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 your situation. It’s very important that 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 report, 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 real estate market.
1. Rose-colored glasses
Many home owners dream of improving their lifestyle and moving to a larger home. The problem is that there's sometimes a discrepancy between our desires 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 removes the guesswork 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 real estate market, listed with all real estate agents, and supply you with detailed information on an ongoing basis. A program like this helps homeowners take off their rose-colored glasses and discover homes that match their house criteria AND financial ability.
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 many times over in the price you are able to get when you sell your home. It's very important that these improvements be made before you put your home on the real estate market. If cash is tight, investigate a short term “family” loan or an equity loan that you can repay at closing.
3. Not selling your home 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. You’ll know exactly how much house you can afford and 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. This gives you an important competitive advantage in the real estate market. 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. Point number three above advises you to sell first. However there are ways to eliminate this dilemma altogether. Some real estate firms offer a Guaranteed Sale Trade-Up Program that can actually take the problem away from you entirely. Such programs can guarantee the sale of your present home so that you can have peace of mind when buying your next one. This helps to reduce your stress and worry.
6. Failing to coordinate closings
Understand the challenge of coordinating two major transactions with all the people involved such as mortgage experts, appraisers, lawyers, loan officers, home inspectors and pest inspectors. Then consider the additional challenges of coordinating repairmen in the event inspections identify issues that need to be remedied. The chances of mix-ups and miscommunication go up dramatically. To avoid a logistical nightmare ensure you work closely with a knowledgeable and experienced real estate agent.