To Buy or Not To Buy? Part Two of a Four-Part Series

Part II: Buying and Selling for Move-Up Buyers

So, you just had that fourth (and unexpected) child and the house is getting a little tight, or your mother-in-law has decided it is time to move in with you. You are tired of small and old and want something bigger and new, or you are just seeing some screaming deals out there. Whatever the reason may be, you have the inkling to sell your current home and buy a new one. Where do you begin?

The answer is two-pronged. You’ll definitely want to start with a lender who can evaluate your financial situation – how much you owe on your current home, how much you can afford to buy, whether you will have to sell your current home in order to buy your next home and give you an estimate of what your interest rate and closing costs would be in order to finance the next home. At the same time, however, you will want to be in touch with a real-estate professional whom you trust who can give you a good idea of what your home is currently worth.

There are definite advantages for Move-Up Homebuyers right now: 

1. Interest rates are low AGAIN. They went up slightly and have come back down to those historical lows you have been hearing about.

2. You may lose on the sale of your home, but you will most likely gain on the purchasing side by getting a great deal – and if you are moving up in to a bigger or more expensive home, your gain is greater.

3. You will be astounded at what your money can by now versus five years ago when the market peaked.

There are, of course, costs associated with buying and selling.

Selling:

1. As the seller, you may need to invest in some repairs or updates to make your home salable and in order to appeal to the most buyers,

2. You pay the commission for both the listing agent and the selling agent as well as your title and escrow fees, excise tax, pro-rated property taxes and your outstanding mortgage balance.

3. There may also be costs that come up to address inspection issues.

4. You may also be asked in the negotiations to pay your buyer’s closing costs which could run about 3 percent.

Buying:

1. As the buyer, you will have to have a down payment (depending on the type of loan), earnest money, and you will have costs associated with the loan.

2. You, as the buyer, could also ask that the seller pays YOUR closing costs.

3. You, as the buyer, do not have to pay the commission.

Once it has been determined that you can afford to buy and sell and you are ready to take action, what is your next step?

First, prepare your home for sale. Make it shine and price it right! Competition is fierce and unfortunately many owner-owned homes (non-distressed properties) are on an even playing field with short-sale and bank-owned properties at this point (unless a neighborhood is absolutely dominated by short-sale and bank-owned properties). It is time we accept the facts and face the music. Those who do will successfully sell their homes right now. Obviously, the more equity you have in your home, the better off you will be.

Secondly, be aware of properties that are available and be ready to pounce once you have received an offer on your own property. It is possible to make an offer on another property that is subject to the successful closing of your own property. This is different than a "contingent offer." The offer on your next home is even stronger if the buyer of your own property has already gone through the inspection and appraisal process on your home.

If timed right, you can arrange for a simultaneous closing of your property and the property that you are purchasing. Make sure the contract on the house you are selling includes a “Closing +3” provision, allowing you three days after closing to move into your new place and clean up your other home.

If you decide you want to pursue a short-sale property, which can take many months to close, or if you don’t find something you want to buy right away, there is the option of renting in the interim. Several apartments will offer a six-month lease, which can be extended month-to-month after that. It does mean moving twice, but it may be worth it for that great short-sale property or to take the time you need to find what you are really looking for.

If you are aching to move, but you owe more than your home is worth and you don’t have the cash to bring to the table to make up the difference, then you may want to follow Suze Orman’s advice and stay put.

Make the best out of your situation, take care of your home and make it a place that you enjoy. As time goes by, the market will improve and, in the meantime, you will be building equity by making your payments and making improvements. And someday that dream will become a reality in a fiscally sound way.