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.
In this article, we outline the
six most common mistakes homeowners make when moving to a larger
home. Knowledge of these six mistakes, and the strategies to
overcome them, will help you make informed choices before you
put your existing home on the market.
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 already sold or that it's more than what you are
willing to pay. Most homeowners get caught in this hit or 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 to put
you in the 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 information on an on-going basis. A
program like this helps homeowners take off their rose-colored
glasses and, affordably, move into the home of their dreams.
2. Failing to make 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.
You should 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
sale 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 as 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 this latter option. Better still,
find a way to eliminate this situation altogether by getting
your agent to guarantee the sale of your present home (see point
number 5 below).
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 a 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. Getting caught in the
"Real Estate Catch 22".
Your biggest dilemma when buying
and selling is deciding which to do first. You don't want to end
up with the terrible situation of owning two houses, or worse,
owning none! Point number 3 above advises you to sell first,
however there are ways to eliminate this dilemma altogether.
Some agents offer a Guaranteed Sale "Trade-Up" Program
that actually takes the problem away from you entirely by
guaranteeing the sale of your present home before you take
possession of your next one.
If you find a home you wish to
purchase and have not sold your current home yet, they will buy
your home from you themselves so you can make your move free of
stress and worry. (By the way, we'll be talking more about
Guaranteed Sales and the "Real Estate Catch 22" in a
later issue of this newsletter. Stay tuned!)
6. Failing to coordinate
closings.
With two major transactions to
coordinate -- together with allthe 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 increase
dramatically. To avoid a logistical nightmare, ensure you work
closely with your agent.
Keep these six points in mind
when you start looking for a new home. They'll make your
life easier, and could potentially save you a lot of money.
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