If you are one of my Happy Homeowners, you know that I encourage you to buy something you can stay in. But, when it’s time to go, it’s time to go. For those trading up into what some call “a forever house,” this is what is different than our first time around:
First you’ll need a reasonable prediction of how much equity will be gained on the sale of your current place. I recommend getting a good Comparative Market Analysis (CMA) from two or so listing agents. Remember that I don’t do the listing business, but I am a connoisseur of those who do it well. I can name names of agents who can give an estimate that is likely to stick.
Once you know the equity level that is likely to be added to your buying power, you are halfway there. The next part is to check that you have the ready cash for down payments and expenses.
- You all know about the dreaded broker fee and so-called closing costs. Add to that the fee for inspections, and legal work.
- Sellers add transfer taxes, capital gains taxes, Registry fees, cost of getting CO/smoke detector certification, costs of clean-up, and staging or otherwise preparing your place for sale.
- Then there’s moving costs. If you are moving once, then one moving cost. If you are moving twice, then two. Plus storage of some stuff. Plus security deposits if you rent in between.
- Also, don’t minimize the cost of your time, effort, and inconvenience during the for-sale period and during the move(s).
- Add repairs or credits after inspection to the list.
If you have the funds, now it’s time to call a lender.
Next, can you get a big enough mortgage to buy without having to have to sell your current place? You need the credit, income, and assets to hold mortgages on both properties at the same time. If you have to sell in order to buy, it is just not going to work. Would you accept an offer on your current place, if the offer can fall through a month or more later because the buyer’s other sale did not go through? No, huh? I thought not.
If you can’t afford to carry two mortgages, you will need to sell, find a temporary place, then go house hunting. It is harder in some ways, but in other ways it is less stressful.
If you can carry two mortgages for a month or so, you can to house hunting. There are ways of structuring your mortgage so that you can borrow enough to buy the new place, then pay off a second mortgage with your excess equity from the sale of your current place. This affords you the luxury of having some overlap time. You can close on the new place, clean it, paint it, do any interior work, then move before closing on the current place. (This is especially wonderful for people with young children!)
If money is tight, you can “double close.” This is quite a hassle. In one to two days you’d need to:
- Move out and clean your current place.
- Close on your current place.
- Close on your new place.
- Empty the moving truck into your new place.