Thinking About Selling Your Home In 2026? Here are Three Financial Mistakes to Avoid

By Jack Strulowitz

For many families in the Five Towns, selling a home is one of the most significant financial moments of their lives. After twenty or thirty years of ownership, the appreciation of that real estate can be substantial. In our community, many families find that their home has become a major part of their retirement plan almost by accident. They may not have saved aggressively or built large investment accounts, but the surge in home values has created a level of financial flexibility they never expected. The proceeds often feel like they will define the next stage of their life. Yet, the outcome is rarely as simple as taking the sale price and moving on. There are important details that shape how much you actually keep and how well those funds support your plans going forward. Understanding these details before you sell can make a meaningful difference in the positive benefit of this milestone.

Many people assume they know what their home will sell for because a real estate agent gave them a figure. Those estimates are not always reliable. Agents sometimes overstate a price to win the listing or test the market, and other times they understate it to create hype and attract bids. Either way, sellers start with a number that is not grounded in a real valuation.

Another misconception is how much of the gain will actually be taxable. A married couple can exclude up to $500,000 of gain on the sale of a primary residence if they lived in the home for two of the last five years. While this exclusion is meaningful, it does not eliminate the tax bill on a home that has appreciated by more than a million dollars. Many sellers misunderstand when this rule applies or assume they will qualify without checking the details.

The next assumption is that the sale price equals the amount they can use for their next home. Taxes on a long-time primary residence can be significant. Closing costs, commissions, and any remaining mortgage balance reduce the number even further. By the time sellers see the true net amount, they may already have committed to a new home or built plans around the wrong figure. Correcting that mistake often requires selling investments at the wrong time, which can either lock in losses or create unexpected taxable gains.

Because home values in our community have appreciated so much over the past few decades, many sellers will face a meaningful capital gains tax when they sell. Your gain is based on the difference between what you sell the home for and your cost basis, which is the amount you invested in the home. The higher your basis, the lower your taxable gain.

Many homeowners paid for major projects in cash over the years and never kept proper records. When they go to sell, they think back to the kitchen renovation, the extension, the bathrooms, the siding, the roof, or the driveway. They may recall spending one hundred thousand dollars here and two hundred thousand dollars there and assume these amounts will lower their capital gain. Then they find out they have no documentation to support any of it, and without proof, the IRS can disregard those costs entirely.

People often keep a rough mental estimate of what they invested, but those estimates usually include repairs. Repairs do not increase basis. You can spend thousands on paint, patching, flooring, and cosmetic updates, but those expenses do not help lower your capital gain. Only true capital improvements count, and they must be documented.

A growing number of people expect to sell their home, invest the proceeds, and rent for the rest of their lives. It sounds simple, but very few sellers know how much they can safely spend on rent or how long their assets can realistically support them.

Renting during retirement requires a different level of planning. You need a clear sense of how much income your investments can generate, how long the portfolio can last, and how market volatility might affect it. You also need to understand how the sale proceeds fit alongside pension income and Social Security. Without this planning, people often overspend early on and find themselves in a difficult position later.

Working with a financial planner to build a clear retirement plan can help you understand what the proceeds can realistically support and avoid the pressure that comes from relying on guesswork.

There are also smaller decisions that can influence your final result. New York taxes long-term capital gains, and the rate you pay depends on your income in the year of the sale. If you are able to close in a lower income year, you may benefit from a lower tax rate. This can be a subtle but meaningful way to reduce the cost of selling.

On the home-preparation side, spending a few thousand dollars on fresh paint, updated appliances, minor repairs, or curb-appeal improvements often produces an excellent return. These small upgrades can make your home show better and help support a stronger sale price without major expense.

While none of these factors replace the core planning involved in a sale, they can noticeably strengthen both your sale price and the amount you ultimately keep.

Your home might be your biggest asset. You spent decades building equity. Treat the sale with the same seriousness you brought to purchasing it. Plan the taxes. Gather the records. Think about the impact on your next purchase or rental decision. Build a complete picture before you list.

These decisions are simpler when you prepare early. They are far more expensive when you do not. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high–net worth individuals and families manage their investments and build comprehensive strategies for retirement, tax, and estate planning. For questions or to schedule a consultation, please contact [email protected] or 847-962-3352.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Securities and advisory services offered through LPL Financial, a Registered Investment Advisor. Member FINRA/SIPC.