You’ve been thinking about upgrading to a bigger home for a while, but you also know that it can be a little complicated to do considering you still have to sell your current home.
You're right. Unlike the experience of buying your first home, it can be tricky when you are looking to move-up and already own a home.
Wondering what you should do first?
It’s very important to consider certain factors before you list your home for sale.
Not only is financing something to consider, but you also have to sell your current come at the exact same time. Most people want to minimize the gap between buying in selling in order to avoid the financial burden of owning 2 homes as well as the dilemma of not having a place to live during the gap of both closings.
Mistake # 1 - Falling in Love
Most of us dream of improving our lifestyle and moving to a larger home, but the problem we run into is that sometimes there is a discrepancy between our hearts and our bank accounts.
You drive by a home that you fall in love with only to find out that it’s already sold or the price is more than you are able or willing to pay. Most homeowners, unfortunately, get caught up in this hit or miss strategy of house hunting when there is much easier way to do this.
Your real estate agent can help you analyze your needs and set you up to receive ALL available homes that match your price, location & search criteria. This way you don’t miss out on the homes that are right for you.
Knowing your price and home criteria will help you take off your rose-colored glasses and affordably move into the home of your dreams.
Mistake # 2 - Not making the right home improvements
If you want to get the best price for the home you are selling, there are certainly upgrades you can make to enhance it in the buyer’s eyes. Luckily, these don’t have to be expensive!
Even if you do need to make bigger improvements, if you make smart investments, they will often come back to you 10-fold in the price you sell your home for.
It’s very important you get your home fully ready prior to putting it on the market.
Mistake # 3 - Not selling first
You should plan to sell first and then buy. This ensure that you don't find yourself at a disadvantage at the negotiating table. What do I mean?
- You won’t feel pressured to accept a below-market price because you are pressured to meet a purchase deadline.
- If you've already sold your current home, you can buy your next home with no strings attached.
- If you get a great offer on your current home, you can put a contingency in the agreement to give you reasonable time to find your next home.
- If your home is not selling quickly, you might consider renting it and putting it up for sale later. (Investigate the tax rules if you decide to go with this option).
Mistake # 4 - Not getting pre-approved for a mortgage
This ,in my opinion, is the very first and critical step before you even start making plans and decisions. You must know where you are financially and then make choices based on the facts.
It's free and easy to get pre-approved, and it doesn’t take long to do it. It’s important to know who you are dealing with. A lot of lenders will give you a pre-approval letter by simply checking your credit and your income. Be careful.
There are a lot more factors that should be considered, and working with a reputable and experienced lender will help you. Make sure your lender also reviews your tax returns for the last 2 years and your current earnings. This will help avoid any surprises down the road during underwriting.
It's best practice is to get pre-approved before starting the buying process, and a lot of lenders offer automated underwriting in house. Ask for family referrals or ask your agent if you already have one to refer you to a good reputable lender that they know will get the job done.
Mistake # 5 - Don’t get caught in Catch-22 dilemma
Which one do you do first? Buy or Sell?
My recommendation is Sell First!
If you want convenience and you don't mind losing some home equity in order to eliminate the risk of having 2 homes, there are some companies that offer a guaranteed trade program. They buy your home for less and subtract their 7% commission and the estimated amount of repairs that needs to be made, and you can sell your home even without putting it on the market.
They need to buy it for less so that they can resell and still make profit. It’s obvious, right? But it’s also very convenient!
Mistake # 6 - Not coordinating both Closings
It’s critical to coordinate the closings for both of your transactions to happen (preferably) at the same closing attorney's office back to back.
This way the funds that are coming from selling your home will be quickly available as a down payment for your next home.
To avoid a nightmare situation, ensure that you work closely with your agent and coordinate with all of the people involved in both of the transactions: lenders, appraisers, attorneys, title companies, insurance agents, home inspectors, pest inspectors, etc.
This will help avoid most miscommunications.