund offers safety, a reasonable rate of return, daily access to your money and check-writing privileges.
5. Choose your next home carefully
Scope out a variety of areas and housing options that meet your family’s needs.
6. Don’t feel pressured to buy
Take your time purchasing your next home; rent for awhile if you’d like extra time or want to try an area out first before buying. “Keep in mind that you have two years to defer tax on your house-sale profits,” Tyson and Brown point out.
7. Reevaluate your personal finances
If your situation changes before you buy another house — you get a promotion, have a baby, go through a divorce — you’ll need to rethink your finances and how much you can afford to pay for your new house.
8. Think about what you need from an agent to help you buy
Carefully consider whether the agent who helped sell your house can meet your needs when you’re buying. Buying and selling require different skills. And, if you’re moving to a new area, you may want someone familiar with the area.
9. Think through your next down payment
Brown and Tyson recommend putting at least 20 percent down on your next house in order to qualify for the best mortgage programs. If you can afford more than 20 percent, consider whether it’s better to put that money in the down payment or to invest the money elsewhere.
“Younger home buyers willing to take on more investment risk should lean toward a 20-percent down payment, whereas older home buyers, who tend to invest less aggressively, should opt for larger down payments,” the pair recommends.
10. Remember to send change-of-address notices
The U.S. Postal Service recommends you complete your change of address 30 days before you move.
Michele Dawson wrote this article.
