Our Seller's Guide: How to Know When it is Time for a New Home
What are your "Must Haves", "Wants" and "Absolutely Nots"?
Before you start looking at new homes, talk with your spouse, children, and any family members that are moving with you and compile a list. This list should include your "absolutely must haves", your "would like to have but could do without", and those that you will "absolutely not find acceptance in your new home". This ensures that all parties are in agreement on what we are looking for from the start of the search.
For your "must haves", include the lower limit of bedrooms and bathrooms as well as any other structural or lot needs such as a 3-car garage or pool.
For your "nice to have but could do without" list, include the aspects of the home that you are willing to compromise. Are you OK with an electric cooktop when you would prefer gas? How about a 3 bedroom when you would prefer 4?
Finally, make a list of your "ABSOLUTELY NOTS". These should be lot or structure based not aesthetics. Do you absolutely not want the owner's suite next to the other rooms? How about absolutely not wanting to back to a major road?
Narrow down the neighborhoods or areas you would be interested in. Is there a particular neighborhood you like because of its convenient location to schools, malls, parks, and other amenities? Are you willing to move further out, where you can find better home prices, or would you rather be closer to the action, even if it costs more?
Knowing what you need (or want) in a new home will make the home-hunting process a lot more efficient, and will help your real estate agent find the right property for you.
Once you know what you need in your new home, share that info with your real estate agent. The more specific your list, the better, because it will narrow down the list of potential homes to see.
Find an Realtor
A trusted Realtor is essential for your success in all aspects of a real estate transaction. That’s because your Realtor acts as a Head Coach, keeping all team members of the transaction moving in the same direction.
Coordinating the right time to sell your old home and buy a new one can be very complex, and needs to be timed just right in order to keep costs manageable. You could run into a huge number of costly pitfalls if you don’t know what you’re doing, and don’t have someone to guide you through the process.
A great Realtor can help you go into the process more confidently through the ups and downs you will inevitably encounter.
Your Realtor might even be able to help you find suitable accommodations while you transition from one home to the next, or even put together a rental agreement with the new homeowners so that you have a place to live until you move to your new, larger home.
Each situation is different and we are here to help you navigate smoothly through the process.
Determine how much home you can afford
While part of the excitement of moving is shopping around for homes, and seeing what’s the biggest and nicest home you could technically purchase, it’s essential that you slow down and crunch the numbers before making a decision.
How much home you can afford should not be determined by the maximum amount of financing you can get. You should NEVER live “house poor.” In other words, living in a situation in which you’re just barely able to pay off your monthly mortgage payments.
Life is uncertain, and if you live house poor, even a small economic difficulty or sickness could threaten your ability to pay off your mortgage.
An even in the unlikely situation were you would be able to successfully pay off your new mortgage without any economic downturn, living house poor would inevitably lead you to sacrifice many life comforts.
You would have a hard time saving money for retirement, you might have to cancel vacations, etc. Getting those comforts back would require you to find a way to significantly increase your household income.
A good rule of thumb is the 28/36 rule, a rule often used by mortgage lenders and creditors to gauge their borrower’s debt repayment capacity. This rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses, and no more than 36% on total debt repayments.
For example, if your household monthly income is $6,000, your household expenses (including your mortgage) should not exceed $1,680, and you total debt repayment (including credit cards, student loans, car loans, etc.) should not exceed $2,160.
In fact, mortgage lenders and other creditors often use this rule to gauge their borrower’s debt repayment capacity.
Should you buy your new home, or sell your old home first?
Typically, it’s better to sell your old home before you buy a new one. By doing so, you’ll have the funds from your sale already, you’ll be able to make a larger downpayment on your mortgage, and you’ll avoid spending time with two mortgages at the same time.
However, we have quite a few strategies that will help you in deciding the order in which to make your move! Again, we will make sure that your goals are front of mind and we will help guide you every step of the way.
Prepare your home to sell
Declutter your home, and have all the interiors professionally cleaned. Do all the handyman work you’ve been putting off, and make any repairs or updates that will make your home desirable.
If there are any issues with the systems of the home, get them fixed before you list.
We will walk your home with you and give you the best strategies to get top dollar in the current market.
Be prepared to take action
At this point, you should be getting ready to list your current home, and you also have a pretty good idea of the type of home you WANT to purchase and CAN purchase.
As mentioned earlier, the best-case scenario is that you’re able to get your home purchase to coincide with your home sale. This is especially important when you want to use your home sale earnings to purchase your new home or use them to make a substantial down payment.
Of course, getting the timing right can be tricky. There are many issues to be aware of, such as:
What kind of market are you in?
If you’re in a seller’s market, there will be more buyers than homes for sale, and selling your home would be fairly easy and quick.
At the same time, that would mean a lot more competition when buying a home. You could easily lose to another buyer, or you would need to offer more money and fewer contingencies to get your next home.
Writing a contingent offer means that the purchase is contingent upon you selling your current home. In essence, this would protect you in case the sale falls through for whatever reason. And while this would seem like a good way to protect your own interests, said clause could actually keep a home seller from accepting your offer.
These are conversations that we will have with each client to ensure the personalized needs of their transaction.
It’s very tricky to negotiate two closes in parallel. Though it's possible to have a simultaneous close with the right team in place.
In case you do end up selling your home before you buy a new one, you have to consider where you would live in the meantime. Would you get a short-term rental, stay with friends or family, stay at a hotel, or negotiate a lease-back with your home buyer?
And what about your possessions? Are you going to keep them in a storage facility, or at a friend’s home? Or would negotiate with your moving company so it can store your items for some time?
There are many moving parts in this process and we will be with you to help you make the best decisions for your situation.
Moving can be a very exciting time! But it also needs to be approached with caution, and with plenty of knowledge about what to expect. We would love to help you make your next move as smooth as possible. Reach out and let us know your goals and let's get to work!