Plan for Selling Our Home and Buying a Different One

[taubel]

Hi - I've posted on here a few times about looking for a larger home and setting up a budget. DH and I decided that we would like to buy a larger home within the next one to two years. 

We are currently in the process of decluttering our home and having some necessary repairs made. We are also, of course, looking at other homes as they come on the market. 

This is our first home, so we have no experience with selling a home. We do know that we will need every cent of the equity we have in this home to use as a downpayment towards a larger home.

Of course, we have only a general idea of what our home will sell for. This makes me nervous, because I don't want to spend too much on another home and then not get enough for ours. 

What's the best way to go? Should we put our home on the market and then hope we find another home quickly? Should we be under contract on another home and then list ours? Should we sell our home and move to an apartment until we find a suitable house?

We are very picky about future homes (want to avoid some of the problems we have with our current home), and homes in our neighborhood are very expensive. We are looking for 4 bedrooms (ours has 3), so that is a big jump in price.

Anyone who's sold and bought a home - please tell me how you did it! Thanks!

[june'smom]

I would find a real estate agent that you trust to come in and look and your home now.  Make a list of the suggestions they make and start working on those.  Our agent had a really good idea of what homes would/could go for, which may eliminate some of the guessing for you.  Then make a budget of what you can spend and see if you can reconcile the two numbers. 

[heatherdeg]

I agree with the pp. In fact, I would call three of them in and ask their opinions on price you'll likely GET (vs. what you'd list at), how long they think it will take (they'll all likely say "hard to tell in this market") and what they think you should do to improve your chances of getting the best price with the quickest market time.  Actually, the very best money you could spend to get the most accurate answer to that question is to pay the few hundred dollars it would cost to have an appraiser come out and do an appraisal.  They'll also know what would make a difference in the value of your home--which affects what you'll likely get, but not how long it will take.  An appraiser will tell you what your home is worth based on recent/past sales.  And frankly, the person buying your home is going to get a mortgage--and all of that is going to be based on an appraisal.  It's EXTREMELY RARE to find a buyer in this market that will pay more than appraised value; and the last few years have made people far more weary of doing it even if they have the means to do so.  Confidence is not yet fully restored for that to happen.

In terms of getting it off the market at the best price, staging it would be A-number-1.  You can either hire a professional stager (find an accredited one at http://www.stagedhomes.com/  (and if someone tells you they're "trained" in staging, check there to see if they're accredited) or you can read the books that are out there.  But some of the stuff you'd need to do could take some time if you're doing it yourself.  Staged houses sell quicker for the best available prices in any market.

If you're going to be really fussy about the next house, I would strongly suggest that you incorporate the possibility of selling your home and if you don't find another place right away--renting until you do.  First of all, it's VERY HARD in this market to get under contract for a new place with a "contingency" for selling your old place (in other words, writing into the contract that you can't buy the house if your old house doesn't sell).  People don't want to take their home off the market and then possibly have your house not sell and then they're back to square one.  And on short sales, foreclosures and relocations, you may not even be ABLE to get into contract if there's a contingency of your house selling.  If you CAN get into contract that way, you'll find yourself settling for even less money than you would have to get your house sold in time to buy the house of your dreams.  The whole scenario just sucks.

So if you are totally resolved to DEFINITELY leaving the house you're in--period--I'd say to start preparing your house for sale now and hope to finish up by Feb. 1st, then put your house on the market in Feb. and sell it even if you don't find another place.  You MIGHT be able to work it out so that you can rent the house you're selling from the new owners for a bit.  But you might need to rent another place.  Something you should ask your agent is whether or not they see people signing leases that have a 60- or 90-day "out"--a clause where they are able to end the lease if they give 60- or 90-days notice beforehand (with or without a penalty--but ask what the penalty is).  A lot of agents don't do rentals--so the 3 you ask might not really know--but definitely find out.

If you can manage to carry both mortgage payments, or if the rental market where you are is such that you could likely rent your house to cover the mortgage, taxes and insurance, then it's possible you could find a new house and just rent out your hold house... BUT... you'd better have a good 6mo of those bills set aside in case it sits vacant.  And landlording can be a COMPLETE PITA.  Add to it that finding a tenant MIGHT cost you a month's worth of rent if you need to use an agency.

It could take you quite a while to find the right house at the right price in the right location.  And it could take you forever to sell your house.  Or you could sell your house in 60 days and NOT find the next house for a year... or find your next house tomorrow and not be able to unload your current house for a year.

Look at your monthly budget and see what you can AFFORD to do, and then map out your plan from there.

[taubel]

Those are all great suggestions! I really wish we had initially bought a house we could stay in long-term. But of course we thought we might only have two kids, but then decided to have three. Unfortunately, we live in a very popular town. We have six elementary schools in our district, so if I want my two kids to continue in the elementary school they're in (I do want that), we have only about a two-mile radius in which to look for houses!

I trust our real estate agent. We bought our current house from him, and we have known him for 10 years. I myself am very familiar with the market. I go to open houses every Sunday (have been doing that for years), and always look up the sale prices of homes once the info is available. Our agent compared our house to similar houses in the area that have recently sold. There was a huge range in price - nearly 40K from the most expensive to the least expensive.

Our realtor also told us which improvements to make. Basically to put down a new cheap vinyl floor in the kitchen and have the entire interior painted. He gave us a value range for our house, which I feel is very accurate.

We base all of our budget calculations on the lowest end of the price range for selling our house (and of course we factor in the 6% that would go to the agents).

We can afford a slightly more expensive house. We CANNOT afford to own two houses at once for several months! Even if we had to own two houses for a month or two, how would we get a mortgage if we didn't have the downpayment dollars from our house?

I would feel most comfortable selling our house and then renting until we know what we want. But DH disagrees. He thinks we'll regret that decision. We definitely do not want to rent out our house. We are not handy people and have very little free time.

I really wish we didn't have to buy/sell. I even had an architect come out to discuss possible additions to our home. She advised me to fix our house up and move! With our style of house (split level), there are really no add-ons that are worth the cost.

I will keep researching.... thanks again both of you for the suggestions!

[heatherdeg]

Is your agent a Pru agent?  I remember when they started "value range pricing". :)

What is it your husband thinks you'll regret about selling, renting and then buying?  And what did your agent suggest?

Splits are hard.  Unless you can put a master suite over the living areas (and assuming that's what you need most) or can build outward from your house without getting outside of the building envelope.  You might want to check another architect or two.  Some of them can be crazy creative!  We'd seen three and then met one at a party that had ideas that blew those three out of the water.  :O  Unfortunately, we'd already sold the house in question.

If you've been following the houses like you have, you can see what's fetching higher prices in improvements--although I'm shocked you have many open houses given the season.

[mattemma04]

I have seen most housesaround us sell by realtor,though many start out as a FSBO. The realtor houses are selling low.They start at a high price and just keep going down till it sells.Some houses even go to auction. I recall one FSBO house that sold for 40k more than neighboring realtor houses. I was pretty impressed with that given the house was nothing special.Ofcourse realtors only use relator listings to calculate value.To bad because the house that sold for 123k(compared to 50-80k) would have brought our value up.

I know realtors say not to list to high,but if there are ANY homes that sold high,and are comparable then adjust your price. Doing a home inspection and appraisal on your home will help sell it too.If I were buying I would also find a real survey(not a mortgage survey) to be beneficial. I hated finding out the REAL property lines after purchase.We got our house from a family already living in a new house,so they REALLY wanted to sell to get out of 2 mortgages.You will find a deal with empty houses carrying mortgages. You can add a clause into your contract that holds the sale/purchase till you sell/buy.

I would not rent either.To many legal issues and you are stuck with tenants for a set time.Best wishes selling and buying!

[heatherdeg]

Originally Posted by mattemma04 

I have seen most housesaround us sell by realtor,though many start out as a FSBO. The realtor houses are selling low.They start at a high price and just keep going down till it sells.Some houses even go to auction. I recall one FSBO house that sold for 40k more than neighboring realtor houses. I was pretty impressed with that given the house was nothing special.Ofcourse realtors only use relator listings to calculate value.To bad because the house that sold for 123k(compared to 50-80k) would have brought our value up.

I know realtors say not to list to high,but if there are ANY homes that sold high,and are comparable then adjust your price. Doing a home inspection and appraisal on your home will help sell it too.If I were buying I would also find a real survey(not a mortgage survey) to be beneficial. I hated finding out the REAL property lines after purchase.We got our house from a family already living in a new house,so they REALLY wanted to sell to get out of 2 mortgages.You will find a deal with empty houses carrying mortgages. You can add a clause into your contract that holds the sale/purchase till you sell/buy.

I would not rent either.To many legal issues and you are stuck with tenants for a set time.Best wishes selling and buying!

You're somewhat contradicting yourself because you're saying that the FSBOs go to a realtor and start out high and just keep coming down until they sell or go to auction, but then you say that realtors want to set the price unreasonably low.  Well, if setting the price high results in the house sitting on the market through price cut after price cut and it ultimately sells low, then why wouldn't a realtor tell you to set the price closer to what the market will bear for your house?  Sounds to me like they're trying to get your house sold quicker for what it's going to go for anyway.

If they WERE FSBO and didn't sell, wonder why...?  And if those houses then went to a realtor listed high, it's likely because the FSBO wanted a specific number--period--on top of wanting to potentially incorporate the realtor fees because they had to have a number that high to cover the outstanding mortgage... which lines up with your point about them winding up in auction at some point.  People who don't NEED to sell their houses due to distress don't wind up in auction.  They just don't sell their house if they can't get the number they need.  And usually, people are FSBO because they need/want every last penny (meaning: they don't want to shell out realtor fees).

An appraiser is only going to use closed sales to set a value and that is absolutely not indicative of the possibilities--it's not projecting forward to what you MIGHT get.  If someone bought a house in your area for $40k more than almost every other house in the area, then the buyer must've had a hell of a down payment and found SOMEthing remarkable about that house--because when financing, the appraisal would've come back closer to the $80k mark at it's highest (since you noted nothing special about the house--so I'm thinking this would be pushing it, but for the sake of argument) and that means that the people were paying $40k more than appraised value.  So that means that buyer is putting $48k down and taking a loan with a PMI payment or putting down $56k to get the 20% equity needed to avoid it because they just loved that house SO MUCH (despite there being nothing special about AND it being priced $40k more than the other available houses).

Doesn't make sense.

Realtors want to sell your home for as much money as they possibly can.  Period.  That's how they make their money.  They don't want your house listed higher than it could probably get because if the house isn't sold in the first 2-3 months, it's "stale" and they know that potential buyers look at how long it's been on the market and know that most sellers are getting tired of waiting and may be more willing to take less to get rid of the house.  The longer it sits, the less you're going to get with the exception of the people that sit for a few years at the same price stumbling on the buyer that's willing to pay it because they've waited long enough to find "the one".  Heck of a risk, really.  So optimally, they set it for just above what you're likely to get because it leaves a little negotiating room and will get your house moved quickly.

Even in this market, in some places, realtors will have you set your house just slightly lower than the competition to get your house sold--and sometimes, they don't even sell for a reduction.  We have been involved in real estate in 4 different states in the last 4 years.  It differs by the area and the price range.

Get with an intelligent realtor.  A home inspection isn't a bad idea, either.  I don't disagree that landlording isn't for everyone, but you are absolutely not "stuck" with tenants for X-period of time if you write the lease to incorporate what you want.  I'm not sure what countless legal issues the pp is referring to, but it's not exactly rocket science.

[K1329]

We sold our house FSBO and saved the 6%. Something to consider, then continue to use your agent to shop your new house. It sounds like, if you don't want to risk two mortgages, that you will have to sell your current home, then possibly rent while you shop for the new home. Not a terrible scenario, IMO. You eliminate the risk of being stressed with two mortgages, anyway.