6 Mistakes To Avoid When Trading Up To A Larger Home
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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.
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 our 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 info 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 10 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 will know to consider putting in a contingency clause in the sales contract giving you 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 #5 below).
4. Failing to get a pre-approved mortgage
Pre-approval is a simple process that many home owners fail to take advantage of even when it doesn't cost or obligate them 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. Point #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 buy 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. Make sure to have your own attorney review these types of agreements with you so you fully understand the benefits and also what exactly you will be giving up by taking this option. NEVER just sign this type of agreement.
6. Failing to coordinate closings
With two major transactions to coordinate together and all the people involved such as mortgage lenders, appraisers, lawyers, insurance, home inspectors, contractors, other specialty inspectors the chances of mix-ups and mis-communication go up dramatically. To avoid a logistical nightmare, ensure you work closely with your agent.