Guest Writer April 19, 2021
Sharad Gupta is the owner of Gupta Realty Group and is a member of the California.com Recommended Business Program, which highlights only the best businesses in the Golden State. To be featured, each business must be highly regarded, have a unique California story, and make a positive impact in their community.
When you’re selling one home and buying another, the process can be more complicated than the experience of being a first-time homebuyer. Moving up to a bigger house comes with two major concerns: financing and living situations. Not only do you want to sell the current home at the right time to avoid the financial burden of owning two properties, but you’ll also want to ensure you have somewhere to live during the interim period.
Understanding these common mistakes and ways to overcome them will help you make informed choices. So, if you’re looking into buying a larger home, these are the issues you should consider before listing your current home.
Things to Avoid When Trading up to a Larger Home
Wearing rose-colored glasses
Most of us dream of improving our lifestyle and buying a bigger home. The problem is that there's sometimes a discrepancy between our desires and our bank accounts.
Sometimes buyers fall in love with a property before they’re pre-approved or cruise by a home that catches their eye but has already been sold. Most homeowners get caught in this hit or miss strategy of house hunting, but 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. These services remove the guesswork and help you get 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 ongoing basis. A program like this helps homeowners take off their rose-colored glasses and, affordably, move into the home of their dreams.
Failing to make necessary improvements
If you want to get the best price for your home, there are a variety of improvements you can make before selling the property that will make it more attractive to prospective buyers. These fix-ups don't necessarily have to be expensive, but if you do have to make a minor investment, the right adjustments often have a tenfold return when you sell.
It's very important that these improvements be made before you put your home on the market. After all, you only get one chance to make a first impression. If cash is tight, look into an equity loan that you can repay on closing.
Not selling first
Since you’re selling one house to buy another, you should plan to sell before you buy so you don’t feel pressured to accept a below-market offer just to meet a purchase deadline. If you've already sold your home, you can buy your next one, 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 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 isn’t selling as quickly as you anticipated, you may want to consider renting the property and putting it on the market later—especially if you’re selling a smaller, starter home. You'll have to investigate the tax rules if you choose this option.
Better still, find a way to eliminate this situation altogether by getting your agent to guarantee the sale of your present home before you take possession of your next one. Programs like this ensure the home will be off your hands before it becomes an issue so you can make your move free of stress and worry.
Failing to get pre-approved for a 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 buying a bigger house—or any home for that matter. It allows you to know exactly how much house you can afford when you put an offer on the home you want to purchase and you already have the green light from your lending institution.
With a pre-approved mortgage, your offer will often be viewed far more favorably by sellers—even if it's lower than another financing-contingent offer. So make sure to take this important step.
Failing to coordinate closings
Selling a home to buy another means there are two major transactions to coordinate together. Since everyone from mortgage experts, appraisers, and lawyers to loan officers, title company representatives, home inspectors, and pest inspectors are involved in the process, there’s a high chance of mix-ups and miscommunication.
To avoid a logistical nightmare, make sure you work closely with your agent. Working with someone you trust will ensure that everything is coordinated and the transaction goes smoothly so you can accomplish your goal of trading up.
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