Sell our house fast or sell our house slow?

[lutorm]

So I think we have a twist on a common question. We're moving to Sweden, hopefully soon, and need to figure out what to do with our house here in HI. Renting is out because we'll need to file HI taxes, GE tax, etc and our taxes will be complicated enough without that. So we'll sell it. The issue, however, is that Sweden taxes capital gains, including on primary residences, with 30%. Our cost basis is around $325-350k and might sell somewhere in the $500k range. So if the house sells after we've moved, we'll be taxable in Sweden and have to pay 30% of the gains. If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less. So what should we do?

I would love if there was a generic "selling price of houses as a function of time since being put on market" curve that we could use to at least make an educated guess about the optimal solution. I'm inclined to just say f.it and pay the tax to avoid the stress, but we're talking $50k-75k down the drain here which hurts.

Thoughts?

[former player]

If you sell fast will the price be more than $50k down?  That seems to be what you might pay at 30% tax on a $150k profit.

The profit you are looking for suggests a strong sellers market: if that is right then selling quick might not be a problem.  Is there any reason not to stage the house for sale, get it on the market quickly and see if you get an acceptable offer that can close before you move?  You don't need to advertise it as a quick sale, just that if you get several offers you start at the top offer and say "offer accepted if you can close by x date".

The other thing to look at might be whether you can put off the date of your residency for tax purposes in Sweden.  Or perhaps is there any chance of living in eg Denmark for a few weeks and commuting?

[clarkfan1979]

So I think we have a twist on a common question. We're moving to Sweden, hopefully soon, and need to figure out what to do with our house here in HI. Renting is out because we'll need to file HI taxes, GE tax, etc and our taxes will be complicated enough without that. So we'll sell it. The issue, however, is that Sweden taxes capital gains, including on primary residences, with 30%. Our cost basis is around $325-350k and might sell somewhere in the $500k range. So if the house sells after we've moved, we'll be taxable in Sweden and have to pay 30% of the gains. If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less. So what should we do?

I would love if there was a generic "selling price of houses as a function of time since being put on market" curve that we could use to at least make an educated guess about the optimal solution. I'm inclined to just say f.it and pay the tax to avoid the stress, but we're talking $50k-75k down the drain here which hurts.

Thoughts?

Hawaii automatically withholds money from the sale of a home for foreign investors so capital gains for state and federal taxes get paid. Based on this structure, I don't see how Sweden would have a claim on the capital gains. I could be wrong. I am not a tax professional.

https://www.hawaiilife.com/blog/the-biggest-misconception-about-selling-maui-property-as-a-foreign-resident/

If I was you, I would consult with a tax professional before making a decision.

[daverobev]

Move as fast as you can, but check in with a lawyer. It may be that you aren't Swedish tax resident immediately - https://www.expat.hsbc.com/expat-explorer/expat-guides/sweden/tax-in-sweden/ "People who are present in Sweden for six months or more and regularly stay overnight are generally considered resident for tax purposes.".

You said 'we' - could one of you stay in the US a little while to delay your landing... basically what I'm getting at is that if you sold in August or September... you might get away with it having happened before you officially had to do stuff with the Swedish authorities.

[daverobev]

So I think we have a twist on a common question. We're moving to Sweden, hopefully soon, and need to figure out what to do with our house here in HI. Renting is out because we'll need to file HI taxes, GE tax, etc and our taxes will be complicated enough without that. So we'll sell it. The issue, however, is that Sweden taxes capital gains, including on primary residences, with 30%. Our cost basis is around $325-350k and might sell somewhere in the $500k range. So if the house sells after we've moved, we'll be taxable in Sweden and have to pay 30% of the gains. If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less. So what should we do?

I would love if there was a generic "selling price of houses as a function of time since being put on market" curve that we could use to at least make an educated guess about the optimal solution. I'm inclined to just say f.it and pay the tax to avoid the stress, but we're talking $50k-75k down the drain here which hurts.

Thoughts?

Hawaii automatically withholds money from the sale of a home for foreign investors so capital gains for state and federal taxes get paid. Based on this structure, I don't see how Sweden would have a claim on the capital gains. I could be wrong. I am not a tax professional.

https://www.hawaiilife.com/blog/the-biggest-misconception-about-selling-maui-property-as-a-foreign-resident/

If I was you, I would consult with a tax professional before making a decision.

A person is taxed where they are tax resident. Immovable property is generally taxed first where it is located, but if that is different from where the person is it will be taxed where the person is as well. The fact that Hawaii has taxed something is neither here nor there if the OP is tax resident of Sweden.

Double taxation treaties come into play as to whether you can subtract one set of tax paid from another due, of course.

But, agreed, asking a tax person is certainly a good idea; getting it dealt with before leaving is undoubtedly the simpler option.

[uniwelder]

If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less.

I"m a little confused why OP thinks the house will sell for more money after moving?  Because the house will be empty for tours or they will repaint the interior?  If OP put the house on the market now, it sounds like there would be a cash in hand buyer within a day of listing, based on all the housing stories I hear.  Why not just put the house on the market now with a condition of renting it from the new owner until moving to Sweden?

edited to add OP's quoted statement and reword my reply.

[ysette9]

I always figured houses sold for more when they se quickly. Selling quickly means a strong market and interest from potential buyers. Houses that sit on the market quickly get the reputation of having something wrong with them, warranted or not. I see no reason not to try to sell quickly, unless your housing market is drastically different than anything I have ever experienced.

The house we bought two years ago had been on the market for about two months by the time we bought it. It had issues that were scaring other potential buyers off, and a bad sales team that wasn’t responsive. We were interested despite that, and had zero competition though the market was insanely competitive due to very limited inventory.

[BicycleB]

Agreeing with the idea that in a hot market, houses can now sell quickly.

Re cost vs time curve, you can bend it towards speed by accepting cash offers vs financing offers, saving perhaps 2-3 weeks. How much lower a cash offer would be depends on many variables; you might just have to decide based on the specific offers that happen in your case.

That said, verifying the details of Swedish tax code should clarify your options. Perhaps you won't have to rush. Once you know the facts, you can decide.

As a reference, PriceWaterhouseCoopers summary comments that:

1. "Individuals resident in Sweden are taxed on capital gains during the period of residence" (supports the idea that selling before you leave could avoid Swedish gains tax)
2. "A tax rate of 22% applies to the sale of private real property" (not 30%)

https://taxsummaries.pwc.com/Sweden/Individual/Income-determination

[Paper Chaser]

HI maybe a unique market, but in general I think competition for properties will stay low as long as interest rates remain high. That, combined with builders adding supply will put some amount of downward pressure on home prices moving forward.

Add student loan repayment kicking back in this summer to tighten some belts and I'd be pretty motivated to sell sooner than later.

[lutorm]

Move as fast as you can, but check in with a lawyer. It may be that you aren't Swedish tax resident immediately - https://www.expat.hsbc.com/expat-explorer/expat-guides/sweden/tax-in-sweden/ "People who are present in Sweden for six months or more and regularly stay overnight are generally considered resident for tax purposes.".

You said 'we' - could one of you stay in the US a little while to delay your landing... basically what I'm getting at is that if you sold in August or September... you might get away with it having happened before you officially had to do stuff with the Swedish authorities.

Because we are moving with the intent to stay more than 6 months, we will be tax residents from the day we arrive.  Tax residency doesn't start after the sixth month.

My wife suggested the split option, but we'd have to write the property over on the person staying and I dunno if that will fly with the bank. So then we'd also need to take out enough cash to pay off the mortgage first. It may be an option but with two small kids it would be a pain.

[lutorm]

If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less.

I"m a little confused why OP thinks the house will sell for more money after moving?  Because the house will be empty for tours or they will repaint the interior?  If OP put the house on the market now, it sounds like there would be a cash in hand buyer within a day of listing, based on all the housing stories I hear.  Why not just put the house on the market now with a condition of renting it from the new owner until moving to Sweden?

edited to add OP's quoted statement and reword my reply.

Not that it will sell for more after moving, just that finding a buyer in time to have the sale close before we move will be very little time. Logically the chance of finding a buyer at price X is greater the longer you can wait for it, so we should be able to get more money.

[Villanelle]

I agree with the suggestion to list now, with a stipulation for a rent-back until the absolute earliest day you can be out, even if that means staying in a hotel or airbnb for a few weeks (or longer) before you leave for Sweden, or changing your Swedish travel dates.

[lutorm]

Agreeing with the idea that in a hot market, houses can now sell quickly.

Re cost vs time curve, you can bend it towards speed by accepting cash offers vs financing offers, saving perhaps 2-3 weeks. How much lower a cash offer would be depends on many variables; you might just have to decide based on the specific offers that happen in your case.

That said, verifying the details of Swedish tax code should clarify your options. Perhaps you won't have to rush. Once you know the facts, you can decide.

As a reference, PriceWaterhouseCoopers summary comments that:

1. "Individuals resident in Sweden are taxed on capital gains during the period of residence" (supports the idea that selling before you leave could avoid Swedish gains tax)
2. "A tax rate of 22% applies to the sale of private real property" (not 30%)

https://taxsummaries.pwc.com/Sweden/Individual/Income-determination

The advice to sell before we move came from a tax firm specializing in US/Sweden cross taxation we consulted with, so I put high reliability on that.

I stand corrected, the tax rate is 30% but you only pay tax on "22/30 of the gain" so it comes out to be 22% net. (Why oh why would you formulate things like that???)

I would not characterize the market here as hot. Prices have not really dropped much, but my impression is that houses definitely sit longer before getting sold. (Clearly if the market is hot, all houses sit on the market a shorter time. But the market is what it is, the question is how long it takes to find a buyer for whom the house is right.)

I think in no case will we get out of paying the HI cap gains tax, so that's really neither here nor there.

[uniwelder]

If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less.

I"m a little confused why OP thinks the house will sell for more money after moving?  Because the house will be empty for tours or they will repaint the interior?  If OP put the house on the market now, it sounds like there would be a cash in hand buyer within a day of listing, based on all the housing stories I hear.  Why not just put the house on the market now with a condition of renting it from the new owner until moving to Sweden?

edited to add OP's quoted statement and reword my reply.

Not that it will sell for more after moving, just that finding a buyer in time to have the sale close before we move will be very little time. Logically the chance of finding a buyer at price X is greater the longer you can wait for it, so we should be able to get more money.

I'm totally ignorant about Hawaii.  Since you're expecting to sell for 500k, that sounds like its on the very low end of pricing, so I would have thought it would be immune-- not a luxury home.  Have you talked with real estate agents about what to expect about time on the market?  Do they think your place could sit for a month before it goes under contract?

[lutorm]

If we sell it before the move (we're aiming for the later half of July) we'll avoid cap gains taxes but instead it seems likely that to get it to sell that fast it'll sell for less.

I"m a little confused why OP thinks the house will sell for more money after moving?  Because the house will be empty for tours or they will repaint the interior?  If OP put the house on the market now, it sounds like there would be a cash in hand buyer within a day of listing, based on all the housing stories I hear.  Why not just put the house on the market now with a condition of renting it from the new owner until moving to Sweden?

edited to add OP's quoted statement and reword my reply.

Not that it will sell for more after moving, just that finding a buyer in time to have the sale close before we move will be very little time. Logically the chance of finding a buyer at price X is greater the longer you can wait for it, so we should be able to get more money.

I'm totally ignorant about Hawaii.  Since you're expecting to sell for 500k, that sounds like its on the very low end of pricing, so I would have thought it would be immune-- not a luxury home.  Have you talked with real estate agents about what to expect about time on the market?  Do they think your place could sit for a month before it goes under contract?

Well, we're not in a tourist area, so it's not very low end, but it's also not high end. Pretty middle of the road, classic island home built in 1950. We did speak to a realtor who agreed that things are slow now and homes sit longer on the market, but she didn't have any specific numbers.

[Paper Chaser]

We did speak to a realtor who agreed that things are slow now and homes sit longer on the market, but she didn't have any specific numbers.

Redfin gathers data for states that might be helpful. You can even search for your specific zip code:

https://www.redfin.com/state/Hawaii/housing-market

[uniwelder]

I was thinking about this topic.  @lutorm what did you end up doing with the house?