Unlike the experience of buying a first home, when you're looking to move-up, and already own a home, there are certain factors that can complicate the situation. It's very important for you to consider these issues before you list your home for sale.
Not only is there the issue of financing to consider, but you also have to sell your present home at exactly the right time in order to avoid either the financial burden of owning two homes or, just as bad, the dilemma of having no place to live during the gap between closings.
The strategies: I've outline the most common mistakes homeowners make when moving to a larger home. Knowledge of these mistakes, and the strategies to overcome them, will help you make informed choices before you put your existing home on the market. Learn from the mistakes of others!
1. Rose-colored glasses
Most of us dream of improving our lifestyle and moving to a larger home. The problem is that there's sometimes a discrepancy between our hearts and our bank accounts. You drive by a home that you fall in love with only to find that it's more than what you are willing to pay. Most homeowners get caught in this hit and miss strategy of house hunting when there's a much easier way of going about the process. For example, find out if your agent offers a Buyer Profile System or "House Hunting Service," which takes the guesswork away and helps put you in a home of your dreams. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed or e-mailed information on an on-going basis. A program like this helps homeowners take off the rose-colored glasses and, affordably, move into the home of their dreams.
2. Failing to make the necessary improvements
If you want to get the best price for the home you're selling, there will certainly be things you can do to enhance it in a prospective buyer's eyes. These fix-ups don't necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It's very important that these improvements be made before you put your home on the market. If cash is tight, investigate an equity loan that you can repay on closing.
3. Not selling first
Plan to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below market value because you have to meet a purchase deadline. If you've already sold your home, you can buy your next one with no strings attached. If you do get a tempting offer on your home but haven't made significant headway on finding your next home, you might want to put in a contingency clause in the sales contract which gives you a reasonable time to find a home to buy. If the market is slow and you find your home is not selling quickly as you anticipated, another option could be renting your home and putting it up on the market later - particularly if you are selling a smaller, starter home. You'll have to investigate the tax rules if you choose the later option.
4. Failing to get a pre-approved mortgage
Pre-approval is a very simple process that many homeowners fail to take advantage of. While it doesn't cost or obligate you to anything, pre-approval gives you a significant advantage when you put an offer on the home you want to purchase because you know exactly how much house you can afford, and you already have the green light from your lending institution. With a pre-approved mortgage, your offer will be viewed far more favorably by the seller, sometimes even if it's a little lower than another offer that's contingent on financing. Don't fail to take this important step.
5. Failing to coordinate closings
With two major transactions to coordinate together with all the people involved such as mortgage experts, appraisers, lawyers, loan officers, title company representatives, home inspectors or pest inspectors the chances of mix-ups and miscommunication go up dramatically. To avoid a logistical nightmare ensure you work closely with your agent.
6. Waiting too Long - "I'll wait until next year."
The same property is unlikely to be available next year, and if it is available, it will usually cost more. Look at the projected price and availability a year from now and see if it makes economic sense to wait.
7. "Our friends want .../Uncle Joe thinks... /my Aunt Mary said ..."
The market may have changes since the friends made their purchase, and the best value may be in another area. Friends and family members are not always informed or objective about the market.
8. Not planning for the unexpected.
Changes in financial status, health, or family needs can occur and require a sale sooner than expected. Resale value will always count at some point, so consider that possibility when buying.
9. "We don't want to spend more than..."
Price is a factor, no matter what the budget, but it shouldn't be the only factor. With interest rates extremely low, buyers can get more home than they expected. Most lenders will be glad to pre-qualify buyers and outline a variety of choices.
10. Not Looking Beyond The Ugly Carpet.
Look beyond paint, wallpaper, and furniture, and see room size, layout, windows, and view. Nearly every new home model is gorgeous, but that doesn't mean it will work for every buyer. Some properties need a facelift, but that shouldn't get in the way of a good value if the layout and location work well.
11. Amenities are nice, but ...
"This community has a restaurant and clubhouse, golf, tennis, shuffleboard, an Olympic-sized pool, a fitness center, paddleboats, and..." Those are all nice amenities if they match the buyer's interests. Not only is the cost of the amenities built into the price of the home and the association fees, but buyers who don't use the amenities may not have anything in common with their neighbors.
12. Not considering deed restrictions.
Many communities have deed restrictions of some kind. They can be as varied as the number and size of pets allowed, to the ability to park a truck in the driveway. The rules are always spelled out in writing in the form of association documents or zoning ordinances. It pays to find out in advance what they are.
13. "We want to look at everything before we make a decision."
In any given month, there are usually thousands of resale homes on the market. In addition, there are almost as many new homes being constructed. It isn't possible to become an expert on everything in the area in a short period of time. So ask. Talk to friends, the person walking his dog, a mortgage broker, or a Realtor.
A real estate agent can help by identifying the buyers' needs and wants and narrowing down the search to only those properties and communities that meet those requirements and reflect current market trends. However, buyers who are willing and able to do their own research can find the same properties and make a buying decision that is both a good investment and a home they will enjoy.
Not only is there the issue of financing to consider, but you also have to sell your present home at exactly the right time in order to avoid either the financial burden of owning two homes or, just as bad, the dilemma of having no place to live during the gap between closings.
The strategies: I've outline the most common mistakes homeowners make when moving to a larger home. Knowledge of these mistakes, and the strategies to overcome them, will help you make informed choices before you put your existing home on the market. Learn from the mistakes of others!
1. Rose-colored glasses
Most of us dream of improving our lifestyle and moving to a larger home. The problem is that there's sometimes a discrepancy between our hearts and our bank accounts. You drive by a home that you fall in love with only to find that it's more than what you are willing to pay. Most homeowners get caught in this hit and miss strategy of house hunting when there's a much easier way of going about the process. For example, find out if your agent offers a Buyer Profile System or "House Hunting Service," which takes the guesswork away and helps put you in a home of your dreams. This type of program will cross-match your criteria with ALL available homes on the market and supply you with printed or e-mailed information on an on-going basis. A program like this helps homeowners take off the rose-colored glasses and, affordably, move into the home of their dreams.
2. Failing to make the necessary improvements
If you want to get the best price for the home you're selling, there will certainly be things you can do to enhance it in a prospective buyer's eyes. These fix-ups don't necessarily have to be expensive. But even if you do have to make a minor investment, it will often come back to you ten-fold in the price you are able to get when you sell. It's very important that these improvements be made before you put your home on the market. If cash is tight, investigate an equity loan that you can repay on closing.
3. Not selling first
Plan to sell before you buy. This way you will not find yourself at a disadvantage at the negotiating table, feeling pressured to accept an offer that is below market value because you have to meet a purchase deadline. If you've already sold your home, you can buy your next one with no strings attached. If you do get a tempting offer on your home but haven't made significant headway on finding your next home, you might want to put in a contingency clause in the sales contract which gives you a reasonable time to find a home to buy. If the market is slow and you find your home is not selling quickly as you anticipated, another option could be renting your home and putting it up on the market later - particularly if you are selling a smaller, starter home. You'll have to investigate the tax rules if you choose the later option.
4. Failing to get a pre-approved mortgage
Pre-approval is a very simple process that many homeowners fail to take advantage of. While it doesn't cost or obligate you to anything, pre-approval gives you a significant advantage when you put an offer on the home you want to purchase because you know exactly how much house you can afford, and you already have the green light from your lending institution. With a pre-approved mortgage, your offer will be viewed far more favorably by the seller, sometimes even if it's a little lower than another offer that's contingent on financing. Don't fail to take this important step.
5. Failing to coordinate closings
With two major transactions to coordinate together with all the people involved such as mortgage experts, appraisers, lawyers, loan officers, title company representatives, home inspectors or pest inspectors the chances of mix-ups and miscommunication go up dramatically. To avoid a logistical nightmare ensure you work closely with your agent.
6. Waiting too Long - "I'll wait until next year."
The same property is unlikely to be available next year, and if it is available, it will usually cost more. Look at the projected price and availability a year from now and see if it makes economic sense to wait.
7. "Our friends want .../Uncle Joe thinks... /my Aunt Mary said ..."
The market may have changes since the friends made their purchase, and the best value may be in another area. Friends and family members are not always informed or objective about the market.
8. Not planning for the unexpected.
Changes in financial status, health, or family needs can occur and require a sale sooner than expected. Resale value will always count at some point, so consider that possibility when buying.
9. "We don't want to spend more than..."
Price is a factor, no matter what the budget, but it shouldn't be the only factor. With interest rates extremely low, buyers can get more home than they expected. Most lenders will be glad to pre-qualify buyers and outline a variety of choices.
10. Not Looking Beyond The Ugly Carpet.
Look beyond paint, wallpaper, and furniture, and see room size, layout, windows, and view. Nearly every new home model is gorgeous, but that doesn't mean it will work for every buyer. Some properties need a facelift, but that shouldn't get in the way of a good value if the layout and location work well.
11. Amenities are nice, but ...
"This community has a restaurant and clubhouse, golf, tennis, shuffleboard, an Olympic-sized pool, a fitness center, paddleboats, and..." Those are all nice amenities if they match the buyer's interests. Not only is the cost of the amenities built into the price of the home and the association fees, but buyers who don't use the amenities may not have anything in common with their neighbors.
12. Not considering deed restrictions.
Many communities have deed restrictions of some kind. They can be as varied as the number and size of pets allowed, to the ability to park a truck in the driveway. The rules are always spelled out in writing in the form of association documents or zoning ordinances. It pays to find out in advance what they are.
13. "We want to look at everything before we make a decision."
In any given month, there are usually thousands of resale homes on the market. In addition, there are almost as many new homes being constructed. It isn't possible to become an expert on everything in the area in a short period of time. So ask. Talk to friends, the person walking his dog, a mortgage broker, or a Realtor.
A real estate agent can help by identifying the buyers' needs and wants and narrowing down the search to only those properties and communities that meet those requirements and reflect current market trends. However, buyers who are willing and able to do their own research can find the same properties and make a buying decision that is both a good investment and a home they will enjoy.
